-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, V1BXhEKf4zqveeB50oOxKZ0XGVBN6k/2nX5nL6T5cGGp8DrTz5Ryasr2GZW5PnZn XndPIw+5o2zs3Jmb8heVQg== 0001104659-05-051185.txt : 20051031 0001104659-05-051185.hdr.sgml : 20051031 20051031142429 ACCESSION NUMBER: 0001104659-05-051185 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 8 CONFORMED PERIOD OF REPORT: 20050930 FILED AS OF DATE: 20051031 DATE AS OF CHANGE: 20051031 FILER: COMPANY DATA: COMPANY CONFORMED NAME: HUNT J B TRANSPORT SERVICES INC CENTRAL INDEX KEY: 0000728535 STANDARD INDUSTRIAL CLASSIFICATION: TRUCKING (NO LOCAL) [4213] IRS NUMBER: 710335111 STATE OF INCORPORATION: AR FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-11757 FILM NUMBER: 051165926 BUSINESS ADDRESS: STREET 1: 615 JB HUNT CORPORATE DR CITY: LOWELL STATE: AR ZIP: 72745 BUSINESS PHONE: 5018200000 10-Q 1 a05-19255_110q.htm QUARTERLY REPORT PURSUANT TO SECTIONS 13 OR 15(D)

FORM 10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

(Mark One)

ý	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
	THE SECURITIES EXCHANGE ACT OF 1934

	For the Quarter Ended September 30, 2005

	OR

o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
	THE SECURITIES EXCHANGE ACT OF 1934

Commission file number 0-11757

J.B. HUNT TRANSPORT SERVICES, INC.

(Exact name of registrant as specified in its charter)

Arkansas		71-0335111
(State or other jurisdiction		(I.R.S. Employer
of incorporation or		Identification No.)
organization)

615 J.B. Hunt Corporate Drive, Lowell, Arkansas 72745

(Address of principal executive offices, and Zip Code)

(479) 820-0000

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to the filing requirements for the past 90 days.

Yes ý

No o

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).

Yes ý

No o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes o

No ý

The number of shares of the registrant’s $.01 par value common stock outstanding on September 30, 2005 was 154,659,692.

(Reflects a two for one stock split paid on May 23, 2005.)

J.B. HUNT TRANSPORT SERVICES, INC.

Form 10-Q

For The Quarter Ended September 30, 2005

Table of Contents

Part I. Financial Information

Item 1.	Consolidated Financial Statements

	Condensed Consolidated Statements of Earnings for the Three and Nine Months Ended September 30, 2005 and 2004

	Condensed Consolidated Balance Sheets as of September 30, 2005 and December 31, 2004

	Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2005 and 2004

	Notes to Condensed Consolidated Financial Statements as of September 30, 2005

Item 2.	Management’s Discussion and Analysis of Results of Operations and Financial Condition

Item 3.	Quantitative and Qualitative Disclosures About Market Risk

Item 4.	Controls and Procedures

Part II. Other Information

Item 1.	Legal Proceedings

Item 2.	Changes in Securities

Item 3.	Defaults Upon Senior Securities

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

Item 5.	Other Information

Item 6.	Exhibits and Reports on Form 8-K

Exhibits

Signatures

J.B. HUNT TRANSPORT SERVICES, INC.

Condensed Consolidated Statements of Earnings

(in thousands, except per share data)

(unaudited)

	Three Months Ended				Nine Months Ended
	September 30				September 30
	2005		2004		2005		2004

Operating revenues	$	801,140	$	718,614	$	2,269,524	$	2,015,349

Operating expenses
Salaries, wages and employee benefits	218,487		214,760		633,025		612,211
Rents and purchased transportation	265,951		236,656		758,326		662,006
Fuel and fuel taxes	104,234		74,529		276,612		205,010
Depreciation and amortization	41,108		37,458		120,448		111,233
Operating supplies and expenses	35,535		32,760		98,399		92,560
Insurance and claims	14,117		14,956		38,947		43,348
Operating taxes and licenses	9,178		9,088		27,393		26,576
General and administrative expenses, net of gain on asset dispositions	15,943		9,902		36,470		24,950
Communication and utilities	5,684		5,837		16,828		17,395
Arbitration settlement	25,801		—		25,801		—
Total operating expenses	736,038		635,946		2,032,249		1,795,289
Operating income	65,102		82,668		237,275		220,060
Interest income	179		300		559		1,556
Interest expense	1,567		1,858		4,559		7,024
Equity in loss of associated company	856		647		2,991		2,030
Earnings before income taxes	62,858		80,463		230,284		212,562
Income taxes	23,015		32,588		88,311		86,088
Net earnings	$	39,843	$	47,875	$	141,973	$	126,474

Average basic shares outstanding*	156,710		162,131		158,586		161,156

Basic earnings per share*	$	.25	$	.30	$	.90	$	.78

Average diluted shares outstanding*	161,174		167,356		163,674		166,569

Diluted earnings per share*	$	.25	$	.29	$	.87	$	.76

Dividends declared per common share*	$	.06	$	.02	$	.18	$	.03

* All shares outstanding and per share amounts for all periods presented reflect a two-for-one stock split paid on May 23, 2005.

See accompanying notes to condensed consolidated financial statements.

J.B. HUNT TRANSPORT SERVICES, INC.

Condensed Consolidated Balance Sheets

(in thousands)

	September 30, 2005		December 31, 2004
	(unaudited)

ASSETS
Current assets:
Cash and cash equivalents	$	3,738	$	23,838
Trade accounts receivable	329,972		289,146
Income taxes receivable	6,580		19,418
Prepaid expenses and other	92,611		131,640
Total current assets	432,901		464,042
Property and equipment	1,557,934		1,450,023
Less accumulated depreciation	523,772		438,644
Net property and equipment	1,034,162		1,011,379
Other assets	22,997		16,285
	$	1,490,060	$	1,491,706

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Trade accounts payable	$	195,158	$	180,018
Accrued payroll	56,890		73,750
Claims accruals	18,033		18,535
Other accrued expenses	8,426		10,504
Deferred income taxes	39,292		25,414
Total current liabilities	317,799		308,221

Borrowings under revolving line of credit	75,700		—
Other long-term liabilities	44,454		40,294
Deferred income taxes	263,209		282,241
Stockholders’ equity	788,898		860,950
	$	1,490,060	$	1,491,706

See accompanying notes to condensed consolidated financial statements.

J.B. HUNT TRANSPORT SERVICES, INC.

Condensed Consolidated Statements of Cash Flows

(in thousands)

(unaudited)

	Nine Months Ended September 30
	2005			2004
Cash flows from operating activities:
Net earnings	$	141,973		$	126,474
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization	120,448			111,233
Gain on sale of revenue equipment	(2,016		)	(149		)
Deferred income taxes	(3,205		)	53,252
Equity in loss of associated company	2,991			2,030
Tax benefit of stock options exercised	10,578			13,602
Amortization of discount, net	—			67
Changes in operating assets and liabilities:
Trade accounts receivable	(40,826		)	(53,169		)
Income taxes receivable	12,838			—
Other assets	38,259			40,793
Trade accounts payable	15,140			(19,291		)
Claims accruals	(502		)	2,496
Accrued payroll and other accrued expenses	(16,727		)	12,908
Net cash provided by operating activities	278,951			290,246
Cash flows from investing activities:
Additions to property and equipment	(199,180		)	(343,599		)
Proceeds from sale of equipment	57,965			149,067
Decrease in other assets	(8,933		)	10,499
Net cash used in investing activities	(150,148		)	(184,033		)
Cash flows from financing activities:
Proceeds (Repayments) from revolving line of credit	75,700			(55,000		)
Principal payments under capital lease obligations	—			(66,844		)
Net acquisition of treasury stock	(195,916		)	(376		)
Dividends paid	(28,687		)	(4,847		)
Net cash used in financing activities	(148,903		)	(127,067		)
Net decrease in cash and cash equivalents	(20,100		)	(20,854		)
Cash and cash equivalents at beginning of period	23,838			58,112
Cash and cash equivalents at end of period	$	3,738		$	37,258
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest	$	3,918		$	7,192
Income taxes	68,100			19,234

See accompanying notes to condensed consolidated financial statements.

J.B. HUNT TRANSPORT SERVICES, INC.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

1. Basis of Presentation

Our condensed consolidated financial statements included in this Form 10-Q have been prepared without audit (except that the balance sheet information as of December 31, 2004 has been derived from consolidated financial statements which were audited) in accordance with the rules and regulations of the Securities and Exchange Commission. Although certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles have been condensed or omitted, we believe that the disclosures are adequate to make the information presented not misleading. You should read the accompanying condensed consolidated financial statements in conjunction with the audited financial statements and notes thereto included in our annual report on Form 10-K for the year ended December 31, 2004.

We believe that all adjustments, including normal recurring adjustments, necessary for a fair presentation of the results of the interim periods presented have been made. The results of operations for the interim periods presented in this report are not necessarily indicative of the results to be expected for the full calendar year ending December 31, 2005.

All share and per share amounts for all periods prior to September 30, 2005 in this Form 10-Q have been adjusted to reflect a two-for-one stock split paid on May 23, 2005.

2. Stock-based Compensation

We have adopted the intrinsic value based method of Accounting Principles Board (APB) Opinion No. 25, Accounting for Stock Issued to Employees and related interpretations in accounting for compensation costs for our stock option plans. Accordingly, compensation expense is recognized on the date of grant only if the current market price of the underlying common stock at date of grant exceeds the exercise price.

Had we determined compensation cost based on the fair value at the grant date for our stock options under Statement of Financial Accounting Standard No. 123, Accounting for Stock-based Compensation (SFAS No. 123), our net earnings would have been reduced to the pro forma amounts indicated below. All amounts in the table, except per share amounts, are in thousands.

	Three Months Ended				Nine Months Ended
	September 30				September 30
	2005		2004		2005		2004
Net earnings as reported (in thousands)	$	39,843	$	47,875	$	141,973	$	126,474
Total stock-based compensation expense determined under fair value based methods for all awards, net of taxes	1,215		1,221		3,544		3,664
Pro forma	$	38,628	$	46,654	$	138,429	$	122,810

Basic earnings per share
As reported	$	.25	$	.30	$	.90	$	.78

Pro forma	$	.25	$	.29	$	.87	$	.76

Diluted earnings per share
As reported	$	.25	$	.29	$	.87	$	.76

Pro forma	$	.24	$	.28	$	.85	$	.74

3. Recent Accounting Pronouncements

In December 2004, the FASB issued SFAS No. 123(R), Share-Based Payment. SFAS No. 123(R) is a revision of SFAS No. 123, and supersedes APB 25. Among other items, SFAS 123(R) eliminates the use of APB 25 and the intrinsic value method of accounting, and requires companies to recognize the cost of employee services received in exchange for awards of equity instruments, based on the grant date fair value of those awards, in the financial statements. In accordance with SFAS No. 123(R), the cost will be based on the grant-date fair value of the award and will be recognized over the period for which an employee is required to provide service in exchange for the award. We are required to adopt SFAS 123(R) no later than January 1, 2006. While we are currently evaluating the impact SFAS 123(R) will have on our financial results, we do not expect the impact to differ materially from the pro forma disclosures currently required by FAS 123 (see “Stock-based Compensation”).

4. Debt (in thousands)

	September 30, 2005		December 31, 2004
Borrowings under revolving line of credit	$	75,700	$	—
Less current maturities	—		—
	$	75,700	$	—

At September 30, 2005, we were authorized to borrow up to $150 million under our revolving line of credit and had a $75.7 million balance outstanding under that agreement. Effective October 6, 2005, we increased the maximum amount that we may borrow under our Senior Revolving Credit Facility Agreement from $150 million to $200 million. Our original credit agreement, which we entered into on April 27, 2005, contained a provision permitting us to increase the maximum commitment amount by up to $50 million. The applicable interest rate under our agreement, which expires in April 2010, is based on either the prime rate or LIBOR, plus a margin based on the level of borrowings. The average interest rate on our outstanding borrowings at September 30, 2005, was 5.11%

5. Capital Stock

We have a stock option plan (Management Incentive Plan) that provides for the awarding of our common stock and stock options to key employees. A summary of the non-qualified options to purchase our common stock follows:

			Weighted average		Number of
	Number of		exercise price		shares
	shares		per share		exercisable
Outstanding at December 31, 2004	13,840,168		$	7.15	918,524
Granted	110,000		20.73
Exercised	(1,939,591	)	4.52
Terminated	(111,600	)	7.81
Outstanding at September 30, 2005	11,898,977		$	7.70	2,532,124

We announced on October 27, 2005 that our Board of Directors declared a regular quarterly dividend of $.06 per common share, payable on November 28, 2005, to stockholders of record on November 7, 2005.

6. Earnings Per Share

We compute basic earnings per share by dividing net earnings available to common shareholders by the weighted average number of common shares outstanding for the reporting period. Diluted earnings per share reflects the potential dilution that could occur if holders of options or other contracts to issue common stock exercised or converted their holdings into common stock. Outstanding stock options represent the only dilutive effects on weighted average shares. The table below presents a reconciliation between basic and diluted weighted average shares outstanding and the related earnings per share. All amounts in the table, except per share amounts, are expressed in thousands.

	Three Months Ended				Nine Months Ended
	September 30				September 30
	2005		2004		2005		2004
Net earnings	$	39,843	$	47,875	$	141,973	$	126,474
Basic weighted average shares outstanding	156,710		162,131		158,586		161,156
Dilutive effect of stock options	4,464		5,225		5,088		5,413
Diluted weighted average shares outstanding	161,174		167,356		163,674		166,569
Basic earnings per share	$	.25	$	.30	$	.90	$	.78
Diluted earnings per share	$	.25	$	.29	$	.87	$	.76

We had some options to purchase shares of common stock which were outstanding during the periods shown, but were excluded from the computation of diluted earnings per share because the option price was greater than the average market price of the common shares. A summary of those options follows:

	Three Months Ended			Nine Months Ended
	September 30			September 30
	2005	2004		2005	2004
Number of shares under option	1,461,000	10,000		35,000	36,000
Range of exercise price	$19.55 - $24.43	$	18.50	$21.25 - $24.43	$16.81 - $18.50

7. Comprehensive Income

During the three and nine months ended September 30, 2005 and 2004, comprehensive income was equal to net earnings.

8. Income Taxes

Our effective income tax rate was 36.6% for the three months ended September 30, 2005, compared with 40.5% during the third quarter of 2004. Our effective income tax rate was 38.3% for the nine months ended September 30, 2005 and 40.5% in 2004. In determining our provision for income taxes, we use an estimated annual effective tax rate, which is based on our expected annual income, statutory tax rates and best estimate of non-deductible and non-taxable items of income and expense and the ultimate outcome of tax audits. The lower effective income tax rate in 2005 reflects changes in estimates of state income taxes and non-deductible and non-taxable items as they relate to expected annual income.

In 1999, we entered into a series of transactions effecting a sale and leaseback of a portion of our Intermodal container and chassis fleet for a selling price of approximately $175 million. This transaction was examined by the IRS in an audit of our 1998 and 1999 tax returns. In December 2003, we received an IRS Notice of Proposed Assessment which disallows the tax benefits associated with these transactions, and as a result, we have filed an appeal in the matter. We have had preliminary discussions with the IRS Appeals Division and have been informed that the IRS Examination Division has been instructed to perform additional work since their case had not been developed adequately for the appellate hearing. To date, we have not been contacted by the IRS Examination Division to provide any additional information for their review. If a resolution of the matter cannot be reached in the appeals process, the IRS will forward a 90 day letter, also known as a Notice of Deficiency. A resolution of the dispute could occur at any point in the administrative process or could extend through a trial and court appeals. If we are unsuccessful in defending this transaction, we could owe additional taxes and interest. In 2003, after receiving the IRS Notice of Proposed Assessment and reviewing applicable accounting literature, we reversed the 2003 expected non-cash tax benefits of approximately $7.7 million recognized during 2003, and suspended any further recognition of the benefit. Based on events occurring subsequent to December 31, 2004, we established a reserve for a contingent tax liability of $33.6 million at December 31, 2004. The liability for this contingency, which included estimated interest expense, was included on our consolidated balance sheet at December 31, 2004 as a long-term liability. We accrued approximately $1.9 million of interest expense during the first nine months of 2005 related to this contingency. We continue to believe our tax positions comply with applicable tax law for which we received advice and opinions from our then external public accountants and attorneys prior to entering into these transactions and we continue to vigorously defend against the IRS position using all administrative and legal processes available. If the IRS were successful in disallowing 100% of the tax benefit from this transaction, the total ultimate impact on liquidity could be approximately $44 million, excluding interest.

9. Contribution

In September 2005, we announced a $10 million pretax lead gift to the University of Arkansas, which will be used to construct a new academic building. $3.5 million of this gift was recorded in the fourth quarter of 2004. Of the remaining gift of $6.5 million, approximately $1.3 million is expected to be paid during the fourth quarter of 2005 and the remaining amount will be paid in equal installments over the next four years. As a result, the present value of $5.6 million of the remaining gift was recorded in the third quarter of 2005, with the balance to be recognized as interest expense over the next five years. This gift reduced earnings per share by $.02 during the current quarter.

10. Legal Proceedings

As previously disclosed, an arbitration process commenced on July 2, 2004 with the BNSF Railway (BNI). BNI provides a significant amount of rail transportation services to our JBI business segment. The arbitration process was initiated in accordance with the terms of our Joint Service

Agreement (JSA) with BNI, after we were unable to resolve our disagreements through mediation. We announced that an interim award was issued by the arbitration panel on September 16, 2005. As a result of this decision, we recorded in the current quarter, pretax charges of $25.8 million, or $16.5 million after income taxes. These charges approximate ten cents per diluted share and are reflected on our condensed consolidated statements of earnings as “Arbitration settlement”. We also estimate this decision will reduce net earnings on a go-forward basis by approximately two cents per diluted share beginning in the fourth quarter of 2005, due to an increase in purchased transportation expense. On October 19, 2005, the arbitration panel issued an order terminating this arbitration proceeding and declaring that the interim award be adopted as the final award in this matter. Normal commercial business activity between the parties, including load tendering, load tracing, billing and payments, has continued on a timely basis during the entire mediation and arbitration process.

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

11. Business Segments

We operated three distinct business segments during the nine months ended September 30, 2005 and 2004. These segments included: Truck (JBT), Intermodal (JBI) and Dedicated Contract Services (DCS). The operation of each of these businesses is described in footnote (11) of our annual report (Form 10-K) for the year ended December 31, 2004. A summary of certain segment information is presented below (in millions):

	Assets*
	As of September 30
	2005		2004
JBT	$	431	$	423
JBI	405		361
DCS	335		366
Other (includes corporate)	319		269
Total	$	1,490	$	1,419

*Business segment assets exclude the net impact of inter-company transactions and accounts.

	Operating Revenues
	Three Months						Nine Months
	Ended September 30						Ended September 30
	2005			2004			2005			2004
JBT	$	258		$	238		$	737		$	680
JBI	328			284			925			789
DCS	219			201			622			558
Subtotal	805			723			2,284			2,027
Inter-segment eliminations	(4		)	(4		)	(14		)	(12		)
Total	$	801		$	719		$	2,270		$	2,015

	Operating Income
	Three Months				Nine Months
	Ended September 30				Ended September 30
	2005		2004		2005		2004
JBT	$	27.1	$	30.6	$	78.6	$	74.4
JBI	13.3		33.0		86.4		93.9
DCS	24.4		18.9		71.5		51.0
Other (includes corporate)	.3		.2		.8		.8
Total	$	65.1	$	82.7	$	237.3	$	220.1

	Depreciation and Amortization Expense
	Three Months				Nine Months
	Ended September 30				Ended September 30
	2005		2004		2005		2004
JBT	$	16.8	$	14.7	$	48.9	$	45.3
JBI	6.6		5.7		19.0		16.7
DCS	14.9		14.3		44.2		41.1
Other (includes corporate)	2.8		2.8		8.3		8.1
Total	$	41.1	$	37.5	$	120.4	$	111.2

12. Reclassifications

We have reclassified certain amounts from our 2004 financial statements so they will be consistent with the way we have classified amounts in 2005.

ITEM 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION

You should refer to the attached interim condensed consolidated financial statements and related notes and also to our annual report (Form 10-K) for the year ended December 31, 2004 as you read the following discussion. We may make statements in this report that reflect our current expectation regarding future results of operations, performance and achievements. These are “forward-looking” statements as defined in the Private Securities Litigation Reform Act of 1995, and are based on our belief or interpretation of information currently available. You should realize there are many risks and uncertainties that could cause actual results to differ materially from those described. Some of the factors and events that are not within our control and could have a significant impact on future operating results are general economic conditions, cost and availability of diesel fuel, adverse weather conditions, competitive rate fluctuations, availability of drivers, adverse legal decisions and audits or tax assessments of various federal, state or local taxing authorities, including the Internal Revenue Service. You should also refer to Item 7 of our annual report (Form 10-K) for the year ended December 31, 2004, for additional information on risk factors and other events that are not within our control. Current and future changes in fuel prices could result in significant fluctuations of quarterly earnings. Our future financial and operating results may fluctuate as a result of these and other risk factors as described from time to time in our filings with the Securities and Exchange Commission.

GENERAL

We are one of the largest full-load transportation companies in North America. We operate three 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 primarily from the actual movement of freight from shippers to consignees and from serving as a logistics provider by offering or arranging for others to provide the transportation service. We account for our business on a calendar year basis with our full year ending on December 31 and our quarterly reporting periods ending on March 31, June 30 and September 30.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The preparation of our financial statements in conformity 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 assets and liabilities are affected by these estimates. We evaluate these estimates on an ongoing basis, utilizing historical experience, consultation with experts and other methods considered reasonable in the particular circumstances. Nevertheless, actual results may differ significantly from our estimates. Any effects on our business, financial position or results of operations resulting from revisions to these estimates are recognized in the accounting period in which the facts that give rise to the revision become known.

We consider our critical accounting policies and estimates to be those that require us to make more significant judgments and estimates when we prepare our financial statements and include the following:

Workers’ Compensation and Accident Costs

We purchase insurance coverage for a portion of expenses related to employee injuries (workers’ compensation), vehicular collisions and accidents and cargo claims. Most insurance arrangements include a level of self-insurance (deductible) coverage applicable to each claim, but provide an umbrella policy to limit our exposure to catastrophic claim costs. The amounts of self-insurance change from time to time based on certain measurement dates and policy expiration dates. We are self-insured for a portion of our claims exposure resulting from cargo loss, personal injury, property damage and workers’ compensation. The self-insured amounts are up to the first $2 million for personal injury and property damage accidents and $1 million for workers’ compensation claims.

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, analyses provided by third-party claims administrators, as well as legal, economic and regulatory factors. Our safety and claims personnel work directly with representatives from the insurance companies to continually update the estimated cost of each claim. The ultimate cost of a claim develops over time as additional information regarding the nature, timing and extent of damages claimed becomes available. Accordingly, we use an actuarial method to develop current claim information to derive an estimate of our ultimate claim liability. This process involves the use of loss-development factors based on our historical claims experience. In doing so, the recorded ultimate liability considers future claims growth and provides an allowance for incurred-but-not-reported claims. We do not discount our estimated losses. We are also substantially self-insured for loss of and damage to our owned and leased revenue equipment. At September 30, 2005, we had approximately $18.0 million of estimated claims payable. In addition, we are required to pay certain advanced deposits and monthly premiums. At September 30, 2005, we had a prepaid insurance asset of approximately $53.3 million, which represented pre-funded claim payments and premiums.

Revenue Equipment

We operate a significant number of tractors, trailers and containers in connection with our business. This equipment may be purchased or acquired under capital or operating lease agreements. In addition, we may rent revenue equipment from third parties and various railroads under short-term rental arrangements. Revenue equipment which is purchased is depreciated on the straight-line method over the estimated useful life down to an estimated salvage or trade-in value. Equipment acquired under capital leases is initially recorded at the net present value of the minimum lease payments and amortized on the straight-line method over the lease term or the estimated useful life, whichever is shorter. We had no revenue equipment under capital lease arrangements at September 30, 2005.

We have an agreement with our primary tractor supplier for guaranteed residual or trade-in values for certain new equipment acquired since 1999. We have utilized the guaranteed trade-in values as well as other operational information, such as anticipated annual miles, in accounting for purchased tractors. If our tractor supplier was unable to perform under the terms of our agreement for guaranteed trade-in values, it could have a materially negative impact on our financial results.

Revenue Recognition

We recognize revenue based on the relative transit time of the freight transported. Accordingly, a portion of the total revenue which will be billed to the customer once a load is delivered is recognized in each reporting period based on the percentage of the freight pickup and delivery service that has been completed at the end of the reporting period.

Segments

We operated three segments during the three and nine months ended September 30, 2005. The operation of each of these businesses is described in footnote (11) of our annual report (Form 10-K) for the year ended December 31, 2004.

RESULTS OF OPERATIONS

Comparison of Third Quarter 2005 to Third Quarter 2004

	Summary of Operating Segments Results For The Three Months Ended September 30
	(dollars in millions)
	Operating Revenue								Operating Income
	2005			2004			% Change		2005		2004
JBT	$	258		$	238		9	%	$	27.1	$	30.6
JBI	328			284			15		13.3		33.0
DCS	219			201			9		24.4		18.9
Other	—			—			—		.3		.2
Subtotal	805			723			11	%	65.1		82.7
Inter-segment eliminations	(4		)	(4		)	—		—		—
Total	$	801		$	719		11	%	$	65.1	$	82.7

Overview

Our total consolidated operating revenue for the third quarter of 2005 was $801 million, an increase of approximately 11% over the $719 million in the third quarter of 2004. Fuel surcharge had an impact on this comparison. If the amount of fuel surcharge revenue was excluded from both the 2005 and 2004 periods, consolidated operating revenue would have increased by 5%. We believe that meaningful analysis of our financial performance and revenue growth requires that fuel surcharge revenue, which can fluctuate significantly between reporting periods, be excluded when making revenue comparisons.

JBT segment revenue totaled $258 million for the third quarter of 2005, an increase of 9% over the $238 million in the third quarter of 2004. If the amount of fuel surcharge revenue was excluded from both the 2005 and 2004 periods, segment revenue would have increased 3%. This 3% increase in revenue was primarily a result of an approximate 4.5% increase in revenue per loaded mile, exclusive of fuel surcharges, partly offset by a 1.7% decline in load count. While the rise in 2005 revenue per loaded mile represented a significant increase in operating income, higher costs such as driver wages, equipment ownership, driver recruiting, accident and workers’ compensation and the rapid increase of fuel costs, more than offset this increase in revenue. JBT segment operating income declined to $27.1 million in 2005, from $30.6 million in 2004. The operating ratio of the JBT segment was 89.5% in 2005 and 87.1% in 2004.

JBI segment revenue increased 15%, to $328 million during the third quarter of 2005, compared with $284 million in 2004. If the amount of fuel surcharge revenue was excluded from both the 2005 and 2004 periods, the increase in JBI revenue would have been 8%. This 8% increase in segment revenue was primarily a result of 4.3% higher revenue per loaded mile, exclusive of fuel surcharges, and a 3.4% increase in load volume. As previously announced, segment operating income for the current quarter was reduced by the $25.8 million pretax charge related to an arbitration decision, which was recorded in September. Operating income for the third quarter of 2005 was $39.1 million, before the arbitration settlement charge, compared with $33.0 million in 2004. The operating ratio of the JBI segment was 95.9% in 2005, including the BNI arbitration settlement, and 88.4% in 2004. The segment operating ratio for the current quarter was 88.1% before the arbitration settlement expense.

DCS segment revenue grew 9%, to $219 million in 2005, from $201 million in 2004. If fuel surcharge revenue was excluded from both the 2005 and 2004 periods, the increase in DCS revenue would have been 3%. This 3% increase in DCS segment revenue was driven by a 6% increase in net revenue per tractor, excluding fuel surcharges, partly offset by a decline in the size of the tractor fleet. Operating income of our DCS segment climbed to $24.4 million in 2005, from $18.9 million in 2004. The DCS operating ratio was 88.9% in 2005 and 90.6% in 2004. The improvement in current year operating income was primarily a result of higher rates and revenue per tractor, partly offset by increases in driver compensation, as well as, equipment ownership and operating expenses, such as tolls.

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

	Three Months Ended September 30
	Percentage of				Percentage Change
	Operating Revenues				Between Quarters
	2005		2004		2005 vs. 2004
Operating revenues	100.0	%	100.0	%	11.5	%
Operating expenses
Salaries, wages and employee benefits	27.3	%	29.9	%	1.7	%
Rents and purchased transportation	33.2		32.9		12.4
Fuel and fuel taxes	13.0		10.4		39.9
Depreciation and amortization	5.1		5.2		9.7
Operating supplies and expenses	4.4		4.5		8.5
Insurance and claims	1.8		2.1		(5.6	)
Operating taxes and licenses	1.2		1.3		1.0
General and administrative expenses, net of gains	2.0		1.4		61.0
Communication and utilities	.7		.8		(2.6	)
Arbitration settlement	3.2		—		—
Total operating expenses	91.9		88.5		15.7
Operating income	8.1		11.5		(21.2	)
Interest income	—		—		(40.3	)
Interest expense	.2		.2		(15.7	)
Equity in loss of associated companies	.1		.1		32.3
Earnings before income taxes	7.8		11.2		(21.9	)

Income taxes	2.8		4.5		(29.4	)
Net earnings	5.0	%	6.7	%	(16.8	)%

Consolidated Operating Expenses

Total operating expenses increased 15.7%, including the arbitration settlement charges, while operating revenues rose 11.5% during the third quarter of 2005, over the comparable period of 2004. The combination of the change in these two categories, including the arbitration settlement charges, resulted in our operating ratio increasing to 91.9% in 2005 from 88.5% in 2004. Excluding the arbitration charges, total current quarter operating expenses rose 11.7% and the operating ratio was 88.7%. Operating income in the current quarter was $65.1 million, including the arbitration charges, and $90.9 million, excluding these charges, compared with $82.7 million in 2004. Increases in revenue per mile and revenue per tractor, exclusive of fuel surcharges, were the most significant factors contributing to our improved operating income, before arbitration charges. However, we incurred sizable increases in driver compensation and recruiting expenses, equipment ownership and operating costs, such as tolls, which partly offset the increase in revenue.

Salaries, wages and employee benefit costs increased 1.7% in 2005 over 2004, but declined to 27.3% of revenue in 2005, from 29.9% in 2004. While we continue to increase various levels of driver compensation as required to attract and retain quality drivers, we, to date, have been able to recover the majority of these higher costs through rate increases in our JBT segment. Rents and purchased transportation costs rose 12.4% in 2005, primarily due to additional funds paid to railroads and drayage companies, related to our JBI business growth.

Fuel cost per gallon was approximately 39% higher in 2005, over 2004. We have fuel surcharge programs in place with the majority of our customers that allow us to recognize and adjust charges relatively quickly when fuel costs change. We were able to recover substantially all of our increased fuel costs experienced during the third quarter of 2005. The 9.7% increase in depreciation and amortization expense was primarily due to higher new tractor purchase prices and a 3% increase in the size of the company-owned tractor fleet.

The 5.6% decline in insurance and claims costs was primarily an overall result of lower accident and claims experience in 2005. We continue to make safety a primary focus item throughout our entire organization. The category of general and administrative expenses includes driver recruiting and testing, legal and professional fees and contributions expense. This expense category increased 61.0% in 2005. Our legal and professional fees rose in 2005, primarily due to our arbitration dispute with the BNSF Railway. As previously announced, we made a gift to the University of Arkansas that represented approximately $5.6 million of pretax expense during the current quarter. Gains and losses on asset dispositions are also classified in this expense category. We experienced a net gain of approximately $.2 million in 2005, compared with a $.4 million gain in 2004. The special charges expense incurred during the current quarter was due to the arbitration decision discussed earlier.

Interest expense declined approximately $.3 million in 2005, due to reduced debt levels. We also paid off all of our remaining capital lease obligations in late 2004. We accrued approximately $.7 million of interest expense during the current quarter related to the income tax contingency. Our effective income tax rate was 36.6% for the third quarter of 2005 and 40.5% in 2004. In determining our quarterly provision for income taxes, we use an estimated annual effective tax rate, which is based on our expected annual income, statutory tax rates and best estimate of non-deductible and non-taxable items of income and expense and the ultimate outcome of tax audits. The lower effective income tax rate in 2005 reflects changes in estimates of state income taxes and non-deductible and non-taxable items as they relate to expected annual income. See “Risk Factors” for additional information on income taxes.

We expect our effective income tax rate to approximate 38.5% for calendar year 2005.

The equity in loss of associated company item on our consolidated statement of earnings reflects our share of the operating results for Transplace, Inc. (TPI).

Comparison of Nine Months Ended September 30, 2005 to Nine Months Ended September 30, 2004

	Summary of Operating Segments Results For The Nine Months Ended September 30
	(dollars in millions)
	Operating Revenue								Operating Income
	2005			2004			% Change		2005		2004
JBT	$	737		$	680		8	%	$	78.6	$	74.4
JBI	925			789			17		86.4		93.9
DCS	622			558			12		71.5		51.0
Other	—			—			—		.8		.8
Subtotal	2,284			2,027			13	%	237.3		220.1
Inter-segment eliminations	(14		)	(12		)	—		—		—
Total	$	2,270		$	2,015		13	%	$	237.3	$	220.1

Overview

Our total consolidated operating revenue for the nine months ended September 30, 2005 was $2,270 million, an increase of approximately 13% over the $2,015 million in the comparable period of 2004. Fuel surcharge revenue had an impact on this comparison. The amount of fuel surcharge revenue billed during the nine month period ended September 30, 2005, was $116 million more than the amount billed during the comparable period in 2004. Excluding fuel surcharges, total operating revenue during the first nine months of 2005 increased 7% over 2004. We believe that meaningful analysis of our financial performance and revenue growth requires that fuel surcharge revenue, which can fluctuate significantly between reporting periods, be excluded when making revenue comparisons.

JBT segment revenue totaled $737 million for the nine months ended September 30, 2005, an increase of 8% over the $680 million in the comparable period of 2004. If the amount of fuel surcharge revenue was excluded from both the 2005 and 2004 periods, segment revenue would have increased 3%. This 3% increase in revenue was primarily a result of a 5.7% increase in revenue per loaded mile, exclusive of fuel surcharges, partly offset by a decline in load count and a small decrease in the average size of the tractor fleet. The increase in revenue per loaded mile, excluding fuel surcharges, contributed to the improvement in operating income of the JBT segment. The higher revenue per mile was primarily a result of rate increases and our capacity management activities. The positive impact of revenue per mile was partly offset by increases in driver compensation and recruiting expenses, as well as equipment ownership, the rapid increase of fuel costs and higher operating expenses such as tolls. Lower miles per tractor also negatively impacted operating income in the current quarter. JBT operating income for the first nine months of 2005 was $78.6 million, compared with $74.4 million in 2004. The operating ratio of the JBT segment was 89.3% in 2005 and 89.1% in 2004.

JBI segment revenue increased 17%, to $925 million during the first nine months of 2005, compared with $789 million in 2004. If the amount of fuel surcharge revenue was excluded from both the 2005 and 2004 periods, the increase in JBI revenue would have been 11%. This increase in revenue was driven by a strong pricing environment, with revenue per loaded mile, excluding fuel surcharge, up 5.9% in 2005 over the comparable period of 2004. Load volume rose 3% over the prior year. Operating income of the JBI segment declined to $86.4 million, including the arbitration settlement charges, in the first nine months of 2005, compared with $93.9 million in 2004. Excluding the arbitration charges, current period operating income totaled $112.2 million. The operating ratio of the JBI segment was 90.7% in 2005, including the BNI arbitration settlement, and 88.1% in 2004. The segment operating ratio for the current period was 87.9%, before the arbitration charges.

DCS segment revenue grew 12%, to $622 million in 2005, from $558 million in 2004. If fuel

surcharge revenue was excluded from both the 2005 and 2004 periods, the increase in DCS revenue would have been 7%. This increase in DCS segment revenue was driven by a 4.7% increase in net revenue per tractor, excluding fuel surcharge, and a 3% increase in the size of the average tractor fleet. Operating income of our DCS segment climbed to $71.5 million in 2005, from $51.0 million in 2004. The DCS operating ratio was 88.5% in 2005 and 90.9% in 2004. Improvement in operating income was driven by higher revenue per tractor and reduced idle tractor count, partly offset by increases in equipment rental, driver compensation, revenue equipment ownership and toll expenses.

	Nine months Ended September 30
	Percentage of				Percentage Change
	Operating Revenues				Between Periods
	2005		2004		2005 vs. 2004
Operating revenues	100.0	%	100.0	%	12.6	%
Operating expenses
Salaries, wages and employee benefits	27.9		30.4	%	3.4	%
Rents and purchased transportation	33.4		32.8		14.5
Fuel and fuel taxes	12.2		10.2		34.9
Depreciation and amortization	5.3		5.5		8.3
Operating supplies and expenses	4.3		4.6		6.3
Insurance and claims	1.7		2.2		(10.2	)
Operating taxes and licenses	1.2		1.3		3.1
General and administrative expenses, net of gains	1.6		1.2		46.2
Communication and utilities	.8		.9		(3.3	)
Arbitration settlement	1.1		—		—
Total operating expenses	89.5		89.1		13.2
Operating income	10.5		10.9		7.8
Interest income	—		—		(64.1	)
Interest expense	.2		.3		(35.1	)
Equity in loss of associated companies	.1		.1		47.3
Earnings before income taxes	10.2		10.5		8.3
Income taxes	3.9		4.2		2.6
Net earnings	6.3	%	6.3	%	12.3	%

Consolidated Operating Expenses

Total operating expenses during the nine month period ended September 30, 2005 increased 13.2%, including the arbitration charges, over the comparable period of 2004. Operating revenues rose 12.6% during this same period. The combination of the change in these two categories resulted in our operating ratio increasing by 40 basis points to 89.5% in 2005, from 89.1% in 2004. Excluding the arbitration charges, total operating expenses for the nine months ended September 30, 2005 increased 11.8% and the operating ratio was 88.4%. Operating income for the nine months ended September 30, 2005 was $237.3, including the arbitration charges, and $263.1 million before the arbitration charges, compared with $220.1 million in 2004. Increases in revenue per mile and revenue per tractor, exclusive of fuel surcharges, were the most significant factors contributing to our improved operating income, before arbitration charges. The total cost of salaries, wages and employee benefits increased 3.4% in 2005. However, this expense category declined to 27.9% of operating revenues in 2005, from 30.4% in 2004. While we experienced some increases in driver compensation and other wages and benefits costs during the first nine months of 2005, the primary reasons for this expense category decline as a

percentage of revenue were higher revenue per loaded mile and continued growth of Intermodal volume. Rents and purchased transportation costs rose 14.5% in 2005, primarily due to additional funds paid to railroads and drayage companies, related to JBI business growth.

The 34.9% increase in fuel and fuel taxes was primarily a result of fuel prices averaging about 35% higher in 2005 and a slight decline in miles per gallon. The higher fuel costs in 2005 were substantially recovered through additional fuel surcharges billed to our customers. While rapid changes in fuel cost per gallon may result in certain timing differences of fuel costs and fuel surcharge recovery between accounting periods, we have been able to recover the majority of our higher 2005 fuel costs per gallon. The 8.3% increase in depreciation and amortization expense was partly due to higher new tractor purchase prices and a 3% increase in the size of the company-owned tractor fleet. The 10.2% decline in insurance and claims expenses was primarily due to reduced claims costs and reflects our continued focus on safety throughout the organization.

The significant increase in general and administrative expenses reflects higher driver recruiting and testing expenses, legal and professional fees and contributions. Our legal and professional fees rose in 2005, primarily due to our arbitration dispute with BNI. As previously announced, we made a gift to the University of Arkansas that represented approximately $5.6 million of pretax expense during the current period. Gains and losses on asset dispositions are also classified in this expense category. We recognized a net gain of $2.0 million in 2005, compared with a $.1 million gain in 2004. The special charges expense incurred during the current period was due to the arbitration decision discussed earlier. Interest expense declined approximately $2.5 million in 2005, due to reduced debt levels. We also paid off all of our remaining capital lease obligations in late 2004. We accrued $1.9 million of interest expense during the first nine months of 2005 related to our income tax contingency. Interest income also declined in 2005, as we utilized available cash in late 2004 to reduce debt and pay off our capital lease obligations. Our effective income tax rate was 38.3% in 2005 and 40.5% in 2004. The lower effective income tax rate in 2005 reflects changes in estimates of state income taxes and non-deductible and non-taxable items as they relate to expected annual income.

The equity in loss of associated company item on our consolidated statement of earnings reflects our share of the operating results for TPI.

Liquidity and Capital Resources

Cash Flow

We typically generate significant amounts of cash from operating activities. Net cash provided by operating activities totaled $279 million during the first nine months of 2005, compared with $290 million for the same period of 2004. Our higher level of net earnings, relative to 2004, positively impacted net cash provided by operating activities by approximately $15 million. However, this and other increases in cash were more than offset by changes in deferred income taxes, an increase in accounts receivable, decreases of accrued payroll and other accrued expenses, all of which reduced net cash provided during the current nine months. We also paid approximately $42 million for estimated 2005 income taxes during the second quarter. Net cash used in investing activities was $150 million in 2005, compared with $183 million in 2004. The lower level of cash used in investing activities during the current nine month period was primarily due to fewer new tractors being purchased or upgraded relative to 2004. Net cash used in financing activities was $149 million in 2005 and $127 million in 2004. Cash from financing activities was used primarily to purchase treasury stock and pay dividends during the current nine month period. The majority of this cash was provided from our revolving line of credit and operating cash flow. We have reclassified certain amounts from our 2004 financial statements so they will be consistent with the way we have classified amounts in 2005.

Selected Balance Sheet Data

	As of
	September 30, 2005		December 31, 2004	September 30, 2004
Working capital ratio	1.36		1.51	1.31

Current maturities of long-term debt, current installments of obligations under capital leases and line-of-credit borrowings (millions)	—		—	$	50.0

Total debt, including current maturities, obligations under capital leases and line-of-credit borrowings (millions)	$	75.7	—	$	50.0

Total debt to equity	.10		—	.06

Total debt as a ratio to total capital	.09		—	.06

At December 31, 2004, we had no balance sheet debt. During the first nine months of 2005, we utilized $75.7 million of net borrowings under our revolving line of credit and cash generated by operating activities and sale of equipment primarily to fund approximately $201 million of treasury stock purchases, to pay our regular quarterly dividends and to purchase property and equipment.

Liquidity

Our need for capital typically relates to our acquisition of revenue equipment to support growth and the replacement of older tractors and trailing equipment with new, late model equipment. We are frequently able to accelerate or postpone some equipment replacements depending on market conditions. In the past we have obtained capital through public stock offerings, debt financing, revolving lines of credit and cash generated from operations. We have also utilized capital and operating leases, from time to time, to acquire revenue equipment. Equipment acquired under capital leases is initially recorded at the net present value of the minimum lease payments. We had an agreement with our primary tractor supplier for guaranteed residual or trade-in values for certain equipment on capitalized leases. We have utilized these values in previous periods in accounting for these capitalized leases. We had no obligations outstanding under capital lease arrangements at September 30, 2005. To date, none of our operating leases contain any guaranteed residual value clauses.

We have spent approximately $201 million on stock repurchases through September 30, 2005. We have authorization to spend an additional $399 million to repurchase our common stock through April 2010.

We believe that 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.

	Contractual Cash Obligations As of September 30, 2005 Amounts Due by Period
	(dollars in millions)
			One Year		One To		Four To		After
	Total		Or Less		Three Years		Five Years		Five Years
Operating leases	$	124	$	60	$	60	$	2	$	2
Revolving line of credit	76		—		—		76		—
Subtotal	200		60		60		78		2
Commitments to acquire revenue equipment	92		92		—		—		—
Facilities	1		1		—		—		—
Total	$	293	$	153	$	60	$	78	$	2

	Financing Commitments Expiring By Period As of September 30, 2005
	(dollars in millions)
			One Year		One To		Four To		After
	Total		Or Less		Three Years		Five Years		Five Years
Revolving credit arrangements*	$	150	$	—	$	—	$	150	$	—
Standby letters of credit	26		26		—		—		—
Total	$	176	$	26	$	—	$	150	$	—

* Effective October 6, 2005, we increased the maximum amount that we may borrow under our revolving credit arrangements to $200 million.

Our net capital expenditures were $141 million during the first nine months of 2005, compared with $195 million for the same period of 2004. As mentioned above, the reduced level of capital expenditures in 2005 was primarily due to fewer tractor purchases and upgrades. We are currently committed to spend approximately $93 million, net of $45 million of expected proceeds from sale or trade-in allowances, on revenue equipment and construction of new facilities during the upcoming year.

Risk Factors

You should refer to Item 7 of our annual report (Form 10-K) for the year ended December 31, 2004, under the caption “Risk Factors” for specific details on the following factors and events that are not within our control and could affect our financial results.

• Our business is subject to general economic and business factors that are largely out of our control, any of which could have a material adverse effect on our results of operations.

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

• 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.

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

• As previously disclosed, an arbitration process commenced on July 2, 2004 with the BNSF Railway (BNI). BNI provides a significant amount of rail transportation services to our JBI business segment. The arbitration process was initiated in accordance with the terms of our Joint Service Agreement (JSA) with BNI, after we were unable to resolve our disagreements through mediation. We announced that an interim award was issued by the arbitration panel on September 16, 2005. As a result of this decision, we recorded in the current quarter, pretax charges of $25.8 million, or $16.5 million after income taxes. These charges approximate ten cents per diluted share and are reflected on our condensed consolidated statements of earnings as “Arbitration settlement”. We also estimate this decision will reduce net earnings on a go-forward basis by approximately two cents per diluted share beginning in the fourth quarter of 2005, due to an increase in purchased transportation expense. On October 19, 2005, the arbitration panel issued an order terminating this arbitration proceeding and declaring that the interim award be adopted as the final award in this matter. Normal commercial business activity between the parties, including load tendering, load tracing, billing and payments, has continued on a timely basis during the entire mediation and arbitration process.

• Difficulty in attracting drivers could affect our profitability and ability to grow.

• Ongoing insurance and claims expenses could significantly reduce our earnings.

• As previously disclosed, the Internal Revenue Service (IRS) has proposed to disallow the tax benefits associated with certain sale-and-leaseback transactions, which we entered into in 1999. Based on events occurring subsequent to December 31, 2004, we established a reserve for a contingent tax liability of $33.6 million at December 31, 2004. The liability for this contingency, which included estimated interest expense, was included on our consolidated balance sheet at December 31, 2004 as a long-term liability. We accrued approximately $1.9 million of interest expense during the first nine months of 2005 related to this contingency. We continue to believe our tax positions comply with applicable tax law for which we received advice and opinions from our then external public accountants and attorneys prior to entering into these transactions and we continue to vigorously defend against the IRS position using all administrative and legal processes available. If the IRS were successful in disallowing 100% of the tax benefit from this transaction, the total ultimate impact on liquidity could be approximately $44 million, excluding interest.

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

• We operate in a highly 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.

• Rapid changes in fuel costs can impact our periodic financial results.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Our earnings are affected by changes in short-term interest rates as a result of our use of revolving lines of credit. From time to time we utilize interest rate swaps to mitigate the effects of interest rate changes; none were outstanding at September 30, 2005. Risk can be estimated by measuring the impact of a near-term adverse movement of 10% in short-term market interest rates. If short-term market interest rates average 10% more during the next twelve months, there would be no material adverse impact on our results of operations based on variable rate debt outstanding at September 30, 2005.

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 three and nine months ended September 30, 2005. 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 its 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 fluctuation in foreign currency exchange rates.

ITEM 4. CONTROLS AND PROCEDURES

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 internal controls and disclosure controls. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of September 30, 2005, in alerting them on a timely basis to material information required to be disclosed by us in our periodic reports to the Securities and Exchange Commission.

In addition, there were no changes in our internal control over financial reporting during our first nine months of 2005 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II

OTHER INFORMATION

Item 1. Legal Proceedings

An arbitration process with the BNSF Railway (BNI) was finalized on October 19, 2005. See “Risk Factors” for additional information on this matter.

Item 2. Changes in Securities

The following tables provide information regarding our purchases of J.B. Hunt Transport Services, Inc. common stock during the periods indicated.

The following purchases were made pursuant to a program adopted by our Board of Directors on December 14, 2004. At that time our Board authorized the purchase of up to $100 million worth of our common stock.

	Total Number of	Average Price		Authorization
Period	Shares Purchased	Paid Per Share		Remaining
1/1/2005-1/31/2005	748,800	$	20.87	$	84,372,764
2/1/2005-2/28/2005	2,889,200	22.38		$	19,713,987
3/1/2005-3/31/2005	889,500	22.16		$	1,682
Total	4,527,500			$	1,682

The following purchases were made pursuant to a program adopted by our Board of Directors on April 21, 2005. This program authorized the purchase of up to $500 million of our common stock over the next five years.

	Total Number of	Average Price		Authorization
Period	Shares Purchased	Paid Per Share		Remaining
4/1/2005-4/30/2005	350,000	$	19.71	$			493,102,680
5/1/2005-5/31/2005	350,000	19.68		$			486,214,475
6/1/2005-6/30/2005	457,165	18.90		$		477,575,035
7/1/2005-7/31/2005	1,134,010	19.53		$		455,427,517
8/1/2005-8/31/2005	2,117,361	18.50		$	416,251,650
9/1/2005-9/30/2005	928,351	18.12		$	399,434,045
Total	5,336,887			$	399,434,045

Item 3. Defaults Upon Senior Securities

None applicable.

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

None applicable.

Item 5. Other Information

On October 27, 2005, the Compensation Committee (the “Committee”) of our Board of Directors approved the base salaries (which were effective as of October 30, 2005) for certain of our executive officers. This salary information, as well as, additional information regarding benefits of these officers is included as Exhibit 10.2 filed with this Form 10-Q.

On October 27, 2005, the Committee in accordance with the terms of our Amended and Restated Management Incentive Plan (the “Plan”) approved a new restricted stock agreement form which is applicable to certain restricted stock which will be awarded to eligible employees and directors from time to time. This form of restricted stock agreement is included as Exhibit 10.3 filed with this Form 10-Q.

Item 6. Exhibits and Reports on Form 8-K

a)	Exhibits

	10.1	Amendment No. 1 to Credit Agreement

	10.2	Summary of Compensation Arrangements With Named Executive Officers

	10.3	Form of Restricted Stock Agreement Applicable to Eligible Employees and Directors

	31.1	Certification by Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

	31.2	Certification by Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

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

	32.2	Certification by Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

b)	Reports on Form 8-K

	On September 20, 2005, we issued a news release announcing an arbitrators’ decision in a dispute with the BNSF Railway.

	On October 14, 2005 we filed a current report on Form 8-K announcing our financial results for the third quarter ended September 30, 2005.

SIGNATURES

Pursuant to the requirements 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 31st day of October, 2005.

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


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


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


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

EX-10.1 2 a05-19255_1ex10d1.htm MATERIAL CONTRACTS

Exhibit 10.1

AMENDMENT NO. 1 TO CREDIT AGREEMENT

This Amendment No. 1 to Credit Agreement (this “Agreement”) dated as of October 5, 2005 and effective as of October 6, 2005, is made by and among J.B. HUNT TRANSPORT SERVICES, INC., an Arkansas corporation (the “Borrower”), the banks and other financial institutions whose signatures appear on the signature pages hereof or which hereafter become parties hereto (collectively the “Banks” and individually a “Bank”), SUNTRUST BANK, LASALLE BANK NATIONAL ASSOCIATION, DEUTSCHE BANK AG NEW YORK BRANCH and THE BANK OF TOKYO-MITSUBISHI, LTD. (collectively the “Co-Syndication Agents” and individually a “Syndication Agent”) and BANK OF AMERICA, N.A. (“Bank of America”), a national banking association, as administrative agent for the Banks hereunder (in such capacity, the “Administrative Agent”).

W I T N E S S E T H:

WHEREAS, the Borrower, the Administrative Agent and the Banks have entered into that certain Credit Agreement dated as of April 27, 2005 (as hereby amended and as from time to time hereafter further amended, modified, supplemented, restated, or amended and restated, the “Credit Agreement”; the capitalized terms as used in this Agreement not otherwise defined herein shall have the respective meanings given thereto in the Credit Agreement), pursuant to which the Banks have made available to the Borrower a revolving credit facility; and

WHEREAS, the Borrower has advised the Administrative Agent and the Banks that the Borrower desires to amend certain provisions of the Credit Agreement as set forth herein in connection with adjustments to the Permitted Securitized Receivables Transaction and the ability of J.B. Hunt Transport, Inc. to guarantee Indebtedness permitted under the Credit Agreement, and the Administrative Agent and the Banks have agreed so to amend the Credit Agreement on the terms and conditions set forth herein;

NOW, THEREFORE, in consideration of the premises and further valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows:

1. Amendments to Credit Agreement. Subject to the terms and conditions set forth herein, the Credit Agreement is hereby amended as follows:

(a) The definition of “Permitted Securitized Receivables Transaction” in Section 1.1 is hereby amended by deleting “$100,000,000” where it appears therein and inserting “$200,000,000” in lieu thereof.

(b) Section 9.6 is hereby amended by inserting the following proviso at the end of such section:

“; provided, however, notwithstanding the foregoing, Transport may guaranty Indebtedness of the Borrower permitted under this Agreement.”

2. Conditions Precedent. The effectiveness of this Agreement and the amendments to the Credit Agreement herein provided are subject to the satisfaction of the following conditions precedent:

(a) The Administrative Agent shall have received each of the following documents or instruments in form and substance reasonably acceptable to the Administrative Agent:

(i) fourteen (14) original counterparts of this Agreement, duly executed by the Borrower, the Administrative Agent, and the Majority Banks, together with all schedules and exhibits thereto duly completed;

(ii) such other documents, instruments, opinions, certifications, undertakings, further assurances and other matters as the Administrative Agent shall reasonably require.

(b) payment of (i) all reasonable out of pocket fees and expenses of counsel to the Administrative Agent incurred in connection with the execution and delivery of this Agreement to the extent invoiced prior to the date hereof; and (ii) all other fees agreed to be paid.

3. Reaffirmation by each Guarantor. Each Guarantor hereby consents, acknowledges and agrees to the amendments of the Credit Agreement set forth herein.

4. Representations and Warranties. In order to induce the Administrative Agent and the Banks to enter into this Agreement, the Borrower represents and warrants to the Administrative Agent and the Banks as follows:

(a) The representations and warranties of (i) the Borrower contained in Article VII (after giving effect to this Agreement) and (ii) each Loan Party contained in each other Loan Document or in any document furnished at any time under or in connection herewith or therewith, shall be true and correct on and as of the date hereof, except to the extent that such representations and warranties specifically refer to an earlier date, in which case they shall be true and correct as of such earlier date, and except that for purposes of this Agreement, the representations and warranties contained in Section 7.4 shall be deemed to refer to the most recent statements furnished pursuant to clause (a) of Section 8.1.

(b) There does not exist any pending or threatened action, suit, investigation or proceeding in any court or before any arbitrator or Governmental Authority that purports to affect any transaction contemplated under this Agreement or the ability of the Borrower to perform its respective obligations under this Agreement;

(c) There has not occurred since December 31, 2004, any event or events which, individually or in the aggregate, would reasonably be expected to have a Materially Adverse Effect; and

(d) No Default has occurred and is continuing.

5. Entire Agreement. This Agreement, together with all the Loan Documents (collectively, the “Relevant Documents”), sets forth the entire understanding and agreement of the parties hereto in relation to the subject matter hereof and supersedes any prior negotiations and agreements among the parties relative to such subject matter. No promise, condition, representation or warranty, express or implied, not herein set forth shall bind any party hereto, and not one of them has relied on any such promise, condition, representation or warranty. Each of the parties hereto acknowledges that, except as otherwise expressly stated in the Relevant Documents, no representations, warranties or commitments, express or implied, have been made by any party to the other. None of the terms or conditions of this Agreement may be changed, modified, waived or canceled orally or otherwise, except as permitted pursuant to Section 14.1 of the Credit Agreement.

6. Full Force and Effect of Agreement. Except as hereby specifically amended, modified or supplemented, the Credit Agreement and all other Loan Documents are hereby confirmed and ratified in all respects by each party hereto and shall be and remain in full force and effect according to their respective terms.

7. Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed an original as against any party whose signature appears thereon, and all of which shall together constitute one and the same instrument.

8. Governing Law. This Agreement shall in all respects be governed by, and construed in accordance with, the laws of the state of New York.

9. Enforceability. Should any one or more of the provisions of this Agreement be determined to be illegal or unenforceable as to one or more of the parties hereto, all other provisions nevertheless shall remain effective and binding on the parties hereto.

10. References. All references in any of the Loan Documents to the “Credit Agreement” shall mean the Credit Agreement, as amended hereby.

11. Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the Borrower, the Administrative Agent and each of the Banks, and their respective successors, assigns and legal representatives; provided, however, that the Borrower, without the prior consent of the Required Banks, may not assign any rights, powers, duties or obligations hereunder.

12. Expenses. The Borrower agrees to pay to the Administrative Agent all reasonable out-of-pocket expenses incurred or arising in connection with the negotiation and preparation of this Agreement.

[Signature pages follow.]

IN WITNESS WHEREOF, the parties hereto have caused this Amendment No. 1 to Credit Agreement to be made, executed and delivered by their duly authorized officers as of the day and year first above written.

	J.B. HUNT TRANSPORT SERVICES, INC.

	By:
		Name:
		Title:


	J.B. HUNT TRANSPORT, INC.

	By:
		Name:
		Title:

	BANK OF AMERICA, N.A., as Administrative Agent

	By:
		Name:
		Title:


	BANK OF AMERICA, N.A., as a Bank

	By:
		Name:
		Title:

	SUNTRUST BANK, as Co-Syndication Agent and as a Bank


	By:
		Name:
		Title:

	LASALLE BANK NATIONAL ASSOCIATION, as Co-Syndication Agent and as a Bank


	By:
		Name:
		Title:

	DEUTSCHE BANK AG NEW YORK BRANCH,
	as Co-Syndication Agent and as a Bank


	By:
		Name:
		Title:

	THE BANK OF TOKYO-MITSUBISHI, LTD.,
	as Co-Syndication Agent and as a Bank


	By:
		Name:
		Title:

	JPMORGAN CHASE BANK, N.A., as a Bank


	By:
		Name:
		Title:

	REGIONS BANK, as a Bank


	By:
		Name:
		Title:

	BRANCH BANKING AND TRUST COMPANY, as a Bank


	By:
		Name:
		Title:

	UBS LOAN FINANCE LLC, as a Bank


	By:
		Name:
		Title:

	U.S. BANK NATIONAL ASSOCIATION, as a
	Bank


	By:
		Name:
		Title:

SCHEDULE 1(a)

TO SENIOR REVOLVING CREDIT FACILITY

BANKS’ COMMITMENTS

Bank	Commitment		Percentage
Bank of America, N.A.	$	29,000,000.00	14.5000	%
SunTrust Bank	$	24,000,000.00	12.0000	%
LaSalle Bank National Association	$	24,000,000.00	12.0000	%
Deutsche Bank AG New York Branch	$	24,000,000.00	12.0000	%
The Bank of Tokyo-Mitsubishi, Ltd.	$	24,000,000.00	12.0000	%
JPMorgan Chase Bank, N.A.	$	15,000,000.00	7.5000	%
Regions Bank	$	15,000,000.00	7.5000	%
Branch Banking and Trust Company	$	15,000,000.00	7.5000	%
UBS Loan Finance LLC	$	15,000,000.00	7.5000	%
U.S. Bank National Association	$	15,000,000.00	7.5000	%

TOTAL	$	200,0000,000.00	100.0000	%

EX-10.2 3 a05-19255_1ex10d2.htm MATERIAL CONTRACTS

Exhibit 10.2

SUMMARY OF COMPENSATION ARRANGEMENTS WITH NAMED EXECUTIVE OFFICERS

On October 27, 2005, the Compensation Committee (the “Committee”) our Board of Directors approved the following base salaries (effective as of October 30, 2005) and the following other compensation amounts (effective January 1, 2006) as indicated:

							Restricted
	Base				Other Annual		Stock
Named Executive Officer	Salary		Bonus		Compensation		(No. of Shares)	All Other
	($)		($)		($)		(3)	($)

Wayne Garrison
Chairman of the Board	$	500,000		(1)		(2)	20,000		(4)

Kirk Thompson
President and CEO	600,000			(1)		(2)	35,000		(4)

Jerry Walton
EVP, Finance/
Administration and CFO	355,000			(1)		(2)	10,000		(4)

Paul Bergant
EVP, Marketing, CMO,
President of Intermodal	315,000			(1)		(2)	10,000		(4)

Craig Harper
EVP, Operations and COO	305,000			(1)		(2)	17,000		(4)

(1)	We have a performance-based bonus program that is related to our earnings per share (EPS) for calendar year 2006. According to the 2006 EPS bonus plan, each of our named executive officers may earn a bonus ranging from 5% to 220% of his annual base salary. Based on our current expectations for 2006 EPS, each named executive officer can be projected to earn a bonus equal to between 25% and 100% of his base salary.

(2)	We will reimburse each named executive officer up to $10,000 for actual expenses incurred for tax, legal and estate plan preparation services.

(3)	The Committee awarded shares of restricted stock to each named executive officer as indicated. The restricted shares vest over various periods ranging up to ten years.

(4)	We have a 401(k) retirement plan that includes matching contributions on behalf of each of the named executive officers. We expect to contribute to the plan on behalf of each named executive officer approximately $6,000 during 2006.

EX-10.3 4 a05-19255_1ex10d3.htm MATERIAL CONTRACTS

Exhibit 10.3

RESTRICTED STOCK AGREEMENT

for the

J. B. HUNT TRANSPORT SERVICES, INC.

AMENDED AND RESTATED MANAGEMENT INCENTIVE PLAN

THIS Restricted Stock Agreement (“Agreement”) made as of by and between J. B. Hunt Transport Services, Inc. (“Company”) and (“Recipient”):

WHEREAS, the Company maintains the J.B. Hunt Transport Services, Inc. Amended and Restated Management Incentive Plan (the “Plan”) under which the Company’s Compensation Committee of the Board of Directors (“Committee”) may, among other things, award shares of the Company’s $.01 par value Common Stock (“Common Stock”) to such members of the Company’s management as the Committee may determine, subject to terms, conditions, or restrictions as it may deem appropriate;

WHEREAS, pursuant to the Plan, the Committee has awarded to Recipient a Restricted Stock Award (“Award”) conditioned upon the execution by the Company and the Recipient of this Agreement setting forth all the terms and conditions applicable to such Award in accordance with the laws of the State of Arkansas;

THEREFORE, in consideration of the past services of the Recipient and the mutual promises and covenants contained herein it is hereby agreed as follows:

1. AWARD OF SHARES:

Under the terms of the Plan, the Committee has awarded to the Recipient an Award on (“Award Date”), for shares of Common Stock subject to the terms, conditions and restrictions set forth in this Agreement. There will be no purchase price required by the Recipient in connection with this transaction.

2. AWARD RESTRICTIONS:

The Award vests as described below and each vested portion of the Award shall expire thirty (30) days after each designated vesting date.

Upon each vesting date and upon satisfaction of the requirements of Paragraph 8, the Company shall cause a stock certificate to be delivered, without legend, in an amount reflecting the number of shares vested and registered on the Company’s books

in the name of the Recipient or the Recipient’s beneficiary. Upon receipt of such stock certificate, the Recipient or beneficiary are free, upon compliance with applicable law, to hold or dispose of such certificate at will.

During the vesting period, those shares covered by the Award, but not vested, are not transferable by the Recipient by means of sale, assignment, exchange, pledge or otherwise. However, during the vesting period, the Recipient does have the right to tender for sale or exchange with the Company’s written consent, any such shares in the event of any tender offer within the meaning of Section 14(d) of the Securities Exchange Act of 1934.

3. ADMINISTRATION OF AWARD:

The Restricted Stock shall be maintained in a book-entry account (the “Account”) by and at the Company’s transfer agent until the restrictions associated with such Restricted Stock expire pursuant to Sections 2, 4 or 8. The Recipient shall execute and deliver to the transfer agent one or more stock powers in blank for the Restricted Stock. The Recipient hereby agrees that the transfer agent shall maintain such Account and the related stock power(s) pursuant to the terms of this Agreement until such restrictions expire pursuant to Sections 2 or 4. The shares of Restricted Stock subject to these Awards are not eligible for dividend distributions (other than adjustments described in Paragraph 5), not eligible to be voted and not eligible to be enrolled in any dividend re-investment program until the restrictions thereon expire.

The Committee shall have full authority and discretion (subject only to the express provisions of the Plan) to decide all matters relating to the administration and interpretation of the Plan and this Agreement. All such Committee determinations shall be final, conclusive and binding upon the Company, the Recipient, and any and all interested parties.

4. EMPLOYMENT TERMINATION:

Termination of the Recipient’s employment with the Company for any reason other than death or disability, shall result in forfeiture of the Award on the date of termination to the extent not already vested. If the Recipient terminates employment with the Company due to death or disability during the vesting period, that Award, to the extent not already vested, shall vest in full as of the date of such termination. If the Recipient’s employment terminates on account of “early retirement” (as defined by the Committee), or under special circumstances determined by the Committee, the Award, to the extent not already vested, may be vested in full or in parts as determined by the Committee. The Recipient may designate a beneficiary to receive the stock certificate representing that portion of the Award automatically vested upon death. The Recipient has the right to change such beneficiary designation at will.

5. ADJUSTMENT OF SHARES FOR RECAPITALIZATION, ETC.

In the event there is any change in the outstanding Stock of the Company by reason of any reorganization, recapitalization, stock split, stock dividend, combination of shares or otherwise, there shall be substituted for or added to each share of Stock theretofore appropriated or thereafter subject, or which may become subject, to this Award, the number and kind of shares of stock or other securities into which each

outstanding share of Stock shall be so changed or for which each such share shall be exchanged, or to which each such share shall be entitled, as the case may be. Adjustment under the preceding provisions of this Section 5 will occur automatically upon any such change in the outstanding Stock of the Company. No fractional interest will be issued under the Plan on account of any such adjustment.

6. COMPANY RECORDS

Records of the Company or its Subsidiaries or Affiliates regarding any period(s) of service, termination of service and the reason therefore, and other matters shall be conclusive for all purposes hereunder, unless determined by the Company to be incorrect.

7. NO LIABILITY FOR GOOD FAITH DETERMINATION.

The members of the Board and the Committee shall not be liable for any act, omission, interpretation or determination taken or made in good faith with respect to this Agreement or the Restricted Stock granted hereunder and all members of the Board or the Committee and each and any officer or employee of the Company acting on their behalf shall, to the extent permitted by law, be fully indemnified and protected by the Company in respect of any such action, determination or interpretation.

8. WITHHOLDING TAXES.

The Company will require the Recipient receiving the shares of Common Stock under an Award, to reimburse the Company for such taxes required to be withheld by the Company and withhold any distribution in whole or in part until the Company is so reimbursed. The Recipient may satisfy the withholding obligation using cash or Company Common Stock owned (other than through this Award) by the Recipient for at least six months prior to the vesting date.

9. IMPACT ON OTHER BENEFITS:

The value of the Award (either on the Award Date or at the time the shares are vested) shall not be includable as compensation or earnings for purposes of any other benefit plan offered by the Company.

10. ACCELERATION OF VESTING:

Notwithstanding anything contained in this Agreement to the contrary, in the event that, at any time following the date of a “change of control” (as hereinafter defined) (i) a Recipient’s employment with the Company or one of its subsidiaries terminates as a result of such Recipient’s retirement, termination without “just cause” (as hereinafter defined) by the Company or one of its subsidiaries, or resignation by the Recipient for good reason; or (ii) with respect to a recipient employed by one of the Company’s subsidiaries, a “sale transaction” (as hereinafter defined) is effected; then all vesting restrictions on any shares of the Company’s Common Stock or acquiring Company Common Stock awarded to that participant under this Agreement shall immediately lapse and such shares shall be vested.

For purposes of this Plan, “just cause” shall mean the willful and continued failure of a Recipient to substantially perform his duties with the Company or one of its subsidiaries after a written demand for substantial performance is delivered to such participant by the Board of Directors of the Company, or its subsidiary, which specifically identifies the manner in which the board believes that such participant has not substantially performed his duties; or willful misconduct by the Recipient materially injures the Company or its subsidiaries monetarily or otherwise (it being understood that no act, or failure to act, on the part of a recipient shall be considered “willful” unless done, or omitted to be done, by such Recipient in bad faith and with knowledge that the action or omission was not in the best interest of the Company or such subsidiary).

“Sale transaction” shall mean, with respect to an employee of one of the Company’s subsidiaries, the direct or indirect sale or other disposition by the Company of in excess of fifty percent (50%) of the voting capital stock of such subsidiary, the complete liquidation of such subsidiary, or the sale by such subsidiary or all or substantially all of its assets.

For purposes of this Paragraph 10, “change of control” means:

(1) Any transaction involving the acquisition (“Acquisition Transaction”), by any person, corporation, partnership or other entity, or any group (collectively referred to herein as a “person”), of beneficial ownership of shares representing thirty percent (30%) or more of the Company’s then outstanding voting securities entitled to vote generally in the election of directors (“Voting Securities”), but excluding, for this purpose, any such acquisition by (a) the Company or any of its subsidiaries or any employee benefit plan (or related trust) of the Company, or any of its subsidiaries, or (b) any corporation with respect to which immediately following such acquisition, shares representing more than fifty percent (50%) of such corporation’s Voting Securities are beneficially owned, directly or indirectly, by those persons who are the beneficial owners of the Company’s voting securities immediately prior to such acquisition; or

(2) Persons who as of May 1, 2005 constitute the Company’s board of directors (the “Incumbent Board”) cease, for any reason, to constitute at least a majority of the board, provided that any person becoming a director of the Company subsequent to May 1, 2005 whose election was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall, for the purposes of this Agreement, be considered to be a member of the Incumbent Board; or

(3) Approval by the stockholders of the Company of a reorganization, merger or consolidation with respect to which those persons who were the beneficial owners of the Company’s voting securities immediately prior to such reorganization, merger or consolidation, do not, following such reorganization, merger or consolidation, beneficially own, directly or indirectly, shares representing more than fifty percent (50%) of the voting securities of the corporation

resulting from such reorganization, merger or consolidation, or a complete liquidation or dissolution of the Company or the sale or other disposition of all or substantially all of the assets of the Company.

For purposes of this Paragraph 10, “acquisition transaction” means any of the following events:

(a) A merger, reorganization or consolidation involving the Company in which the outstanding stock is converted into or exchanged for the Common Stock of another entity, provided that such other entity has not, prior to or at the time of such merger, reorganization or consolidation, directly or indirectly acquired beneficial ownership of in excess of twenty percent (20%) of the outstanding shares of the Company for consideration other than such Common Stock (such a merger, reorganization or consolidation being herein referred to as a “Stock Merger Transaction”); or

(b) Any merger, reorganization or consolidation involving the Company which is not a Stock Merger Transaction and with respect to which these persons who were the beneficial owners of the Company stock immediately prior to such merger, reorganization, or consolidation, do not, following such merger, reorganization, or consolidation, beneficially own, directly or indirectly, shares representing more than fifty percent (50%) of the Common Stock of the corporation resulting from such merger, reorganization or consolidation, or a complete liquidation or dissolution of the Company or the sale or other disposition of all or substantially all of the assets of the Company.

11. RIGHT TO CONTINUED EMPLOYMENT:

Nothing in this Agreement or in the Plan shall confer on a Recipient any right to continue in the employ of the Company or in any way affect the Company’s right to terminate the Recipient’s employment without prior notice at any time for any and no reason.

12. AMENDMENTS:

This Agreement shall be subject to the terms of the Plan as amended except that the Award that is the subject of this Agreement may not in any way be restricted or limited by any Plan amendment or termination approved after the date of the award without the Recipient’s written consent.

13. FORCE AND EFFECT:

The various provisions of this Agreement are severable in their entirety. Any determination of invalidity or unenforceability of any one provision shall have no effect on the continuing force and effect of the remaining provisions.

14. PREVAILING LAWS:

This Agreement shall be construed and enforced in accordance with and governed by the laws of the State of Arkansas applicable to corporations and the issuance of stock by Arkansas corporations.

15. SUCCESSORS:

This Agreement shall be binding upon and inure to the benefit of the successors, assigns and heirs of the respective parties.

16. NOTICE:

Unless waived by the Company, any notice to the Company required under or relating to this Agreement shall be in writing and addressed to:

J. B. HUNT TRANSPORT SERVICES, INC.

Attention: Kirk Thompson

P. O. Box 130

Lowell, Arkansas 72745

17. TERMS

Any terms used in this Agreement that are not otherwise defined shall have the meanings prescribed to them in the Plan.

18. ENTIRE AGREEMENT:

This Agreement contains the entire understanding of the parties and shall not be modified or amended except in writing and duly signed by the parties. No waiver by either party of any default under this Agreement shall be deemed a waiver of any later default.

IN WITNESS THEREOF, the parties have signed this Agreement as of the date hereof.

	J. B. HUNT TRANSPORT SERVICES, INC.


	By:
	Kirk Thompson
	President and Chief Executive Officer


	Recipient:

EX-31.1 5 a05-19255_1ex31d1.htm 302 CERTIFICATION

Exhibit 31.1

CERTIFICATION BY CHIEF EXECUTIVE OFFICER

PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Kirk Thompson, certify that:

1. I have reviewed this quarterly report on Form 10-Q of J.B. Hunt Transport Services, Inc. (JBHT);

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of JBHT as of, and for the periods presented in this report;

4. JBHT’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for JBHT and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to JBHT, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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;

c) Evaluated the effectiveness of JBHT’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in JBHT’s internal control over financial reporting that occurred during JBHT’s most recent calendar quarter that has materially affected, or is reasonably likely to materially affect, JBHT’s internal control over financial reporting; and

5. JBHT’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to JBHT’s auditors and the audit committee of JBHT’s board of directors:

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect JBHT’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in JBHT’s internal control over financial reporting.

Date: October 31, 2005	/s/ Kirk Thompson
	Kirk Thompson
	President and Chief Executive Officer

EX-31.2 6 a05-19255_1ex31d2.htm 302 CERTIFICATION

Exhibit 31.2

CERTIFICATION BY CHIEF FINANCIAL OFFICER

PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Jerry W. Walton, certify that:

1. I have reviewed this quarterly report on Form 10-Q of J.B. Hunt Transport Services, Inc. (JBHT);

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in JBHT’s internal control over financial reporting.

Date: October 31, 2005	/s/ Jerry W. Walton
	Jerry W. Walton
	Executive Vice President, Finance and
	Administration,
	Chief Financial Officer

EX-32.1 7 a05-19255_1ex32d1.htm 906 CERTIFICATION

Exhibit 32.1

CERTIFICATION BY CHIEF EXECUTIVE OFFICER

PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of J.B. Hunt Transport Services, Inc. (the “Corporation”) on Form 10-Q for the quarterly period ended September 30, 2005 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Kirk Thompson, President and Chief Executive Officer of the Corporation, certify to my knowledge, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S. C. Section 1350) that:

1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Corporation.

Date: October 31, 2005	/s/ Kirk Thompson
	Kirk Thompson
	President and Chief Executive Officer

EX-32.2 8 a05-19255_1ex32d2.htm 906 CERTIFICATION

Exhibit 32.2

CERTIFICATION BY CHIEF FINANCIAL OFFICER

PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of J.B. Hunt Transport Services, Inc. (the “Corporation”) on Form 10-Q for the quarterly period ended September 30, 2005 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Jerry W. Walton, Executive Vice President, Finance and Administration, Chief Financial Officer of the Corporation, certify to my knowledge, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S. C. Section 1350) that:

1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Corporation.

Date: October 31, 2005	/s/ Jerry W. Walton
	Jerry W. Walton
	Executive Vice President, Finance and
	Administration,
	Chief Financial Officer

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Arkansas

71-0335111

Notes to Condensed Consolidated Financial Statements

Workers’ Compensation and Accident Costs

Revenue Equipment

Revenue Recognition

Segments

RESULTS OF OPERATIONS

Overview

Consolidated Operating Expenses

Overview

Consolidated Operating Expenses

Liquidity