10-Q

 UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended September 30, 2017

OR

__ 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)

479-820-0000

(Registrant's telephone number, including area code)

www.jbhunt.com

(Registrant's web site)

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  X            No        

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes  X            No____

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company.  See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer   X    Accelerated filer          Non-accelerated filer        

Smaller reporting company        Emerging growth company       

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [  ]

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

            Yes                No  X             

The number of shares of the registrant’s $0.01 par value common stock outstanding on September 30, 2017 was 109,751,895.

J.B. HUNT TRANSPORT SERVICES, INC.

Form 10-Q

For The Quarterly Period Ended September 30, 2017

Table of Contents

		Page
Part I.    Financial Information
Item 1.	Financial Statements
	Condensed Consolidated Statements of Earnings for the Three and Nine Months Ended September 30, 2017 and 2016	3
	Condensed Consolidated Balance Sheets as of September 30, 2017 and December 31, 2016	4
	Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2017 and 2016	5
	Notes to Condensed Consolidated Financial Statements as of September 30, 2017	6
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	13
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	21
Item 4.	Controls and Procedures	21
Part II.    Other Information
Item 1.	Legal Proceedings	22
Item 1A.	Risk Factors	22
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	22
Item 3.	Defaults Upon Senior Securities	22
Item 4.	Mine Safety Disclosures	22
Item 5.	Other Information	22
Item 6.	Exhibits	22
Signatures		24
Exhibits

2

Part I. Financial Information

ITEM 1. FINANCIAL STATEMENTS

J.B. HUNT TRANSPORT SERVICES, INC.

Condensed Consolidated Statements of Earnings

(in thousands, except per share amounts)

(unaudited)

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2017		2016		2017		2016
Operating revenues, excluding fuel surcharge revenues	$	1,657,380	$	1,538,701	$	4,670,200	$	4,448,709
Fuel surcharge revenues		185,954		151,958		529,208		385,688
Total operating revenues		1,843,334		1,690,659		5,199,408		4,834,397
Operating expenses:
Rents and purchased transportation		947,145		846,238		2,624,707		2,381,547
Salaries, wages and employee benefits		408,340		374,517		1,178,524		1,108,997
Depreciation and amortization		95,959		91,001		281,198		269,717
Fuel and fuel taxes		87,006		74,179		246,725		205,082
Operating supplies and expenses		67,578		62,191		190,085		173,222
Insurance and claims		26,463		21,862		76,930		58,384
General and administrative expenses, net of asset dispositions		29,389		21,025		74,597		61,570
Operating taxes and licenses		10,744		11,665		32,329		34,156
Communication and utilities		5,738		5,004		16,337		15,063
Total operating expenses		1,678,362		1,507,682		4,721,432		4,307,738
Operating income		164,972		182,977		477,976		526,659
Net interest expense		8,310		6,485		22,521		19,347
Earnings before income taxes		156,662		176,492		455,455		507,312
Income taxes		56,277		67,067		154,499		192,778
Net earnings	$	100,385	$	109,425	$	300,956	$	314,534
Weighted average basic shares outstanding		109,703		112,630		110,066		112,790
Basic earnings per share	$	0.92	$	0.97	$	2.73	$	2.79
Weighted average diluted shares outstanding		110,628		113,363		111,154		113,709
Diluted earnings per share	$	0.91	$	0.97	$	2.71	$	2.77
Dividends declared per common share	$	0.23	$	0.22	$	0.69	$	0.66

See Notes to Condensed Consolidated Financial Statements.

3

J.B. HUNT TRANSPORT SERVICES, INC.

Condensed Consolidated Balance Sheets

(in thousands)

	September 30, 2017		December 31, 2016
	(unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	7,707	$	6,377
Trade accounts receivable, net		858,720		745,288
Prepaid expenses and other		140,164		194,016
Total current assets		1,006,591		945,681
Property and equipment, at cost		4,507,917		4,258,915
Less accumulated depreciation		1,632,108		1,440,124
Net property and equipment		2,875,809		2,818,791
Goodwill		55,737		-
Other intangible assets, net		58,685		-
Other assets		57,101		64,516
Total assets	$	4,053,923	$	3,828,988
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Trade accounts payable	$	493,585	$	384,308
Claims accruals		117,645		109,745
Accrued payroll		47,514		51,929
Other accrued expenses		23,011		27,152
Total current liabilities		681,755		573,134
Long-term debt		1,084,801		986,278
Other long-term liabilities		68,564		64,881
Deferred income taxes		746,833		790,634
Stockholders' equity		1,471,970		1,414,061
Total liabilities and stockholders' equity	$	4,053,923	$	3,828,988

See Notes to Condensed Consolidated Financial Statements.

4

J.B. HUNT TRANSPORT SERVICES, INC.

Condensed Consolidated Statements of Cash Flows

(in thousands)

(unaudited)

	Nine Months Ended
	September 30,
	2017			2016
Cash flows from operating activities:
Net earnings	$	300,956		$	314,534
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization		281,198			269,717
Share-based compensation		30,953			30,173
(Gain)/Loss on sale of revenue equipment and other		5,716			2,357
Provision for deferred income taxes		(43,801	)		(9,152	)
Changes in operating assets and liabilities:
Trade accounts receivable		(113,432	)		(118,404	)
Other assets		58,230			50,319
Trade accounts payable		100,020			56,827
Income taxes payable or receivable		8,350			73,512
Claims accruals		7,901			22
Accrued payroll and other accrued expenses		(7,542	)		14,058
Net cash provided by operating activities		628,549			683,963
Cash flows from investing activities:
Additions to property and equipment		(328,218	)		(498,913	)
Net proceeds from sale of equipment		13,380			140,159
Business acquisition		(137,630	)		-
Changes in other assets		(3,641	)		(17	)
Net cash used in investing activities		(456,109	)		(358,771	)
Cash flows from financing activities:
Proceeds from revolving lines of credit and other		2,108,891			1,087,164
Payments on revolving lines of credit and other		(2,006,001	)		(1,152,465	)
Purchase of treasury stock		(179,813	)		(174,760	)
Stock option exercises and other		1,100			1,342
Stock repurchased for payroll taxes		(19,167	)		(18,613	)
Tax benefit of stock options exercised		-			6,532
Dividends paid		(76,120	)		(74,477	)
Net cash used in financing activities		(171,110	)		(325,277	)
Net change in cash and cash equivalents		1,330			(85	)
Cash and cash equivalents at beginning of period		6,377			5,566
Cash and cash equivalents at end of period	$	7,707		$	5,481
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest	$	24,641		$	21,614
Income taxes	$	187,313		$	118,803

See Notes to Condensed Consolidated Financial Statements.

5

J.B. HUNT TRANSPORT SERVICES, INC.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

1. General

Basis of Presentation

The accompanying unaudited interim Condensed Consolidated Financial Statements have been prepared in accordance with U.S. generally accepted accounting principles (GAAP) for interim financial information. We believe such statements include all adjustments (consisting only of normal recurring adjustments) necessary for the fair presentation of our financial position, results of operations and cash flows at the dates and for the periods indicated. Pursuant to the requirements of the Securities and Exchange Commission (SEC) applicable to quarterly reports on Form 10-Q, the accompanying financial statements do not include all disclosures required by GAAP for annual financial statements. While we believe the disclosures presented are adequate to make the information not misleading, these unaudited interim Condensed Consolidated Financial Statements should be read in conjunction with the Consolidated Financial Statements and related notes included in our Annual Report on Form 10-K for the year ended December 31, 2016. Operating results for the periods presented in this report are not necessarily indicative of the results that may be expected for the calendar year ending December 31, 2017, or any other interim period. Our business is somewhat seasonal with slightly higher freight volumes typically experienced during August through early November in our full-load freight transportation business.

Goodwill and Other Intangible Assets

Goodwill represents the excess of cost over the fair value of net identifiable tangible and intangible assets acquired in a business combination. Goodwill and intangible assets with indefinite lives are not amortized. Goodwill is reviewed for potential impairment during the third quarter on an annual basis or, more frequently, if circumstances indicate a potential impairment is present. Intangible assets with definite lives are amortized on the straight-line method over the estimated useful lives of 5 to 8 years.

Recent Accounting Pronouncements

In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2014-09, Revenue from Contracts with Customers, which supersedes virtually all existing revenue recognition guidance. The new standard requires an entity to recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration the entity expects to receive in exchange for those goods or services. This update also requires additional disclosure about the nature, amount, timing, and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract.

In August 2015, the FASB issued ASU 2015-14, Revenue from Contracts with Customers: Deferral of the Effective Date, which deferred the effective date of ASU 2014-09, one year to interim and annual periods beginning after December 15, 2017. Early adoption is permitted after the original effective date of December 15, 2016.

To date, our implementation team has completed the process of contract review and documentation in accordance with the standard. We intend to adopt this new standard in the first quarter 2018, using the modified retrospective transition approach. We do not expect the standard to have a material impact on our financial statements. 

In February 2016, the FASB issued ASU 2016-02, Leases, which requires lessees to recognize a right-of-use asset and a lease liability for most leases in the balance sheet as well as other qualitative and quantitative disclosures. ASU 2016-02 is to be applied using a modified retrospective method and is effective for interim and annual periods beginning after December 15, 2018, but early adoption is permitted. We are currently evaluating the potential effects of the adoption of this update on our financial statements.

6

Accounting Pronouncement Adopted in 2017

In March 2016, the FASB issued ASU 2016-09, Compensation – Stock Compensation: Improvements to Employee Share-Based Payment Accounting, which amended and simplified certain aspects of accounting for share-based payment award transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. The amendments were effective for interim and annual periods beginning after December 15, 2016. The application methods used in adoption varied with each component of the standard. We prospectively adopted ASU 2016-09 during the first quarter 2017, which, upon vesting of share-based awards, will result in the recognition of excess tax benefits or tax deficiencies from share-based compensation as a discrete item in our income tax expense. Historically, these amounts were recorded as additional paid-in capital. Effectively all of our outstanding share-based awards vest within the third quarter of the vesting year, and accordingly, we recognized an excess tax benefit of $4.5 million during the third quarter 2017. In addition, cash flows from excess tax benefits from share-based compensation, which historically have been reported as cash flows from financing activities are now reported, on a prospective basis, as cash flows from operating activities in our Condensed Consolidated Statement of Cash Flows. The remaining amendments within the standard had no impact on our Condensed Consolidated Financial Statements.

2. Earnings Per Share

We compute basic earnings per share by dividing net earnings available to common stockholders by the actual weighted average number of common shares outstanding for the reporting period. Diluted earnings per share reflects the potential dilution that could occur if holders of unvested restricted and performance share units or vested and unvested stock options exercised or converted their holdings into common stock. The dilutive effect of restricted and performance share units and stock options was 0.9 million shares during the third quarter 2017, compared to 0.7 million shares during third quarter 2016. During the nine months ended September 30, 2017 and 2016, the dilutive effect of restricted and performance share units and stock options was 1.1 million shares and 0.9 million shares, respectively.

3. Share-based Compensation

The following table summarizes the components of our share-based compensation program expense (in thousands):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2017		2016		2017		2016
Restricted share units:
Pretax compensation expense	$	5,977	$	5,390	$	22,987	$	22,298
Tax benefit		2,146		2,048		7,793		8,473
Restricted share unit expense, net of tax	$	3,831	$	3,342	$	15,194	$	13,825
Performance share units:
Pretax compensation expense	$	1,867	$	1,868	$	7,966	$	7,875
Tax benefit		670		710		2,700		2,992
Performance share unit expense, net of tax	$	1,197	$	1,158	$	5,266	$	4,883

As of September 30, 2017, we had $55.0 million and $11.4 million of total unrecognized compensation expense related to restricted share units and performance share units, respectively, that is to be recognized over the remaining weighted average period of approximately 3.7 years for restricted share units and 2.3 years for performance share units. During the nine months ended September 30, 2017, we issued 379,161 shares for vested restricted share units, 155,867 shares for vested performance share units. Of these totals, 364,538 shares for vested restricted share units and 155,867 for performance share units were issued during the third quarter, 2017.

7

4. Financing Arrangements

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

	September 30, 2017		December 31, 2016
Senior revolving line of credit	$	241.0	$	139.0
Senior notes		843.8		847.3
Total long-term debt	$	1,084.8	$	986.3

Senior Revolving Line of Credit

At September 30, 2017, we were authorized to borrow up to $500 million under a senior revolving line of credit, which is supported by a credit agreement with a group of banks and expires in September 2020. This senior credit facility allows us to request an increase in the total commitment by up to $250 million and to request a one-year extension of the maturity date. The applicable interest rate under this agreement is based on either the Prime Rate, the Federal Funds Rate or LIBOR, depending upon the specific type of borrowing, plus an applicable margin based on our credit rating and other fees. At September 30, 2017, we had $242.0 million outstanding at an average interest rate of 2.25% under this agreement.

Senior Notes

Our senior notes consist of three separate issuances. The first and second issuances are $250 million of 2.40% senior notes due March 2019 and $250 million of 3.85% senior notes due March 2024, respectively, both of which were issued in March 2014. Interest payments under both notes are due semiannually in March and September of each year, beginning September 2014. The third is $350 million of 3.30% senior notes due August 2022, issued in August 2015. Interest payments under this note are due semiannually in February and August of each year, beginning February 2016. All three senior notes were issued by J.B. Hunt Transport Services, Inc., a parent-level holding company with no significant assets or operations. The notes are guaranteed on a full and unconditional basis by a wholly-owned subsidiary. All other subsidiaries of the parent are minor. We registered these offerings and the sale of the notes under the Securities Act of 1933, pursuant to a shelf registration statement filed in February 2014. All notes are unsecured obligations and rank equally with our existing and future senior unsecured debt. We may redeem for cash some or all of the notes based on a redemption price set forth in the note indenture. See Note 5, Derivative Financial Instruments, for terms of interest rate swaps entered into on the $250 million of 2.40% senior notes due March 2019 and the $350 million of 3.30% senior notes due August 2022.  

Our financing arrangements require us to maintain certain covenants and financial ratios.  We were in compliance with all covenants and financial ratios at September 30, 2017.

5. Derivative Financial Instruments

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

We entered into receive fixed-rate and pay variable-rate interest rate swap agreements simultaneously with the issuance of our $250 million of 2.40% senior notes due March 2019 and $350 million of 3.30% senior notes due August 2022, to effectively convert this fixed-rate debt to variable-rate. The notional amounts of these interest rate swap agreements equal those of the corresponding fixed-rate debt. The applicable interest rates under these agreements are based on LIBOR plus an established margin, resulting in an interest rate of 2.17% for our $250 million of 2.40% senior notes and 2.67% for our $350 million of 3.30% senior notes at September 30, 2017. The swaps expire when the corresponding senior notes are due. The fair values of these swaps are recorded in other long-term liabilities in our Condensed Consolidated Balance Sheet at September 30, 2016. See Note 7, Fair Value Measurements, for disclosure of fair value. These derivatives meet the required criteria to be designated as fair value hedges, and as the specific terms and notional amounts of these derivative instruments match those of the fixed-rate debt being hedged, these derivative instruments are assumed to perfectly hedge the related debt against changes in fair value due to changes in the benchmark interest rate. Accordingly, any change in the fair value of these interest rate swaps recorded in earnings is offset by a corresponding change in the fair value of the related debt.

8

6. Capital Stock

On October 22, 2015, our Board of Directors authorized the purchase of $500 million of our common stock. On April 20, 2017, our Board of Directors authorized an additional purchase of up to $500 million of our common stock. At September 30, 2017, $521 million of the combined authorization was remaining. We did not purchase any shares under our repurchase authorization during the three months ended September 30, 2017. On July 20, 2017, our Board of Directors declared a regular quarterly cash dividend of $0.23, which was paid August 18, 2017, to stockholders of record on August 7, 2017. On October 19, 2017, our Board of Directors declared a regular quarterly dividend of $0.23 per common share, which will be paid on November 17, 2017, to stockholders of record on November 3, 2017.

7. Fair Value Measurements

Assets and Liabilities Measured at Fair Value on a Recurring Basis

Our assets and liabilities measured at fair value are based on valuation techniques which consider prices and other relevant information generated by market transactions involving identical or comparable assets and liabilities. These valuation methods are based on either quoted market prices (Level 1) or inputs, other than quoted prices in active markets, that are observable either directly or indirectly (Level 2). The following are assets and liabilities measured at fair value on a recurring basis at September 30, 2017 (in millions):

	Asset/(Liability) Balance			Input Level
Trading investments	$	15.9			1
Interest rate swaps	$	(1.5	)		2
Senior notes	$	(595.3	)		2

The fair value of trading investments has been measured using the market approach (Level 1) and reflect quoted market prices. The fair values of interest rate swaps and corresponding senior notes have been measured using the income approach (Level 2), which include relevant interest rate curve inputs. Trading investments are classified in other assets and the interest rate swaps are classified in other long-term liabilities in our Condensed Consolidated Balance Sheet. The senior notes are classified in long-term debt in our Condensed Consolidated Balance Sheet.

Financial Instruments

The carrying amount and estimated fair value at September 30, 2017, using the income approach (Level 2), based on their net present value, discounted at our current borrowing rate, of our senior revolving line of credit and remaining senior notes not measured at fair value on a recurring basis, were $489.5 million and $504.0 million, respectively.

The carrying amounts of all other instruments at September 30, 2017, approximate their fair value due to the short maturity of these instruments.

9

8. Income Taxes

Our effective income tax rate was 35.9% for the three months ended September 30, 2017, compared to 38.0% for the three months ended September 30, 2016. Our effective income tax rate was 33.9% for the first nine months of 2017, compared to 38.0% in 2016. In determining our quarterly provision for income taxes, we use an estimated annual effective tax rate, adjusted for discrete items. This rate is based on our expected annual income, statutory tax rates, best estimate of nontaxable and nondeductible items of income and expense, and the ultimate outcome of tax audits. Income tax expense for the first nine months of 2017 included a one-time after-tax benefit of $13.6 million for the claiming of federal research and development tax credits and domestic production tax deductions for the 2012 through 2016 tax years, recorded in the first quarter of 2017. In addition, an after-tax benefit of $4.5 million for stock compensation tax benefits and a one-time after-tax cost of $1.5 million for state income tax rate changes, were both recorded in the third quarter 2017.

At September 30, 2017, we had a total of $35.6 million in gross unrecognized tax benefits, which are a component of other long-term liabilities on our Condensed Consolidated Balance Sheets. Of this amount, $23.2 million represents the amount of unrecognized tax benefits that, if recognized, would impact our effective tax rate. The total amount of accrued interest and penalties for such unrecognized tax benefits was $5.8 million at September 30, 2017.

9. Legal Proceedings

We are a defendant in certain class-action lawsuits in which the plaintiffs are current and former California-based drivers who allege claims for unpaid wages, failure to provide meal and rest periods, and other items.  During the first half of 2014, the District Court in the lead class-action granted judgment in our favor with regard to all claims.  The plaintiffs appealed the case to the United States Court of Appeals for the Ninth Circuit.  On July 31, 2017, the Ninth Circuit issued a Memorandum decision vacating the judgment in our favor and remanding the case to the District Court for further proceedings.  We filed a Petition for Rehearing En Banc with the Ninth Circuit, which is currently pending.  The overlapping claims in the other lawsuits remain stayed pending final resolution of the appellate process or a final decision in the lead class-action case.  We cannot reasonably estimate at this time the possible loss or range of loss, if any, that may arise from these lawsuits.

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

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

10. Acquisition

On July 20, 2017, we entered into an agreement to acquire Special Logistics Dedicated, LLC (SLD), and its affiliated entities, subject to customary closing conditions.  The purchase price was $136.0 million with no assumption of debt. The closing of the transaction was effective on July 31, 2017. Total consideration paid in cash under the SLD agreement was $137.6 million and consisted of the agreed upon purchase price adjusted for an estimated working capital adjustment and cash acquired. In addition, we incurred approximately $3.0 million in transaction costs which are recorded in general and administrative expenses, net of asset dispositions in our Condensed Consolidated Statements of Earnings. The SLD acquisition was accounted for as a business combination. Assets acquired and liabilities assumed were recorded in our Condensed Consolidated Balance Sheet at their estimated fair values, as of the closing date, using cost, market data and valuation techniques that reflect management’s judgment and estimates. As a result of the acquisition, we recorded approximately $60 million of definite-lived intangible assets and approximately $56 million of goodwill. Goodwill consists of acquiring and retaining the SLD existing network and expected synergies from the combination of operations. The following table outlines the consideration transferred and preliminary purchase price allocation at their respective estimated fair values as of July 31, 2017 (in millions):

10

Consideration	$	137.6
Accounts receivable		9.4
Other current assets		1.5
Property and equipment		14.9
Intangibles		60.2
Accounts payable		(3.9	)
Accrued Liabilities		(0.2	)
Goodwill	$	55.7

As of September 30, 2017, the purchase price allocation is considered preliminary, subject to revision, as valuation procedures and tax considerations are completed.

11. Goodwill and Other Intangible Assets

As discussed in Note 10, Acquisitions, in third quarter 2017, we recorded goodwill of approximately $56 million and definite-lived intangible assets of approximately $60 million in connection with the SLD acquisition. All goodwill was assigned to our Dedicated Contract Services® business segment. There has been no change in the carrying amount or impairment losses recorded for goodwill as of September 30, 2017. Identifiable intangible assets consist of the following (in millions):

	September 30, 2017			Weighted Average Amortization Period
Definite-lived intangibles:
Non-competition agreements	$	0.2			5
Customer relationships		60.0			8
Total definite-lived intangibles		60.2
Less accumulated amortization		(1.5	)
Total identifiable intangible assets, net	$	58.7

At September 30, 2017, accumulated amortization consists of $1.5 million. Our definite-lived intangible assets have no assigned residual values.

Intangible asset amortization expense was $1.5 million for the three and nine months ended September 30, 2017. Estimated amortization expense for our definite-lived intangible assets is expected to be approximately $7.5 million annually. Actual amounts of amortization expense may differ from estimated amounts due to additional intangible asset acquisitions, impairment or accelerated amortization of intangible assets, and other events.

11

12. Business Segments

We reported four distinct business segments during the three and nine months ended September 30, 2017 and 2016. These segments included Intermodal (JBI), Dedicated Contract Services® (DCS), Integrated Capacity Solutions (ICS), and Truckload (JBT). The operation of each of these businesses is described in Note 11, Segment Information, of our Annual Report (Form 10-K) for the year ended December 31, 2016. A summary of certain segment information is presented below (in millions):

	Assets (Excludes intercompany accounts) As of
	September 30, 2017		December 31, 2016
JBI	$	2,077	$	2,032
DCS		1,138		951
ICS		182		136
JBT		262		279
Other (includes corporate)		395		431
Total	$	4,054	$	3,829

	Operating Revenues
	Three Months Ended September 30,						Nine Months Ended September 30,
	2017			2016			2017			2016
JBI	$	1,048		$	970		$	2,987		$	2,798
DCS		438			394			1,242			1,135
ICS		269			233			701			620
JBT		93			97			281			291
Subtotal		1,848			1,694			5,211			4,844
Inter-segment eliminations		(5	)		(3	)		(12	)		(10	)
Total	$	1,843		$	1,691		$	5,199		$	4,834

	Operating Income
	Three Months Ended September 30,				Nine Months Ended September 30,
	2017		2016		2017		2016
JBI	$	109.1	$	116.9	$	314.1	$	325.6
DCS		42.9		52.5		136.2		147.7
ICS		7.3		8.5		11.5		30.2
JBT		5.7		5.1		16.2		23.1
Other (includes corporate)		-		-		-		0.1
Total	$	165.0	$	183.0	$	478.0	$	526.7

	Depreciation and Amortization Expense
	Three Months Ended September 30,				Nine Months Ended September 30,
	2017		2016		2017		2016
JBI	$	40.4	$	40.3	$	121.2	$	119.4
DCS		40.4		35.8		114.1		106.3
ICS		0.3		0.1		0.9		0.3
JBT		10.2		10.1		30.7		30.4
Other (includes corporate)		4.7		4.7		14.3		13.3
Total	$	96.0	$	91.0	$	281.2	$	269.7

12

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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, 2016, 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, interference with or termination of our relationships with certain railroads, cost and availability of fuel, accidents, adverse weather conditions, disruption or failure of information technology systems, competitive rate fluctuations, availability of drivers, adverse legal decisions and audits or tax assessments of various federal, state, or local taxing authorities. Additionally, our business is somewhat seasonal with slightly higher freight volumes typically experienced during August through early November in our full-load transportation business. You should also refer to Item 1A of our Annual Report (Form 10-K) for the year ended December 31, 2016, for additional information on risk factors and other events that are not within our control. 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 SEC.

GENERAL

We are one of the largest surface transportation, delivery, and logistics companies in North America. We operate four distinct, but complementary, business segments and provide a wide range of transportation and delivery services to a diverse group of customers throughout the continental United States, Canada, and Mexico. Our service offerings include transportation of full-truckload containerized freight, which we directly transport utilizing our company-controlled revenue equipment and company drivers or independent contractors. We have arrangements with most of the major North American rail carriers to transport freight in containers or trailers, while we perform the majority of the pickup and delivery services. We also provide customized freight movement, revenue equipment, labor, systems, and delivery services that are tailored to meet individual customers’ requirements and typically involve long-term contracts. These arrangements are generally referred to as dedicated services and may include multiple pickups and drops, local and home deliveries, freight handling, specialized equipment, and freight network design. Our local and home delivery services typically are provided through a network of cross-dock service centers throughout the continental United States. Utilizing a network of thousands of reliable third-party carriers, we also provide comprehensive transportation and logistics services. In addition to dry-van, full-load operations, these unrelated outside carriers also provide flatbed, refrigerated, less-than-truckload (LTL), and other specialized equipment, drivers, and services. Also, we utilize a combination of company-owned and contracted power units to provide traditional over-the-road full truckload delivery services. 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. The operation of each of our four business segments is described in Note 11, Segment Information, of our Annual Report (Form 10-K) for the year ended December 31, 2016.

Critical Accounting Policies and Estimates

The preparation of our financial statements in conformity with U.S. GAAP requires us to make estimates and assumptions that impact the amounts reported in our Condensed Consolidated Financial Statements and accompanying notes. Therefore, the reported amounts of assets, liabilities, revenues, expenses, and associated disclosures of contingent liabilities are affected by these estimates. We evaluate these estimates on an ongoing basis, utilizing historical experience, consultation with 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.

13

Information regarding our Critical Accounting Policies and Estimates can be found in our Annual Report (Form 10-K). The critical accounting policies that we believe require us to make more significant judgments and estimates when we prepare our financial statements include those relating to self-insurance accruals, revenue equipment, revenue recognition, income taxes, goodwill, and other intangible assets. We have discussed the development and selection of these critical accounting policies and estimates with the Audit Committee of our Board of Directors. In addition, Note 2, Summary of Significant Accounting Policies, to the financial statements in our Annual Report (Form 10-K) for the year ended December 31, 2016, contains a summary of our critical accounting policies. Note 1, General, to the financial statements in this quarterly report contains any subsequent updates to this summary. There have been no material changes to the methodology we apply for critical accounting estimates as previously disclosed in our Annual Report on Form 10-K, with the exception of that disclosed in Note 1, General, to the financial statements in this quarterly report.

RESULTS OF OPERATIONS

Comparison of Three Months Ended September 30, 2017 to Three Months Ended September 30, 2016

	Summary of Operating Segment Results For the Three Months Ended September 30, ( in millions)
	Operating Revenues						Operating Income
	2017			2016			2017		2016
JBI	$	1,048		$	970		$	109.1	$	116.9
DCS		438			394			42.9		52.5
ICS		269			233			7.3		8.5
JBT		93			97			5.7		5.1
Other (includes corporate)		-			-			-		-
Subtotal		1,848			1,694			165.0		183.0
Inter-segment eliminations		(5	)		(3	)		-		-
Total	$	1,843		$	1,691		$	165.0	$	183.0

Total consolidated operating revenues were $1.84 billion for the third quarter 2017, compared to $1.69 billion for the third quarter 2016. Current quarter total operating revenue, excluding fuel surcharges, increased 8% versus the comparable quarter in 2016. This increase was primarily due to load growth of 6% in JBI, improved asset productivity and a 14% increase in revenue producing trucks in DCS, and a 17% increase in revenue per load in ICS, partially offset by a 7% decrease in load count in JBT and overall operating disruptions caused by hurricanes Harvey, Irma and Maria.

JBI segment revenue increased 8% to $1.05 billion during the third quarter 2017, compared with $970 million in 2016. This increase in segment revenue was primarily a result of a 6% increase in load volume and a 2% increase in revenue per load, which is the combination of changes in freight mix, customer rates, and fuel surcharge revenue, compared to a year ago. Revenue per load excluding fuel surcharges was flat compared to third quarter 2016. Load volume in our eastern network increased 2%, and transcontinental loads grew 8% over the third quarter 2016. Operating income of our JBI segment decreased 7% to $109.1 million in 2017, from $116.9 million in 2016. Benefits from volume growth were offset by higher driver wage and retention expenses, increased insurance and claims costs, increased rail purchased transportation rates, increases in costs from inefficiencies due to rail congestion, rail rationalization, equipment ownership costs, and operating disruptions caused by hurricanes.

DCS segment revenue increased 11% to $438 million in 2017, from $394 million in 2016. This increase in segment revenue was due to better integration of assets between customer accounts and customer rate increases, partially offset by lower productivity at new customer accounts implemented during the current quarter. Productivity, defined as revenue per truck per week, increased 2% in the third quarter 2017, when compared to the same period in 2016. Productivity excluding fuel surcharge was flat from a year ago. A net additional 1,024 revenue producing trucks were in the fleet by the end of the current quarter compared to prior year, primarily from private fleet conversions in the current and prior periods. Customer retention rates remain above 98%. Operating income of our DCS segment decreased 18% to $42.9 million in 2017, from $52.5 million in 2016. The decrease is primarily due to the timing between increased driver wages and their subsequent recovery through customer contracts, increased driver recruiting costs, increased insurance and claims costs, increased salaries and benefits costs, higher equipment ownership costs and operating disruptions caused by hurricanes. In addition, DCS incurred approximately $4.5 million in acquisition costs and intangible asset amortization associated with the purchase of SLD, which closed during the third quarter 2017.

14

ICS segment revenue increased 16% to $269 million in the third quarter 2017, from $233 million in the third quarter 2016. Revenue per load increased 17%, primarily from increased spot market activity which created a more favorable balance between contractual and spot revenue. Overall volumes decreased 1%. Contractual business represented approximately 65% of total load volume and 48% of total revenue in the current period compared to 75% and 64%, respectively, in third quarter 2016. Operating income of our ICS segment decreased 14% to $7.3 million from $8.5 million in 2016. Gross profit margin was flat at 12.8% in the current quarter compared to the third quarter 2016, primarily due to improvements in spot market gross margins being fully offset by continued compression of gross margins within contractual business. In addition, benefits from increased revenue were more than offset by higher technology development costs and a larger number of branches open less than two years during the current quarter compared to 2016. ICS’s carrier base increased 10% and employee count increased 17% compared to third quarter 2016.

JBT segment revenue decreased 5% to $93 million for the third quarter 2017, from $97 million in the third quarter 2016. Revenue excluding fuel surcharges decreased 6%, primarily due to a 7% decrease in load count, partially offset by a 1% increase in revenue per load. Revenue per load increased primarily due to a 4% increase in rates per loaded mile, partially offset by a 3% decrease in length of haul compared to third quarter 2016. Core customer rates were flat compared to the same period in 2016. At the end of the current quarter, JBT operated 2,040 tractors compared to 2,183 in 2016. JBT segment operating income increased 12% to $5.7 million in 2017, compared with $5.1 million in 2016. The increase in operating income was driven primarily by higher rates per loaded mile and lower safety and insurance costs, partially offset by increased driver wages, higher independent contractor costs per mile, lower tractor utilization, and increased tractor maintenance costs compared to third quarter 2016.

Consolidated Operating Expenses

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,
	Dollar Amounts as a Percentage of Total Operating Revenues						Percentage Change of Dollar Amounts Between Quarters
	2017			2016			2017 vs. 2016
Total operating revenues		100.0	%		100.0	%		9.0	%
Operating expenses:
Rents and purchased transportation		51.4			50.1			11.9
Salaries, wages and employee benefits		22.2			22.2			9.0
Depreciation and amortization		5.2			5.4			5.4
Fuel and fuel taxes		4.7			4.4			17.3
Operating supplies and expenses		3.7			3.7			8.7
Insurance and claims		1.4			1.3			21.0
General and administrative expenses, net of asset dispositions		1.6			1.1			39.8
Operating taxes and licenses		0.6			0.7			(7.9	)
Communication and utilities		0.3			0.3			14.7
Total operating expenses		91.1			89.2			11.3
Operating income		8.9			10.8			(9.8	)
Net interest expense		0.4			0.4			28.1
Earnings before income taxes		8.5			10.4			(11.2	)
Income taxes		3.1			3.9			(16.1	)
Net earnings		5.4	%		6.5	%		(8.3	)%

15

Total operating expenses increased 11.3%, while operating revenues increased 9.0% during the third quarter 2017, from the comparable period 2016. Operating income decreased to $165.0 million during the third quarter 2017 from $183.0 million in 2016.

Rents and purchased transportation costs increased 11.9% in 2017. This increase was primarily the result of increased third-party rail and truck purchased transportation rates within JBI and ICS segments and the increase in JBI load volume, which increased services provided by third-party rail carriers.

Salaries, wages and employee benefits costs increased 9.0% during the third quarter 2017, compared with 2016. This increase was primarily related to increases in driver pay and office personnel compensation due to a tighter supply of qualified drivers and an increase in the number of employees.

Depreciation and amortization expense increased 5.4% in 2017, primarily due to additions to our JBI segment tractor, container and chassis fleets to support additional business demand and equipment purchased related to new DCS long-term customer contracts. Fuel costs increased 17.3% in 2017, compared with 2016, due to an increase in the price of fuel, partially offset by decreased road miles.

Operating supplies and expenses increased 8.7%, driven primarily by increases in travel activity and tire expense. Insurance and claims expense increased 21.0% in 2017 compared with 2016, primarily due to higher incident volume and accident severity. General and administrative expenses increased 39.8% for the current quarter from the comparable period in 2016, primarily due to higher professional fees expenses, increased building rental expenses, higher computer software subscription costs, and increased net losses from asset sales and disposals. Net loss from sale or disposal of assets was $2.3 million in 2017, compared to a net gain of $1.3 million in 2016.

Net interest expense increased 28.1% in 2017 due to an increase in average debt levels and higher effective interest rates on our debt compared to third quarter 2017. Income tax expense decreased 16.1% in 2017, compared with 2016, primarily due to an after-tax benefit of $4.5 million for stock compensation tax benefits, partially offset by a one-time after-tax cost of $1.5 million for state income tax rate changes, both of which were recorded in third quarter 2017. Our effective income tax rate was 35.9% for the three months ended September 30, 2017, compared with 38.0% for the three months ended September 30, 2016. Our annual tax rate for 2017 is expected to be 35.0% and the normalized annual tax rate, excluding one-time benefits or costs, is expected to be 37.0%. In determining our quarterly provision for income taxes, we use an estimated annual effective tax rate, adjusted for discrete items. This rate is based on our expected annual income, statutory tax rates, best estimate of nontaxable and nondeductible items of income and expense, and the ultimate outcome of tax audits.

Comparison of Nine Months Ended September 30, 2017 to Nine Months Ended September 30, 2017

	Summary of Operating Segment Results For the Nine Months Ended September 30, ( in millions)
	Operating Revenues						Operating Income
	2017			2016			2017		2016
JBI	$	2,987		$	2,798		$	314.1	$	325.6
DCS		1,242			1,135			136.2		147.7
ICS		701			620			11.5		30.2
JBT		281			291			16.2		23.1
Other (includes corporate)		-			-			-		0.1
Subtotal		5,211			4,844			478.0		526.7
Inter-segment eliminations		(12	)		(10	)		-		-
Total	$	5,199		$	4,834		$	478.0	$	526.7

Total consolidated operating revenues were $5.20 billion for the first nine months 2017, an 8% increase from $4.83 billion for the comparable period 2016. Fuel surcharge revenues were $529.2 million during the first nine months 2017, compared with $385.7 million in 2016. If fuel surcharge revenues were excluded from both periods, the increase of 2017 revenue from 2016 was 5%.

16

JBI segment revenue increased 7%, to $2.99 billion during the first nine months of 2016, compared with $2.80 billion in 2016. This increase in revenue was primarily a result of a 4% increase in load volume and a 2% increase in revenue per load, which is the combination of changes in freight mix, customer rates, and fuel surcharge revenue, compared to a year ago. Operating income of the JBI segment decreased to $314.1 million in the first nine months of 2017, from $325.6 million in 2016. Benefits from volume growth were more than offset by lower revenue per load excluding fuel surcharges, increases in rail purchased transportation costs, rail inefficiencies, higher driver wages and recruiting costs, higher equipment ownership costs, increased insurance and claims costs, increased technology development and modernization costs, and operating disruptions caused by hurricanes.

DCS segment revenue increased 9%, to $1.24 billion during the first nine months of 2017, from $1.14 billion in 2016. Productivity, defined as revenue per truck per week, increased 3% from a year ago Productivity excluding fuel surcharge for the first nine months of 2017 increased 1% from a year ago. The increase in revenue was primarily a result of better integration of assets between customer accounts and customer rate increases, partially offset by lower productivity under new customer contracts and a more impactful winter weather season during the first quarter of 2017 compared to 2016. Operating income of our DCS segment decreased to $136.2 million in 2017, from $147.7 million in 2016. Increased revenue and improved asset integration was offset by higher driver wages, increased insurance and claims cost, increased start up expenditures for new customer contracts, operating disruptions caused by hurricanes, and the addition of acquisition costs and intangible asset amortization associated with the purchase of SLD when compared to the first nine months of 2016.

ICS revenue increased 13% to $701 million during the first nine months of 2017, from $620 million in 2016. Overall volumes increased 16%. Revenue per load decreased 3% primarily due to freight mix changes driven by customer demand. ICS segment operating income decreased 62% to $11.5 million, from $30.2 million in 2016, primarily due to lower gross profit margins, increased claims cost, increased number of branches less than two years old, and higher technology development costs. Gross profit margin decreased to 12.9% in the current period versus 14.9% last year primarily due to higher purchased transportation costs that outpaced customer rate increases implemented on contractual business, compared to a year ago.

JBT segment revenue decreased 4% to $281 million for the first nine months 2017, from $291 million in 2016, primarily from a 2% decrease in load count and a 2% decrease in revenue per load. The decrease in revenue per load when compared to 2016 was primarily due to a 5% decrease in length of haul. Revenue excluding fuel surcharges decreased 6%, compared to 2016. Our JBT segment operating income decreased to $16.2 million during the first nine months 2017, from $23.1 million in 2016. The decrease in operating income was driven primarily by lower revenue, increased driver wages and recruiting costs, higher independent contractor cost per mile, lower tractor utilization and increased tractor maintenance costs compared to 2016.

Consolidated Operating Expenses

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.

	Nine Months Ended September 30,
	Dollar Amounts as a Percentage of Total Operating Revenues						Percentage Change of Dollar Amounts Between Periods
	2017			2016			2017 vs. 2016
Total operating revenues		100.0	%		100.0	%		7.6	%
Operating expenses:
Rents and purchased transportation		50.5			49.3			10.2
Salaries, wages and employee benefits		22.7			22.9			6.3
Depreciation and amortization		5.4			5.6			4.3
Fuel and fuel taxes		4.7			4.2			20.3
Operating supplies and expenses		3.7			3.6			9.7
Insurance and claims		1.5			1.2			31.8
General and administrative expenses, net of asset dispositions		1.4			1.3			21.2
Operating taxes and licenses		0.6			0.7			(5.3	)
Communication and utilities		0.3			0.3			8.5
Total operating expenses		90.8			89.1			9.6
Operating income		9.2			10.9			(9.2	)
Net interest expense		0.4			0.4			16.4
Earnings before income taxes		8.8			10.5			(10.2	)
Income taxes		3.0			4.0			(19.9	)
Net earnings		5.8	%		6.5	%		(4.3	)%

17

Total operating expenses increased 9.6%, while operating revenues increased 7.6%, during the first nine months 2017, from the comparable period of 2016. Operating income decreased to $478.0 million during the first nine months 2017, from $526.7 million in 2016.

Rents and purchased transportation costs increased 10.2% in 2017. This increase was primarily the result of increased rail and truck purchased transportation rates and the increase in load volume, which increased services provided by third-party rail and truck carriers within JBI and ICS segments.

Salaries, wages and employee benefits costs increased 6.3% in 2017 from 2016. This increase was primarily related to increases in driver pay and office personnel compensation due to a tighter supply of qualified drivers and an increase in the number of employees.

Depreciation and amortization expense increased 4.3% in 2017 primarily due to additions to our JBI segment tractor, container and chassis fleets to support additional business demand and equipment purchased related to new DCS long-term customer contracts. Fuel costs increased 20.3% in 2017, compared with 2016, due to increases in the price of fuel.

Operating supplies and expenses increased 9.7% driven primarily by increases in travel activity and tire expense. Insurance and claims expense increased 31.8% in 2017 compared with 2016, primarily due to higher accident severity. General and administrative expenses increased 21.2% from the comparable period in 2016, primarily due to higher professional fees expenses, increased building rental expenses, higher computer software subscription costs, and increased net losses from asset sales and disposals. Net loss from sale or disposal of assets was $5.7 million in 2017, compared to a net loss of $2.4 million in 2016.

Net interest expense increased 16.4% in 2017, due to an increase in average debt levels and higher effective interest rates on our debt during the current period. Income tax expense decreased 19.9% in 2017, compared with 2016, primarily due to a one-time after-tax benefit of $13.6 million for the claiming of federal research and development tax credits and domestic production tax deductions for the 2012 through 2016 tax years, recorded in the first quarter of 2017. In addition, an after-tax benefit of $4.5 million for stock compensation tax benefits and a one-time after-tax cost of $1.5 million for state income tax rate changes, were both recorded in the third quarter 2017. Our effective income tax rate was 33.9% for the first nine months of 2017, compared to 38.0% in 2016. Our annual tax rate for 2017 is expected to be 35.0% and the normalized annual tax rate, excluding one-time benefits or costs, is expected to be 37.0%. In determining our quarterly provision for income taxes, we use an estimated annual effective tax rate, adjusted for discrete items. This rate is based on our expected annual income, statutory tax rates, best estimate of nontaxable and nondeductible items of income and expense, and the ultimate outcome of tax audits.

Liquidity and Capital Resources

Cash Flow

Net cash provided by operating activities totaled $628.5 million during the first nine months of 2017, compared with $684.0 million for the same period 2016. Operating cash flows decreased due primarily to the reduction in earnings, an increase in cash paid for income taxes, net of refunds, and the timing of general working capital activities. Net cash used in investing activities totaled $456.1 million in 2017, compared with $358.8 million in 2016. The increase resulted from the purchase of SLD, which closed during the third quarter 2017, partially offset by a decrease in equipment purchases, net of proceeds from the sale of equipment, in 2017. Net cash used in financing activities was $171.1 million in 2017, compared with $325.3 million in 2016. This decrease resulted primarily from current period activities being offset by higher proceeds from long-term debt issuances, net of long-term debt repayments, in 2017. These net proceeds from long-term debt were used primarily for the purchase of SLD.

18

Debt and Liquidity Data

	September 30, 2017			December 31, 2016			September 30, 2016
Working capital ratio		1.48			1.65			1.40
Total debt (millions)	$	1,084.8		$	986.3		$	943.7
Total debt to equity		0.74			0.70			0.68
Total debt as a percentage of total capital		42	%		41	%		41	%

Liquidity

Our need for capital has typically resulted from the acquisition of containers, chassis, trucks, tractors, and trailers required to support our growth and the replacement of older equipment. We are frequently able to accelerate or postpone a portion of equipment replacements depending on market conditions. We have, during the past few years, obtained capital through cash generated from operations, revolving lines of credit, and long-term debt issuances. We have also periodically utilized operating leases to acquire revenue equipment.

We believe our liquid assets, cash generated from operations and revolving line of credit will provide sufficient funds for our operating and capital requirements for the foreseeable future. The following table summarizes our expected obligations and commitments as of September 30, 2017 (in millions):

	Total		One Year Or Less		One to Three Years		Three to Five Years		After Five Years
Operating leases	$	68.8	$	23.8	$	30.0	$	12.5	$	2.5
Debt obligations		1,091.8		-		491.8		350.0		250.0
Interest payments on debt (1)		133.0		29.8		51.6		37.2		14.4
Commitments to acquire revenue equipment and facilities		804.7		387.4		417.3		-		-
Total	$	2,098.3	$	441.0	$	990.7	$	399.7	$	266.9

(1) Interest payments on debt are based on the debt balance and applicable rate at September 30, 2017.

Our net capital expenditures were approximately $315 million during the first nine months of 2017, compared with $359 million for the same period 2016. Our net capital expenditures include net additions to revenue equipment and non-revenue producing assets that are necessary to contribute to and support the future growth of our various business segments. Capital expenditures in 2017 were primarily for tractors, additional intermodal containers and chassis, and other trailing equipment. We are currently committed to spend approximately $109.4 million during the remainder of 2017. We expect to spend in the range of $475 million to $500 million for net capital expenditures during calendar year 2017. On July 31, 2017, we completed our acquisition of SLD, and its affiliated entities; see Note 10, Acquisition, in our Condensed Consolidated Financial Statements. We used our existing revolving credit facility to finance this transaction and to provide any necessary liquidity for current and future operations. This acquisition did not have a material impact on our interest expense. The table above excludes $41.4 million of potential liabilities for uncertain tax positions, including interest and penalties, which are recorded on our Condensed Consolidated Balance Sheets. However, we are unable to reasonably estimate the ultimate timing of any settlements.

Off-Balance Sheet Arrangements

Our only off-balance sheet arrangements as of September 30, 2017, were operating leases related primarily to facility lease obligations.

19

Risk Factors

You should refer to Item 1A of our Annual Report (Form 10-K) for the year ended December 31, 2016, 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, any of which could have a material adverse effect on our results of operations. Economic trends and tightening of credit in financial markets could adversely affect our ability, and the ability of our suppliers, to obtain financing for operations and capital expenditures.

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

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

● Insurance and claims expenses could significantly reduce our earnings.

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

● Difficulty in attracting and retaining drivers, delivery personnel, and third-party carriers could affect our profitability and ability to grow.

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

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

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

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

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

We could have difficulty integrating acquired companies’ assets, personnel and operations with our own.  Regardless of whether we are successful in making an acquisition or completing a business combination, the negotiations could disrupt our ongoing business, distract our management and employees and increase our operating costs.  Acquisitions and business combinations are accompanied by a number of inherent risks, including, without limitation, the following:

● the difficulty of integrating acquired companies and operations;

● the potential disruption of our ongoing businesses and distraction of our management or the management of acquired companies;

● difficulties in maintaining controls, procedures and policies;

● the potential impairment of relationships with employees and partners as a result of any integration of new management personnel;

● the potential inability to manage an increased number of locations and employees;

● the failure to realize expected efficiencies, synergies and cost savings; or

● the effect of any government regulations which relate to the businesses acquired.

20

Our business could be materially impacted if and to the extent that we are unable to succeed in addressing any of these risks or other problems encountered in connection with an acquisition or business combination, many of which cannot be presently identified.  These risks could disrupt our ongoing business, distract our management and employees, increase our costs and adversely affect our results of operations.

ITEM 3. Quantitative And Qualitative Disclosures AbouT Market Risk

Our outstanding debt at September 30, 2017 includes our senior revolving line of credit and senior notes issuances. Our senior notes have fixed interest rates ranging from 2.40% to 3.85%. Our senior revolving line of credit has variable interest rates, which are based on the Prime Rate, the Federal Funds Rate, or LIBOR, depending upon the specific type of borrowing, plus any applicable margins. We currently have interest rate swap agreements which effectively convert our $250 million of 2.40% and $350 million of 3.30% fixed rate senior notes due March 2019 and August 2022, respectfully, to variable rates, to allow us to maintain a desired mix of variable and fixed rate debt. The applicable interest rates under these agreements are based on LIBOR plus an established margin. Risk can be quantified by measuring the financial impact of a near-term adverse increase in short-term interest rates. Our earnings would be affected by changes in these short-term variable interest rates. At our current level of borrowing, a one percentage point increase in our applicable rate would reduce annual pretax earnings by $8.4 million.

Although we conduct business in foreign countries, international operations are not material to our consolidated financial position, results of operations, or cash flows. Additionally, foreign currency transaction gains and losses were not material to our results of operations for the three or nine months ended September 30, 2017. Accordingly, we are not currently subject to material foreign currency exchange rate risks from the effects that exchange rate movements of foreign currencies would have on our future costs or on future cash flows we would receive from our foreign investment. As of September 30, 2017, we had no foreign currency forward exchange contracts or other derivative financial instruments to hedge the effects of adverse fluctuations in foreign currency exchange rates.

The price and availability of diesel fuel are subject to fluctuations due to changes in the level of global oil production, seasonality, weather, and other market factors. Historically, we have been able to recover a majority of fuel price increases from our customers in the form of fuel surcharges. We cannot predict the extent to which high fuel price levels may occur in the future or the extent to which fuel surcharges could be collected to offset such increases. As of September 30, 2017, we had no derivative financial instruments to reduce our exposure to fuel price fluctuations.

ITEM 4. CONTROLS AND PROCEDURES

We maintain controls and procedures designed to ensure that the information we are required to disclose in the reports we file with the SEC is recorded, processed, summarized and reported, within the time periods specified in the SEC rules, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended). Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of September 30, 2017.

There were no changes in our internal control over financial reporting during the third quarter of 2017 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

21

Part II. Other Information

ITEM 1. LEGAL PROCEEDINGS

We are a defendant in certain class-action lawsuits in which the plaintiffs are current and former California-based drivers who allege claims for unpaid wages, failure to provide meal and rest periods, and other items.  During the first half of 2014, the District Court in the lead class-action granted judgment in our favor with regard to all claims.  The plaintiffs appealed the case to the United States Court of Appeals for the Ninth Circuit.  On July 31, 2017, the Ninth Circuit issued a Memorandum decision vacating the judgment in our favor and remanding the case to the District Court for further proceedings.  We filed a Petition for Rehearing En Banc with the Ninth Circuit, which is currently pending.  The overlapping claims in the other lawsuits remain stayed pending final resolution of the appellate process or a final decision in the lead class-action case.  We cannot reasonably estimate at this time the possible loss or range of loss, if any, that may arise from these lawsuits.

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

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

ITEM 1A. RISK FACTORS

Information regarding risk factors appears in Part I, Item 2, Management’s Discussion and Analysis of Financial Condition and Results of Operations of this report on Form 10-Q and in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2016.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Not applicable.     

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

Not applicable.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

Not applicable.

ITEM 6. EXHIBITS

Index to Exhibits

22

Exhibit
Number	Exhibits

  3.1 Amended and Restated Articles of Incorporation of J.B. Hunt Transport Services, Inc. dated May 19, 1988 (incorporated by reference from Exhibit 3.1 of the Company’s Quarterly Report on Form 10-Q for the period ended March 31, 2005, filed April 29, 2005)

  3.2 Amended and Restated Bylaws of J.B. Hunt Transport Services, Inc. dated April 23, 2015 (incorporated by reference from Exhibit 3.1 of the Company’s current report on Form 8-K, filed April 27, 2015)

31.1 Rule 13a-14(a)/15d-14(a) Certification

31.2 Rule 13a-14(a)/15d-14(a) Certification

32.1 Section 1350 Certification

32.2 Section 1350 Certification

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

101.INS XBRL Instance Document

101.SCH XBRL Taxonomy Extension Schema Document

101.CAL XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF XBRL Taxonomy Extension Definition Linkbase Document

101.LAB XBRL Taxonomy Extension Label Linkbase Document

101.PRE XBRL Taxonomy Extension Presentation Linkbase Document

23

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 27th day of October, 2017.

J.B. HUNT TRANSPORT SERVICES, INC.
(Registrant)
BY:	/s/ John N. Roberts, III
	John N. Roberts, III
	President and Chief Executive Officer
	(Principal Executive Officer)

BY:	/s/ David G. Mee
	David G. Mee
	Executive Vice President, Finance and
	Administration and Chief Financial Officer
	(Principal Financial Officer)

BY:	/s/ John K. Kuhlow
	John K. Kuhlow
	Senior Vice President-Finance, Controller,
	Chief Accounting Officer
	(Principal Accounting Officer)

24

EX-31.1

Exhibit 31.1

RULE 13a-14(a)/15d-14(a) CERTIFICATION

I, John N. Roberts, III, Principal Executive Officer, certify that:

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

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 the registrant as of, and for the periods presented in this report;

4. The registrant’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 the registrant 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 the registrant, 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 the registrant’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 the registrant’s internal control over financial reporting that occurred during the registrant’s most recent calendar quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

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

Date: October 27, 2017	/s/ John N. Roberts, III
	John N. Roberts, III
	President and Chief Executive Officer
	(Principal Executive Officer)

EX-31.2

Exhibit 31.2

RULE 13a-14(a)/15d-14(a) CERTIFICATION

I, David G. Mee, Principal Financial Officer, certify that:

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

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 the registrant as of, and for the periods presented in this report;

4. The registrant’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 the registrant 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 the registrant, 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 the registrant’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 the registrant’s internal control over financial reporting that occurred during the registrant’s most recent calendar quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

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

Date: October 27, 2017	/s/ David G. Mee
	David G. Mee
	Executive Vice President, Finance and
	Administration and Chief Financial Officer
	(Principal Financial Officer)

EX-32.1

Exhibit 32.1

SECTION 1350 CERTIFICATION

In connection with the Quarterly Report of J.B. Hunt Transport Services, Inc. (the “Company”) on Form 10-Q for the period ended September 30, 2017 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, John N. Roberts, III, Principal Executive Officer, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002:

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 Company as of the dates presented and consolidated results of operations of the Company for the periods presented.

Date: October 27, 2017	/s/ John N. Roberts, III
	John N. Roberts, III
	President and Chief Executive Officer
	(Principal Executive Officer)

EX-32.2

Exhibit 32.2

SECTION 1350 CERTIFICATION

In connection with the Quarterly Report of J.B. Hunt Transport Services, Inc. (the “Company”) on Form 10-Q for the period ended September 30, 2017 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, David G. Mee, Principal Financial Officer, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002:

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 Company as of the dates presented and consolidated results of operations of the Company for the periods presented.

Date: October 27, 2017	/s/ David G. Mee
	David G. Mee
	Executive Vice President, Finance and
	Administration and Chief Financial Officer
	(Principal Financial Officer)

XML

Document And Entity Information	9 Months Ended
	Sep. 30, 2017 shares
Document Information [Line Items]
Entity Registrant Name	HUNT J B TRANSPORT SERVICES INC
Entity Central Index Key	0000728535
Trading Symbol	jbht
Current Fiscal Year End Date	--12-31
Entity Filer Category	Large Accelerated Filer
Entity Current Reporting Status	Yes
Entity Voluntary Filers	No
Entity Well-known Seasoned Issuer	Yes
Entity Common Stock, Shares Outstanding (in shares)	109,751,895
Document Type	10-Q
Document Period End Date	Sep. 30, 2017
Document Fiscal Year Focus	2017
Document Fiscal Period Focus	Q3
Amendment Flag	false

XML

Condensed Consolidated Statements of Earnings (Unaudited) - USD ($) shares in Thousands, $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016
Operating revenues, excluding fuel surcharge revenues	$ 1,657,380	$ 1,538,701	$ 4,670,200	$ 4,448,709
Fuel surcharge revenues	185,954	151,958	529,208	385,688
Total operating revenues	1,843,334	1,690,659	5,199,408	4,834,397
Operating expenses:
Rents and purchased transportation	947,145	846,238	2,624,707	2,381,547
Salaries, wages and employee benefits	408,340	374,517	1,178,524	1,108,997
Depreciation and amortization	95,959	91,001	281,198	269,717
Fuel and fuel taxes	87,006	74,179	246,725	205,082
Operating supplies and expenses	67,578	62,191	190,085	173,222
Insurance and claims	26,463	21,862	76,930	58,384
General and administrative expenses, net of asset dispositions	29,389	21,025	74,597	61,570
Operating taxes and licenses	10,744	11,665	32,329	34,156
Communication and utilities	5,738	5,004	16,337	15,063
Total operating expenses	1,678,362	1,507,682	4,721,432	4,307,738
Operating income	164,972	182,977	477,976	526,659
Net interest expense	8,310	6,485	22,521	19,347
Earnings before income taxes	156,662	176,492	455,455	507,312
Income taxes	56,277	67,067	154,499	192,778
Net earnings	$ 100,385	$ 109,425	$ 300,956	$ 314,534
Weighted average basic shares outstanding (in shares)	109,703	112,630	110,066	112,790
Basic earnings per share (in dollars per share)	$ 0.92	$ 0.97	$ 2.73	$ 2.79
Weighted average diluted shares outstanding (in shares)	110,628	113,363	111,154	113,709
Diluted earnings per share (in dollars per share)	$ 0.91	$ 0.97	$ 2.71	$ 2.77
Dividends declared per common share (in dollars per share)	$ 0.23	$ 0.22	$ 0.69	$ 0.66

XML

Condensed Consolidated Balance Sheets (Current Period Unaudited) - USD ($) $ in Thousands	Sep. 30, 2017	Dec. 31, 2016
Current assets:
Cash and cash equivalents	$ 7,707	$ 6,377
Trade accounts receivable, net	858,720	745,288
Prepaid expenses and other	140,164	194,016
Total current assets	1,006,591	945,681
Property and equipment, at cost	4,507,917	4,258,915
Less accumulated depreciation	1,632,108	1,440,124
Net property and equipment	2,875,809	2,818,791
Goodwill	55,737
Other intangible assets, net	58,685
Other assets	57,101	64,516
Total assets	4,053,923	3,828,988
Current liabilities:
Trade accounts payable	493,585	384,308
Claims accruals	117,645	109,745
Accrued payroll	47,514	51,929
Other accrued expenses	23,011	27,152
Total current liabilities	681,755	573,134
Long-term debt	1,084,801	986,278
Other long-term liabilities	68,564	64,881
Deferred income taxes	746,833	790,634
Stockholders' equity	1,471,970	1,414,061
Total liabilities and stockholders' equity	$ 4,053,923	$ 3,828,988

XML

Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016
Cash flows from operating activities:
Net earnings	$ 300,956	$ 314,534
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization	281,198	269,717
Share-based compensation	30,953	30,173
(Gain)/Loss on sale of revenue equipment and other	5,716	2,357
Provision for deferred income taxes	(43,801)	(9,152)
Changes in operating assets and liabilities:
Trade accounts receivable	(113,432)	(118,404)
Other assets	58,230	50,319
Trade accounts payable	100,020	56,827
Income taxes payable or receivable	8,350	73,512
Claims accruals	7,901	22
Accrued payroll and other accrued expenses	(7,542)	14,058
Net cash provided by operating activities	628,549	683,963
Cash flows from investing activities:
Additions to property and equipment	(328,218)	(498,913)
Net proceeds from sale of equipment	13,380	140,159
Business acquisition	(137,630)
Changes in other assets	(3,641)	(17)
Net cash used in investing activities	(456,109)	(358,771)
Cash flows from financing activities:
Proceeds from revolving lines of credit and other	2,108,891	1,087,164
Payments on revolving lines of credit and other	(2,006,001)	(1,152,465)
Purchase of treasury stock	(179,813)	(174,760)
Stock option exercises and other	1,100	1,342
Stock repurchased for payroll taxes	(19,167)	(18,613)
Tax benefit of stock options exercised		6,532
Dividends paid	(76,120)	(74,477)
Net cash used in financing activities	(171,110)	(325,277)
Net change in cash and cash equivalents	1,330	(85)
Cash and cash equivalents at beginning of period	6,377	5,566
Cash and cash equivalents at end of period	7,707	5,481
Supplemental disclosure of cash flow information:
Interest	24,641	21,614
Income taxes	$ 187,313	$ 118,803

XML

Note 1 - General

9 Months Ended

Sep. 30, 2017

Notes to Financial Statements

Organization, Consolidation and Presentation of Financial Statements Disclosure [Text Block]

1. General

Basis of Presentation

The accompanying unaudited interim Condensed Consolidated Financial S

tatements have been prepared in accordance with U.S. generally accepted accounting principles (GAAP) for interim financial information. We believe such statements include all adjustments (consisting only of normal recurring adjustments) necessary for the fair presentation of our financial position, results of operations and cash flows at the dates and for the periods indicated. Pursuant to the requirements of the Securities and Exchange Commission (SEC) applicable to quarterly reports on Form

10

-Q, the accompanying financial statements do

not

include all disclosures required by GAAP for annual financial statements. While we believe the disclosures presented are adequate to make the information

not

misleading, these unaudited interim Condensed Consolidated Financial Statements should be read in conjunction with the Consolidated Financial Statements and related notes included in our Annual Report on Form

10

-K for the year ended

December 31, 2016.

Operating results for the periods presented in this report are

not

necessarily indicative of the results that

may

be expected for the calendar year ending

December 31, 2017,

or any other interim period. Our business is somewhat seasonal with slightly higher freight volumes typically experienced during

August

through early

November

in our full-load freight transportation business.

Goodwill

a

nd Other Intangible Assets

Goodwill represents the excess of cost over the fair value of net identifiable tangible and intangible assets acquired in a business combination. Goodwill and intangible assets with indefinite lives are

not

amortized. Goodwill is reviewed for potential impairment during the

third

quarter on an annual basis or, more frequently, if circumstances indicate a potential impairment is present. Intangible assets with definite lives are amortized on the straight-line method over the estimated useful lives of

5

to

8

 years.

Recent Accounting Pronouncements

In

May 2014,

the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU)

No.

2014

-

09,

Revenue from Contracts with Customers, which supersedes virtually all existing revenue recognition guidance. The new standard requires an entity to recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration the entity expects to receive in exchange for those goods or services. This update also requires additional disclosure about the nature, amount, timing, and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract.

In

August 2015,

the FASB issued ASU

2015

-

14,

Revenue from Contracts with Customers: Deferral of the Effective Date, which deferred the effective date of ASU

2014

-

09,

one

year to interim and annual periods beginning after

December 15, 2017.

Early adoption is permitted after the original effective date of

December 15, 2016.

To date, our

implementation team has completed the process of contract review and documentation in accordance with the standard. We intend to adopt this new standard in the

first

quarter

2018,

using the modified retrospective transition approach. We do

not

expect the standard to have a material impact on our financial statements. 

In

February 2016,

the FASB issued ASU

2016

-

02,

Leases, which requires lessees to recognize a right-of-use asset and a lease liability for most leases in the balance sheet as well as other qualitative and quantitative disclosures. ASU

2016

-

02

is to be applied using a modified retrospective method and is effective for interim and annual periods beginning after

December 15, 2018,

but early adoption is permitted. We are currently evaluating the potential effects of the adoption of this update on our financial statements.

Accounting Prono

uncement

Adopted in

201

7

In

March 2016,

the FASB issued ASU

2016

-

09,

Compensation

– Stock Compensation: Improvements to Employee Share-Based Payment Accounting, which amended and simplified certain aspects of accounting for share-based payment award transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. The amendments were effective for interim and annual periods beginning after

December 15, 2016.

The application methods used in adoption varied with each component of the standard. We prospectively adopted ASU

2016

-

09

during the

first

quarter

2017,

which, upon vesting of share-based awards, will result in the recognition of excess tax benefits or tax deficiencies from share-based compensation as a discrete item in our income tax expense. Historically, these amounts were recorded as additional paid-in capital. Effectively all of our outstanding share-based awards vest within the

third

quarter of the vesting year, and accordingly, we recognized an excess tax benefit of

$4.5

million during the

third

quarter

2017.

In addition, cash flows from excess tax benefits from share-based compensation, which historically have been reported as cash flows from financing activities are now reported, on a prospective basis, as cash flows from operating activities in our Condensed Consolidated Statement of Cash Flows. The remaining amendments within the standard had

no

impact on our Condensed Consolidated Financial Statements.

XML

Note 2 - Earnings Per Share

9 Months Ended

Sep. 30, 2017

Notes to Financial Statements

Earnings Per Share [Text Block]

2. Earnings Per Share

We compute basic earnings per share by dividing net earnings available to common stockholders by the actual weighted average number of common shares outstanding for the reporting period. Diluted earnings per share reflects the potential dilution that could occur if holders of unvested restricted and performance share units or vested and unvested stock options exercised or converted their holdings into common stock. The dilutive effect of restricted and performance share units and stock options was

0.9

million shares during the

third

quarter

2017,

compared to

0.7

million shares during

third

quarter

2016.

During the

nine

months ended

September 30, 2017

and

2016,

the dilutive effect of restricted and performance share units and stock options was

1.1

million shares and

0.9

million shares, respectively.

XML

Note 3 - Share-based Compensation

9 Months Ended

Sep. 30, 2017

Notes to Financial Statements

Disclosure of Compensation Related Costs, Share-based Payments [Text Block]

3 . Share-b ased Compensation

The following table summarizes the components of our share-based compensation program expense (in thousands):

	Three Months Ended September 30,				Nine Months Ended September 30,
	201 7		201 6		201 7		201 6
Restricted share units:
Pretax compensation expense	$	5,977	$	5,390	$	22,987	$	22,298
Tax benefit		2,146		2,048		7,793		8,473
Restricted share unit expense, net of tax	$	3,831	$	3,342	$	15,194	$	13,825
Performance share units:
Pretax compensation expense	$	1,867	$	1,868	$	7,966	$	7,875
Tax benefit		670		710		2,700		2,992
Performance share unit expense, net of tax	$	1,197	$	1,158	$	5,266	$	4,883

As of

September 30, 2017,

we had

$55.0

million and

$11.4

million of total unrecognized compensation expense related to restricted share units and performance share units, respectively, that is to be recognized over the remaining weighted average period of approximately

3.7

years for restricted share units and

2.3

years for performance share units. During the

nine

months ended

September 30, 2017,

we issued

379,161

shares for vested restricted share units,

155,867

shares for vested performance share units. Of these totals,

364,538

shares for vested restricted share units and

155,867

for performance share units were issued during the

third

quarter,

2017.

XML

Note 4 - Financing Arrangements

9 Months Ended

Sep. 30, 2017

Notes to Financial Statements

Debt Disclosure [Text Block]

4. Financing Arrangements

Outstanding borrowings, net of unamortized discount and debt issuance cost, under

our current financing arrangements consist of the following (in millions):

	September 30, 201 7		December 31 , 2016
Senior r evolving line of credit	$	241.0	$	139.0
Senior notes		843.8		847.3
Total long-term debt	$	1,084.8	$	986.3

Senior Revolving Line

of Credit

At

September 30, 2017,

we were authorized to borrow up to

$500

million under a senior revolving line of credit, which is supported by a credit agreement with a group of banks and expires in

September 2020.

This senior credit facility allows us to request an increase in the total commitment by up to

$250

million and to request a

one

-year extension of the maturity date. The applicable interest rate under this agreement is based on either the Prime Rate, the Federal Funds Rate or LIBOR, depending upon the specific type of borrowing, plus an applicable margin based on our credit rating and other fees. At

September 30, 2017,

we had

$242.0

million outstanding at an average interest rate of

2.25%

under this agreement.

Seni

or Notes

Our senior notes consist of

three

separate issuances. The

first

and

second

issuances are

$250

million of

2.40%

senior notes due

March 2019

and

$250

million of

3.85%

senior notes due

March 2024,

respectively, both of which were issued in

March 2014.

Interest payments under both notes are due semiannually in

March

and

September

of each year, beginning

September 2014.

The

third

is

$350

million of

3.30%

senior notes due

August 2022,

issued in

August 2015.

Interest payments under this note are due semiannually in

February

and

August

of each year, beginning

February 2016.

All

three

senior notes were issued by J.B. Hunt Transport Services, Inc., a parent-level holding company with

no

significant assets or operations. The notes are guaranteed on a full and unconditional basis by a wholly-owned subsidiary. All other subsidiaries of the parent are minor. We registered these offerings and the sale of the notes under the Securities Act of

1933,

pursuant to a shelf registration statement filed in

February 2014.

All notes are unsecured obligations and rank equally with our existing and future senior unsecured debt. We

may

redeem for cash some or all of the notes based on a redemption price set forth in the note indenture. See Note

5,

Derivative Financial Instruments, for terms of interest rate swaps entered into on the

$250

million of

2.40%

senior notes due

March 2019

and the

$350

million of

3.30%

senior notes due

August 2022.  

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

September 30, 2017.

XML

Note 5 - Derivative Financial Instruments

9 Months Ended

Sep. 30, 2017

Notes to Financial Statements

Derivative Instruments and Hedging Activities Disclosure [Text Block]

5 . Derivative Financial Instruments

We periodically utilize derivative instruments for hedging and non-trading purposes to manage exposure to changes in interest rates and to maintain an appropriate mix of fixed and variable-rate debt. At inception of a derivative contract, we document relationships between derivative instruments and hedged items, as well as our risk-management objective and strategy for undertaking various derivative transactions, and assess hedge effectiveness. If it is determined that a derivative is

not

highly effective as a hedge, or if a derivative ceases to be a highly effective hedge, we discontinue hedge accounting prospectively.

We entered into receive fixed-rate and pay variable-rate interest rate swap agreements simultaneously with the issuance of our

$250

million of

2.40%

senior notes due

March 2019

and

$350

million of

3.30%

senior notes due

August 2022,

to effectively convert this fixed-rate debt to variable-rate. The notional amounts of these interest rate swap agreements equal those of the corresponding fixed-rate debt. The applicable interest rates under these agreements are based on LIBOR plus an established margin, resul

ting in an interest rate of

2.17%

for our

$250

million of

2.40%

senior notes and

2.67%

for our

$350

million of

3.30%

senior notes at

September 30, 2017.

The swaps expire when the corresponding senior notes are due. The fair values of these swaps are recorded in other long-term liabilities in our Condensed Consolidated Balance Sheet at

September 30, 2016.

See Note

7,

Fair Value Measurements, for disclosure of fair value. These derivatives meet the required criteria to be designated as fair value hedges, and as the specific terms and notional amounts of these derivative instruments match those of the fixed-rate debt being hedged, these derivative instruments are assumed to perfectly hedge the related debt against changes in fair value due to changes in the benchmark interest rate. Accordingly, any change in the fair value of these interest rate swaps recorded in earnings is offset by a corresponding change in the fair value of the related debt.

XML

Note 6 - Capital Stock

9 Months Ended

Sep. 30, 2017

Notes to Financial Statements

Stockholders' Equity Note Disclosure [Text Block]

6 . Capital Stock

On

October 2

2,

2015,

our Board of Directors authorized the purchase of

$500

million of our common stock. On

April 20, 2017,

our Board of Directors authorized an additional purchase of up to

$500

million of our common stock. At

September 30, 2017,

$521

million of the combined authorization was remaining. We did

not

purchase any shares under our repurchase authorization during the

three

months ended

September 30, 2017.

On

July 20, 2017,

our Board of Directors declared a regular quarterly cash dividend of

$0.23,

which was paid

August 18, 2017

,

to stockholders of record on

August 7, 2017

.

On

October 19, 2017,

our Board of Directors declared a regular quarterly dividend of

$0.23

per common share, which will be paid on

November 17, 2017

,

to stockholders of record on

November 3, 2017

.

XML

Note 7 - Fair Value Measurements

9 Months Ended

Sep. 30, 2017

Notes to Financial Statements

Fair Value Disclosures [Text Block]

7 . Fair Value Measurements

Assets and Liabilities Measured at Fair Value on a Recurring Basis

Our a

ssets and liabilities measured at fair value are based on valuation techniques which consider prices and other relevant information generated by market transactions involving identical or comparable assets and liabilities. These valuation methods are based on either quoted market prices (Level

1

) or inputs, other than quoted prices in active markets, that are observable either directly or indirectly (Level

2

). The following are assets and liabilities measured at fair value on a recurring basis at

September 30, 2017 (

in millions):

	Asset/(Liability) Balance			Input Level
Trading investments	$	15.9			1
Interest rate swap s	$	(1.5	)		2
Senior notes	$	(595.3	)		2

The fair value of trading investments has been measured using the market approach (Level

1

) and reflect quoted market prices. The fair values of interest rate swaps and corresponding senior notes have been measured using the income approach (Level

2

), which include relevant interest rate curve inputs.

Trading investments are classified in other assets and the interest rate swaps are classified in other long-term liabilities in our Condensed Consolidated Balance Sheet. The senior notes are classified in long-term debt in our Condensed Consolidated Balance Sheet.

Financial Instruments

The carrying amount and estimated fair value

at

September 30, 2017,

using the income approach (Level

2

), based on their net present value, discounted at our current borrowing rate, of our senior revolving line of credit and remaining senior notes

not

measured at fair value on a recurring basis, were

$489.5

million and

$504.0

million, respectively.

The carrying amounts of a

ll other instruments at

September 30, 2017,

approximate their fair value due to the short maturity of these instruments.

XML

Note 8 - Income Taxes

9 Months Ended

Sep. 30, 2017

Notes to Financial Statements

Income Tax Disclosure [Text Block]

8 . Income Taxes

Our effective income tax rate was

35.9%

for the

three

months ended

September 30, 2017,

compared to

38.0%

for the

three

months ended

September 30, 2016.

Our effective income tax rate was

33.9%

for the

first

nine

months of

2017,

compared to

38.0%

in

2016.

In determining our quarterly provision for income taxes, we use an estimated annual effective tax rate, adjusted for discrete items. This rate is based on our expected annual income, statutory tax rates, best estimate of nontaxable and nondeductible items of income and expense, and the ultimate outcome of tax audits. Income tax expense for the

first

nine

months of

2017

included a

one

-time after-tax benefit of

$13.6

million for the claiming of federal research and development tax credits and domestic production tax deductions for the

2012

through

2016

tax years, recorded in the

first

quarter of

2017.

In addition, an after-tax benefit of

$4.5

million for stock compensation tax benefits and a

one

-time after-tax cost of

$1.5

million for state income tax rate changes, were both recorded in the

third

quarter

2017.

At

September 30, 2017,

we had a total of

$35.6

million in gross unrecognized tax benefits, which are a component of other long-term liabilities on our Condensed Consolidated Balance Sheets. Of this amount,

$23.2

million represents the amount of unrecognized tax benefits that, if recognized, would impact our effective tax rate. The total amount of accrued interest and penalties for such unrecognized tax benefits was

$5.8

million at

September 30, 2017.

XML

Note 9 - Legal Proceedings

9 Months Ended

Sep. 30, 2017

Notes to Financial Statements

Commitments and Contingencies Disclosure [Text Block]

9 . Legal Proceedings

We are a defendant in certain class-action lawsuits in which the plaintiffs are current and former California-based drivers who allege claims for unpaid wages, failure to provide meal and rest periods, and other items.  During the

first

half of

2014,

the District Court in the lead class-action granted judgment in our favor with regard to all claims.  The plaintiffs appealed the case to the United States Court of Appeals for the Ninth Circuit.  On

July 31, 2017,

the Ninth Circuit issued a Memorandum decision vacating the judgment in our favor and remanding the case to the District Court for further proceedings.  We filed a Petition for Rehearing En Banc with the Ninth Circuit, which is currently pending.  The overlapping claims in the other lawsuits remain stayed pending final resolution of the appellate process or a final decision in the lead class-action case.  We cannot reasonably estimate at this time the possible loss or range of loss, if any, that

may

arise from these lawsuits.

In

January 

2017,

we exercised our right to utilize the arbitration process to review the division of revenue collected beginning

May 1, 2016,

as well as to clarify other issues, under our Joint Service Agreement with BNSF Railway Company (BNSF). BNSF has requested the same, and the arbitration process has commenced. BNSF provides a significant amount of rail transportation services to our JBI business segment. At this time, we are unable to reasonably predict the outcome of the arbitration, and, as such,

no

gain or loss contingency can be determined or recorded. Normal commercial business activity between the parties, including load tendering, load tracing, billing and payments, is expected to continue on a timely basis.

We are involved in certain

other claims and pending litigation arising from the normal conduct of business. Based on present knowledge of the facts and, in certain cases, opinions of outside counsel, we believe the resolution of these claims and pending litigation will

not

have a material adverse effect on our financial condition, results of operations or liquidity.

XML

Note 10 - Acquisition

9 Months Ended

Sep. 30, 2017

Notes to Financial Statements

Business Combination Disclosure [Text Block]

1 0 . Acquisition

On

July 20, 2017,

we entered into an agreement to acquire

Special Logistics Dedicated, LLC (SLD), and its affiliated entities, subject to customary closing conditions.  The purchase price was

$136.0

million with

no

assumption of debt.

The closing of the transaction was effective on

July 31, 2017.

Total consideration paid in cash under the SLD agreement was

$137.6

million and consisted of the agreed upon purchase price adjusted for an estimated working capital adjustment and cash acquired. In addition, we incurred approximately

$3.0

million in transaction costs which are recorded in general and administrative expenses, net of asset dispositions in our Condensed Consolidated Statements of Earnings. The SLD acquisition was accounted for as a business combination. Assets acquired and liabilities assumed were recorded in our Condensed Consolidated Balance Sheet at their estimated fair values, as of the closing date, using cost, market data and valuation techniques that reflect management’s judgment and estimates. As a result of the acquisition, we recorded approximately

$60

 million of definite-lived intangible assets and approximately

$56

 million of goodwill. Goodwill consists of acquiring and retaining the SLD existing network and expected synergies from the combination of operations. The following table outlines the consideration transferred and preliminary purchase price allocation at their respective estimated fair values as of

July 31, 2017 (

in millions):

Consideration	$	137.6
Accounts receivable		9.4
Other current assets		1.5
Property and equipment		14.9
Intangible s		60.2
Accounts payable		(3.9	)
Accrued Liabilities		(0.2	)
Goodwill	$	55.7

As of

September 30, 2017,

the purchase price allocation is considered preliminary, subject to revision, as valuation procedures and tax considerations are completed.

XML

Note 11 - Goodwill and Other Intangible Assets

9 Months Ended

Sep. 30, 2017

Notes to Financial Statements

Goodwill and Intangible Assets Disclosure [Text Block]

1 1 . Goodwill a nd Other Intangible Assets

As discussed in Note

10,

Acquisitions, in

third

quarter

2017,

we recorded goodwill of approximately

$56

 million and definite-lived intangible assets of approximately

$60

 million in connection with the SLD acquisition. All goodwill was assigned to our Dedicated Contract Services® business segment. There has been

no

change in the carrying amount or impairment losses recorded for goodwill as of

September 30, 2017.

Identifiable intangible assets consist of the following (in millions):

	September 30, 201 7			Weighted Average Amortization Period
Definite-lived intangibles:
Non-competition agreements	$	0.2			5
Customer relationships		60.0			8
Total definite-lived intangibles		60.2
Less accumulated amortization		(1.5	)
Total iden tifiable intangible assets, net	$	58.7

At

September 30, 2017,

accumulated amortization consists of

$1.5

million. Our definite-lived intangible assets have

no

assigned residual values.

Intangible asset amortization expense was

$1.5

million for the

three

and

nine

months ended

September 30, 2017.

Estimated amortization expense for our definite-lived intangible assets is expected to be approximately

$7.5

million annually. Actual amounts of amortization expense

may

differ from estimated amounts due to additional intangible asset acquisitions, impairment or accelerated amortization of intangible assets, and other events.

XML

Note 12 - Business Segments

9 Months Ended

Sep. 30, 2017

Notes to Financial Statements

Segment Reporting Disclosure [Text Block]

1 2 . Business Segments

We reported

four

distinct business segments during the

three

and

nine

months ended

September 30, 2017

and

2016.

These segments included Intermodal (JBI), Dedicated Contract Services® (DCS), Integrated Capacity Solutions (ICS), and Truckload (JBT). The operation of each of these businesses is described in Note

11,

Segment Information

, of our Annual Report (Form

10

-K) for the year ended

December 31, 2016.

A summary of certain segment information is presented below (in millions):

	Assets (Excludes intercompany accounts) As of
	September 30, 2017		December 31, 201 6
JBI	$	2,077	$	2,032
DCS		1,138		951
ICS		182		136
JBT		262		279
Other (includes corporate)		395		431
Total	$	4,054	$	3,829

	Operating Revenues
	Three Months Ende d September 30,						Nine Months Ended September 30,
	201 7			201 6			201 7			201 6
JBI	$	1,048		$	970		$	2,987		$	2,798
DCS		438			394			1,242			1,135
ICS		269			233			701			620
JBT		93			97			281			291
Subtotal		1,848			1,694			5,211			4,844
Inter-segment eliminations		(5	)		(3	)		(12	)		(10	)
Total	$	1,843		$	1,691		$	5,199		$	4,834

	Operating Income
	Three Months Ended September 30,				Nine Months Ended September 30,
	201 7		201 6		201 7		201 6
JBI	$	109.1	$	116.9	$	314.1	$	325.6
DCS		42.9		52.5		136.2		147.7
ICS		7.3		8.5		11.5		30.2
JBT		5.7		5.1		16.2		23.1
Other (includes corporate)		-		-		-		0.1
Total	$	165.0	$	183.0	$	478.0	$	526.7

	Depreciation and Amortization Expense
	Three Months Ended September 30,				Nine Months Ended September 30,
	201 7		201 6		201 7		201 6
JBI	$	40.4	$	40.3	$	121.2	$	119.4
DCS		40.4		35.8		114.1		106.3
ICS		0.3		0.1		0.9		0.3
JBT		10.2		10.1		30.7		30.4
Other (includes corporate)		4.7		4.7		14.3		13.3
Total	$	96.0	$	91.0	$	281.2	$	269.7

XML

Significant Accounting Policies (Policies)

9 Months Ended

Sep. 30, 2017

Accounting Policies [Abstract]

Basis of Accounting, Policy [Policy Text Block]

Basis of Presentation

The accompanying unaudited interim Condensed Consolidated Financial S

tatements have been prepared in accordance with U.S. generally accepted accounting principles (GAAP) for interim financial information. We believe such statements include all adjustments (consisting only of normal recurring adjustments) necessary for the fair presentation of our financial position, results of operations and cash flows at the dates and for the periods indicated. Pursuant to the requirements of the Securities and Exchange Commission (SEC) applicable to quarterly reports on Form

10

-Q, the accompanying financial statements do

not

include all disclosures required by GAAP for annual financial statements. While we believe the disclosures presented are adequate to make the information

not

misleading, these unaudited interim Condensed Consolidated Financial Statements should be read in conjunction with the Consolidated Financial Statements and related notes included in our Annual Report on Form

10

-K for the year ended

December 31, 2016.

Operating results for the periods presented in this report are

not

necessarily indicative of the results that

may

be expected for the calendar year ending

December 31, 2017,

or any other interim period. Our business is somewhat seasonal with slightly higher freight volumes typically experienced during

August

through early

November

in our full-load freight transportation business.

Goodwill and Intangible Assets, Policy [Policy Text Block]

Goodwill

a

nd Other Intangible Assets

Goodwill represents the excess of cost over the fair value of net identifiable tangible and intangible assets acquired in a business combination. Goodwill and intangible assets with indefinite lives are

not

amortized. Goodwill is reviewed for potential impairment during the

third

quarter on an annual basis or, more frequently, if circumstances indicate a potential impairment is present. Intangible assets with definite lives are amortized on the straight-line method over the estimated useful lives of

5

to

8

 years.

New Accounting Pronouncements, Policy [Policy Text Block]

Recent Accounting Pronouncements

In

May 2014,

the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU)

No.

2014

-

09,

Revenue from Contracts with Customers, which supersedes virtually all existing revenue recognition guidance. The new standard requires an entity to recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration the entity expects to receive in exchange for those goods or services. This update also requires additional disclosure about the nature, amount, timing, and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract.

In

August 2015,

the FASB issued ASU

2015

-

14,

Revenue from Contracts with Customers: Deferral of the Effective Date, which deferred the effective date of ASU

2014

-

09,

one

year to interim and annual periods beginning after

December 15, 2017.

Early adoption is permitted after the original effective date of

December 15, 2016.

To date, our

implementation team has completed the process of contract review and documentation in accordance with the standard. We intend to adopt this new standard in the

first

quarter

2018,

using the modified retrospective transition approach. We do

not

expect the standard to have a material impact on our financial statements. 

In

February 2016,

the FASB issued ASU

2016

-

02,

Leases, which requires lessees to recognize a right-of-use asset and a lease liability for most leases in the balance sheet as well as other qualitative and quantitative disclosures. ASU

2016

-

02

is to be applied using a modified retrospective method and is effective for interim and annual periods beginning after

December 15, 2018,

but early adoption is permitted. We are currently evaluating the potential effects of the adoption of this update on our financial statements.

Accounting Prono

uncement

Adopted in

201

7

In

March 2016,

the FASB issued ASU

2016

-

09,

Compensation

– Stock Compensation: Improvements to Employee Share-Based Payment Accounting, which amended and simplified certain aspects of accounting for share-based payment award transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. The amendments were effective for interim and annual periods beginning after

December 15, 2016.

The application methods used in adoption varied with each component of the standard. We prospectively adopted ASU

2016

-

09

during the

first

quarter

2017,

which, upon vesting of share-based awards, will result in the recognition of excess tax benefits or tax deficiencies from share-based compensation as a discrete item in our income tax expense. Historically, these amounts were recorded as additional paid-in capital. Effectively all of our outstanding share-based awards vest within the

third

quarter of the vesting year, and accordingly, we recognized an excess tax benefit of

$4.5

million during the

third

quarter

2017.

In addition, cash flows from excess tax benefits from share-based compensation, which historically have been reported as cash flows from financing activities are now reported, on a prospective basis, as cash flows from operating activities in our Condensed Consolidated Statement of Cash Flows. The remaining amendments within the standard had

no

impact on our Condensed Consolidated Financial Statements.

XML

Note 3 - Share-based Compensation (Tables)

9 Months Ended

Sep. 30, 2017

Notes Tables

Schedule of Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Table Text Block]

	Three Months Ended September 30,				Nine Months Ended September 30,
	201 7		201 6		201 7		201 6
Restricted share units:
Pretax compensation expense	$	5,977	$	5,390	$	22,987	$	22,298
Tax benefit		2,146		2,048		7,793		8,473
Restricted share unit expense, net of tax	$	3,831	$	3,342	$	15,194	$	13,825
Performance share units:
Pretax compensation expense	$	1,867	$	1,868	$	7,966	$	7,875
Tax benefit		670		710		2,700		2,992
Performance share unit expense, net of tax	$	1,197	$	1,158	$	5,266	$	4,883

XML

Note 4 - Financing Arrangements (Tables)

9 Months Ended

Sep. 30, 2017

Notes Tables

Schedule of Debt [Table Text Block]

	September 30, 201 7		December 31 , 2016
Senior r evolving line of credit	$	241.0	$	139.0
Senior notes		843.8		847.3
Total long-term debt	$	1,084.8	$	986.3

XML

Note 7 - Fair Value Measurements (Tables)

9 Months Ended

Sep. 30, 2017

Notes Tables

Schedule of Fair Value, Assets and Liabilities Measured on Recurring Basis [Table Text Block]

	Asset/(Liability) Balance			Input Level
Trading investments	$	15.9			1
Interest rate swap s	$	(1.5	)		2
Senior notes	$	(595.3	)		2

XML

Note 10 - Acquisition (Tables)

9 Months Ended

Sep. 30, 2017

Notes Tables

Schedule of Recognized Identified Assets Acquired and Liabilities Assumed [Table Text Block]

Consideration	$	137.6
Accounts receivable		9.4
Other current assets		1.5
Property and equipment		14.9
Intangible s		60.2
Accounts payable		(3.9	)
Accrued Liabilities		(0.2	)
Goodwill	$	55.7

XML

Note 11 - Goodwill and Other Intangible Assets (Tables)

9 Months Ended

Sep. 30, 2017

Notes Tables

Schedule of Finite-Lived Intangible Assets [Table Text Block]

	September 30, 201 7			Weighted Average Amortization Period
Definite-lived intangibles:
Non-competition agreements	$	0.2			5
Customer relationships		60.0			8
Total definite-lived intangibles		60.2
Less accumulated amortization		(1.5	)
Total iden tifiable intangible assets, net	$	58.7

XML

Note 12 - Business Segments (Tables)

9 Months Ended

Sep. 30, 2017

Notes Tables

Reconciliation of Assets from Segment to Consolidated [Table Text Block]

	Assets (Excludes intercompany accounts) As of
	September 30, 2017		December 31, 201 6
JBI	$	2,077	$	2,032
DCS		1,138		951
ICS		182		136
JBT		262		279
Other (includes corporate)		395		431
Total	$	4,054	$	3,829

Reconciliation of Revenue from Segments to Consolidated [Table Text Block]

	Operating Revenues
	Three Months Ende d September 30,						Nine Months Ended September 30,
	201 7			201 6			201 7			201 6
JBI	$	1,048		$	970		$	2,987		$	2,798
DCS		438			394			1,242			1,135
ICS		269			233			701			620
JBT		93			97			281			291
Subtotal		1,848			1,694			5,211			4,844
Inter-segment eliminations		(5	)		(3	)		(12	)		(10	)
Total	$	1,843		$	1,691		$	5,199		$	4,834

Reconciliation of Operating Profit (Loss) from Segments to Consolidated [Table Text Block]

	Operating Income
	Three Months Ended September 30,				Nine Months Ended September 30,
	201 7		201 6		201 7		201 6
JBI	$	109.1	$	116.9	$	314.1	$	325.6
DCS		42.9		52.5		136.2		147.7
ICS		7.3		8.5		11.5		30.2
JBT		5.7		5.1		16.2		23.1
Other (includes corporate)		-		-		-		0.1
Total	$	165.0	$	183.0	$	478.0	$	526.7

Reconciliation of Other Significant Reconciling Items from Segments to Consolidated [Table Text Block]

	Depreciation and Amortization Expense
	Three Months Ended September 30,				Nine Months Ended September 30,
	201 7		201 6		201 7		201 6
JBI	$	40.4	$	40.3	$	121.2	$	119.4
DCS		40.4		35.8		114.1		106.3
ICS		0.3		0.1		0.9		0.3
JBT		10.2		10.1		30.7		30.4
Other (includes corporate)		4.7		4.7		14.3		13.3
Total	$	96.0	$	91.0	$	281.2	$	269.7

XML

Note 1 - General (Details Textual) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016
Income Tax Expense (Benefit)	$ 56,277	$ 67,067	$ 154,499	$ 192,778
Accounting Standards Update 2016-09 [Member]
Income Tax Expense (Benefit)	$ (4,500)
Minimum [Member]
Finite-Lived Intangible Asset, Useful Life			5 years
Maximum [Member]
Finite-Lived Intangible Asset, Useful Life			8 years

XML

Note 2 - Earnings Per Share (Details Textual) - shares shares in Millions	3 Months Ended		9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016
Incremental Common Shares Attributable to Dilutive Effect of Share-based Payment Arrangements	0.9	0.7	1.1	0.9

XML

Note 3 - Share-based Compensation (Details Textual) $ in Millions	3 Months Ended	9 Months Ended
	Sep. 30, 2017 USD ($) shares	Sep. 30, 2017 USD ($) shares
Restricted Stock Units (RSUs) [Member]
Employee Service Share-based Compensation, Nonvested Awards, Compensation Cost Not yet Recognized | $	$ 55.0	$ 55.0
Employee Service Share-based Compensation, Nonvested Awards, Compensation Cost Not yet Recognized, Period for Recognition		3 years 255 days
Share-based Compensation Arrangement by Share-based Payment Award, Shares Issued in Period | shares	364,538	379,161
Performance Shares [Member]
Employee Service Share-based Compensation, Nonvested Awards, Compensation Cost Not yet Recognized | $	$ 11.4	$ 11.4
Employee Service Share-based Compensation, Nonvested Awards, Compensation Cost Not yet Recognized, Period for Recognition		2 years 109 days
Share-based Compensation Arrangement by Share-based Payment Award, Shares Issued in Period | shares	155,867	155,867

XML

Note 3 - Share-based Compensation - Components of Share-based Compensation (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016
Restricted Stock Units (RSUs) [Member]
Pretax compensation expense	$ 5,977	$ 5,390	$ 22,987	$ 22,298
Tax benefit	2,146	2,048	7,793	8,473
Share unit expense, net of tax	3,831	3,342	15,194	13,825
Performance Shares [Member]
Pretax compensation expense	1,867	1,868	7,966	7,875
Tax benefit	670	710	2,700	2,992
Share unit expense, net of tax	$ 1,197	$ 1,158	$ 5,266	$ 4,883

XML

Note 4 - Financing Arrangements (Details Textual) $ in Millions	Sep. 30, 2017 USD ($)
Senior Notes [Member] | Senior Notes, First Issuance [Member]
Unsecured Debt	$ 250
Debt Instrument, Interest Rate, Stated Percentage	2.40%
Senior Notes [Member] | Senior Notes, Second Issuance [Member]
Unsecured Debt	$ 250
Debt Instrument, Interest Rate, Stated Percentage	3.85%
Senior Notes [Member] | Senior Notes, Third Issuance [Member]
Unsecured Debt	$ 350
Debt Instrument, Interest Rate, Stated Percentage	3.30%
Senior Debt Obligations [Member]
Line of Credit Facility, Maximum Borrowing Capacity	$ 500
Line of Credit Facility, Maximum Borrowing Capacity Increase	250
Senior Debt Obligations [Member] | Line of Credit [Member]
Long-term Line of Credit	$ 242
Debt, Weighted Average Interest Rate	2.25%

XML

Note 4 - Financing Arrangements - Outstanding Borrowings (Details) - USD ($) $ in Thousands	Sep. 30, 2017	Dec. 31, 2016
Long-term debt	$ 1,084,801	$ 986,278
Senior Debt Obligations [Member] | Line of Credit [Member]
Long-term Debt	241,000	139,000
Senior Debt Obligations [Member] | Senior Notes [Member]
Long-term Debt	$ 843,800	$ 847,300

XML

Note 5 - Derivative Financial Instruments (Details Textual) $ in Millions	Sep. 30, 2017 USD ($)
Senior Notes, First Issuance [Member] | Fair Value Hedging [Member] | Interest Rate Swap [Member] | London Interbank Offered Rate (LIBOR) [Member]
Derivative, Variable Interest Rate	2.17%
Senior Notes, Third Issuance [Member] | Fair Value Hedging [Member] | Interest Rate Swap [Member] | London Interbank Offered Rate (LIBOR) [Member]
Derivative, Variable Interest Rate	2.67%
Senior Notes [Member] | Senior Notes, First Issuance [Member]
Unsecured Debt	$ 250
Debt Instrument, Interest Rate, Stated Percentage	2.40%
Senior Notes [Member] | Senior Notes, Third Issuance [Member]
Unsecured Debt	$ 350
Debt Instrument, Interest Rate, Stated Percentage	3.30%

XML

Note 6 - Capital Stock (Details Textual) - USD ($) $ / shares in Units, shares in Thousands, $ in Millions				3 Months Ended		9 Months Ended
	Oct. 19, 2017	Jul. 20, 2017	Apr. 20, 2017	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016	Oct. 22, 2015
Stock Repurchase Program, Authorized Amount								$ 500
Stock Repurchase Program, Additional Authorized Amount			$ 500
Stock Repurchase Program, Remaining Authorized Repurchase Amount				$ 521		$ 521
Treasury Stock, Shares, Acquired				0
Common Stock, Dividends, Per Share, Declared		$ 0.23		$ 0.23	$ 0.22	$ 0.69	$ 0.66
Dividends Payable, Date to be Paid		Aug. 18, 2017
Dividends Payable, Date of Record		Aug. 07, 2017
Subsequent Event [Member]
Common Stock, Dividends, Per Share, Declared	$ 0.23
Dividends Payable, Date to be Paid	Nov. 17, 2017
Dividends Payable, Date of Record	Nov. 03, 2017

XML

Note 7 - Fair Value Measurements (Details Textual) - Senior Notes [Member] - Fair Value, Measurements, Recurring [Member] $ in Millions	Sep. 30, 2017 USD ($)
Long-term Debt	$ 489.5
Estimate of Fair Value Measurement [Member]
Long-term Debt, Fair Value	$ 504.0

XML

Note 7 - Fair Value Measurements - Assets and Liabilities Measured at Fair Value (Details) - Fair Value, Measurements, Recurring [Member] $ in Millions	Sep. 30, 2017 USD ($)
Fair Value, Inputs, Level 1 [Member]
Trading investments	$ 15.9
Fair Value, Inputs, Level 2 [Member]
Interest rate swaps	(1.5)
Senior notes	$ (595.3)

XML

Note 8 - Income Taxes (Details Textual) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016
Effective Income Tax Rate Reconciliation, Percent	35.90%	38.00%	33.90%	38.00%
Effective Income Tax Rate Reconciliation, Tax Credit, Research, Amount			$ 13,600
Income Tax Expense (Benefit)	$ 56,277	$ 67,067	154,499	$ 192,778
Effective Income Tax Rate Reconciliation, Change in Enacted Tax Rate, Amount	1,500
Unrecognized Tax Benefits that Would Impact Effective Tax Rate	23,200		23,200
Unrecognized Tax Benefits, Income Tax Penalties and Interest Accrued	5,800		5,800
Other Noncurrent Liabilities [Member]
Unrecognized Tax Benefits	35,600		$ 35,600
Accounting Standards Update 2016-09 [Member]
Income Tax Expense (Benefit)	$ (4,500)

XML

Note 10 - Acquisition (Details Textual) - USD ($) $ in Thousands	Jul. 31, 2017	Jul. 20, 2017	Sep. 30, 2017	Dec. 31, 2016
Goodwill			$ 55,737
Special Logistics Dedicated, LLC [Member]
Business Combination, Consideration Transferred		$ 136,000
Business Combination, Consideration Transferred, Liabilities Incurred		$ 0
Payments to Acquire Businesses, Gross	$ 137,600
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Finite-Lived Intangibles	60,200
Goodwill	55,700
Special Logistics Dedicated, LLC [Member] | General and Administrative Expense [Member]
Business Combination, Acquisition Related Costs	$ 3,000

XML

Note 10 - Acquisition - Purchase Price Allocation (Details) - USD ($) $ in Thousands	Sep. 30, 2017	Jul. 31, 2017	Dec. 31, 2016
Goodwill	$ 55,737
Special Logistics Dedicated, LLC [Member]
Consideration		$ 137,600
Accounts receivable		9,400
Other current assets		1,500
Property and equipment		14,900
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Finite-Lived Intangibles		60,200
Accounts payable		(3,900)
Accrued Liabilities		(200)
Goodwill		$ 55,700

XML

Note 11 - Goodwill and Other Intangible Assets (Details Textual) $ in Thousands	3 Months Ended	9 Months Ended
	Sep. 30, 2017 USD ($)	Sep. 30, 2017 USD ($)
Goodwill, Impairment Loss	$ 0
Finite-Lived Intangible Assets, Accumulated Amortization	1,500	$ 1,500
Acquired Finite-lived Intangible Asset, Residual Value	0	0
Amortization of Intangible Assets	1,500	1,500
Finite-Lived Intangible Assets, Amortization Expense, Annual Amount	7,500	$ 7,500
Goodwill, Period Increase (Decrease)	0
Special Logistics Dedicated, LLC [Member]
Goodwill, Acquired During Period	56,000
Finite-lived Intangible Assets Acquired	$ 60,000

XML

Note 11 - Goodwill and Other Intangible Assets - Identifiable Intangible Assets (Details) $ in Thousands	9 Months Ended
	Sep. 30, 2017 USD ($)
Definite-lived intangibles:
Finite-lived intangible assets, gross	$ 60,200
Less accumulated amortization	(1,500)
Total identifiable intangible assets, net	58,700
Noncompete Agreements [Member]
Definite-lived intangibles:
Finite-lived intangible assets, gross	$ 200
Weighted average amortization period (Year)	5 years
Customer Relationships [Member]
Definite-lived intangibles:
Finite-lived intangible assets, gross	$ 60,000
Weighted average amortization period (Year)	8 years

XML

Note 12 - Business Segments (Details Textual)	3 Months Ended
	Sep. 30, 2017
Number of Reportable Segments	4

XML

Note 12 - Business Segments - Assets (Details) - USD ($) $ in Thousands	Sep. 30, 2017	Dec. 31, 2016
Assets	$ 4,053,923	$ 3,828,988
Operating Segments [Member] | JBI [Member]
Assets	2,077,000	2,032,000
Operating Segments [Member] | DCS [Member]
Assets	1,138,000	951,000
Operating Segments [Member] | ICS [Member]
Assets	182,000	136,000
Operating Segments [Member] | JBT [Member]
Assets	262,000	279,000
Operating Segments [Member] | Corporate and Other [Member]
Assets	$ 395,000	$ 431,000

XML

Note 12 - Business Segments - Operating Revenues (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016
Revenues	$ 1,843,334	$ 1,690,659	$ 5,199,408	$ 4,834,397
Operating Segments [Member]
Revenues	1,848,000	1,694,000	5,211,000	4,844,000
Operating Segments [Member] | JBI [Member]
Revenues	1,048,000	970,000	2,987,000	2,798,000
Operating Segments [Member] | DCS [Member]
Revenues	438,000	394,000	1,242,000	1,135,000
Operating Segments [Member] | ICS [Member]
Revenues	269,000	233,000	701,000	620,000
Operating Segments [Member] | JBT [Member]
Revenues	93,000	97,000	281,000	291,000
Intersegment Eliminations [Member]
Revenues	$ (5,000)	$ (3,000)	$ (12,000)	$ (10,000)

XML

Note 12 - Business Segments - Operating Income (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016
Operating income	$ 164,972	$ 182,977	$ 477,976	$ 526,659
JBI [Member] | Operating Segments [Member]
Operating income	109,100	116,900	314,100	325,600
DCS [Member] | Operating Segments [Member]
Operating income	42,900	52,500	136,200	147,700
ICS [Member] | Operating Segments [Member]
Operating income	7,300	8,500	11,500	30,200
JBT [Member] | Operating Segments [Member]
Operating income	5,700	5,100	16,200	23,100
Corporate and Other [Member] | Operating Segments [Member]
Operating income				$ 100

XML

Note 12 - Business Segments - Depreciation and Amortization (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016
Depreciation and amortization	$ 95,959	$ 91,001	$ 281,198	$ 269,717
JBI [Member] | Operating Segments [Member]
Depreciation and amortization	40,400	40,300	121,200	119,400
DCS [Member] | Operating Segments [Member]
Depreciation and amortization	40,400	35,800	114,100	106,300
ICS [Member] | Operating Segments [Member]
Depreciation and amortization	300	100	900	300
JBT [Member] | Operating Segments [Member]
Depreciation and amortization	10,200	10,100	30,700	30,400
Corporate and Other [Member] | Operating Segments [Member]
Depreciation and amortization	$ 4,700	$ 4,700	$ 14,300	$ 13,300