JB Hunt Annual Report 2015

Plain-text annual report

J . B . H U N T T R A N S P O R T S E R V I C E S , I N C . 2015 NOTICE OF ANNUAL MEETING, PROXY STATEMENT AND ANNUAL REPORT TABLE OF CONTENTS LETTER TO OUR STOCKHOLDERS NOTICE OF ANNUAL MEETING OF STOCKHOLDERS PROXY STATEMENT Questions and Answers About the Proxy Materials and the Annual Meeting Proposal Number One – Election of Directors Information About the Board Nominees for Director Director Compensation Executive Ofﬁcers of the Company Security Ownership of Management Corporate Governance Audit Committee Executive Compensation Committee Nominating and Corporate Governance Committee Principal Stockholders of the Company Report of the Executive Compensation Committee Compensation Discussion and Analysis Process of Setting Compensation 2015 Compensation Summary Compensation Grants of Plan-Based Awards Outstanding Equity Awards at Calendar year-end Restricted Share Units Vested Nonqualiﬁed Deferred Compensation Potential Post-Employment Beneﬁts Report of the Audit Committee Proposal Number Two – Ratiﬁcation of Independent Registered Public Accounting Firm Proposal Number Three – Stockholder Proposal Regarding Sexual Orientation Nondiscrimination Policy 2 4 5 5 10 10 11 13 14 15 16 20 20 21 22 23 24 25 28 31 33 34 37 38 38 39 40 41 l T a b e o f C o n t e n t s 2015 ANNUAL REPORT PART I Item 1. Business Item 1A. Risk Factors Item 1B. Unresolved Staff Comments Item 2. Properties Item 3. Legal Proceedings Item 4. Mine Safety Disclosures PART II Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Stock Performance Graph Item 6. Selected Financial Data Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations Item 7A. Quantitative and Qualitative Disclosures About Market Risk Item 8. Financial Statements and Supplementary Data Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure Item 9A. Controls and Procedures Item 9B. Other Information PART III Item 10. Directors, Executive Ofﬁcers and Corporate Governance Item 11. Executive Compensation Item 12. Security Ownership of Certain Beneﬁcial Owners and Management and Related Stockholder Matters Item 13. Certain Relationships and Related Transactions, and Director Independence Item 14. Principal Accounting Fees and Services PART IV Item 15. Exhibits, Financial Statement Schedules Signatures Exhibit Index Index to Consolidated Financial Information CORPORATE INFORMATION Directors Ofﬁcers Stockholder Information Revenue by Industry 44 45 48 49 50 50 50 51 52 53 54 61 61 62 62 62 62 63 63 63 63 63 64 65 66 84 84 84 85 l s r e d o h k c o t S r u O o T r e t t e L TO THE STOCKHOLDERS OF J.B. HUNT TRANSPORT SERVICES, INC. We are very pleased with the accomplishments of 2015, especially in realizing our long-held belief in the power of our complementary services. We not only beneﬁt from our diversiﬁed and balanced portfolio ﬁnancially, but as importantly, we are learning how to use our blend of offerings to differentiate J.B. Hunt as a complex Supply Chain Management company for our customers. Given the strength and size of our largest segment, the JBHT Intermodal franchise, it can be a task to make up shortfalls in this business unit. Actually, that is exactly what we did in 2015. We will elaborate more later in this letter. As in recent years, we again faced a number of uncontrollable obstacles and headwinds in 2015, a recurring theme in the U.S. economy. Rather than spending time on issues beyond our control, we will discuss how our efforts were focused on things we can inﬂuence to accomplish our bottom-line goals and deliver, in many categories, another record setting year in 2015. As we do every year, we recognize and thank our hard-working employees. So that we do not allow this recognition to become a passive or overly generic placeholder, let us elaborate on our thoughts here. Every day in every part of the company, more than 21,500 of the most dedicated people in the transportation industry work with a passion and commitment to serve our customers and each other. Each of them helps to deliver on our promises that we will be safe and strive to create real value for our customers and our stockholders. Our culture encourages innovation and we embrace the challenges we face by listening to our customers’ needs driving forward with expanding services built on a growing foundation of industry-leading technology. So far, this combination of core principles has been at the center of our growth and sustainability. Every day, the good people of J.B. Hunt are working hard to build a bigger, stronger and better company. We are very proud of them. 2015 Financial Results We set records in several important ﬁnancial categories again in 2015. In fact, we achieved all of our primary goals with the exception of our total revenue targets. Here we should acknowledge the impact that fuel has on all businesses and consider the underlying revenue trends excluding the effects of fuel. While we did not fully achieve our objectives in this category, we did grow the company’s revenue excluding fuel surcharge by a respectable 9%. We increased operating income by 13% and earnings per share by 16% with EBITDA exceeding $1 billion in 2015. All of these metrics are new records that met or exceeded our plans for the year. Some interesting statistics show a more comprehensive picture of the company’s ﬁnancial performance over the past several years. Starting in 2010 through 2015, we have invested $2.7 billion in net capital expenditures, generated over $4.7 billion in EBITDA, delivered more than $1.9 billion in net earnings, paid out just under $450 million in regular dividends and repurchased over $1 billion in common stock. At year’s end, we owned 12,500 tractors, 29,247 trailers, 78,986 containers, and 68,076 chassis. We owned or leased 42 terminal facilities, 89 Final Mile Services cross-dock locations, 34 ICS branch sales ofﬁces, and other support locations across the USA, Canada and Mexico. Important Developments in 2015 As mentioned, our strategy in 2015 focused on being intentional in areas of the company that we had more control over. A good example of this is an initiative called Elevation. This program is designed to pull together some of our very brightest people on cross-functional teams to gather, process and prioritize ideas and input from all across the company. We generated nearly 5,000 new ideas ranging from cost improvements to enhanced services. After testing for viability and real value, the ﬁnal ideas were submitted to a steering committee consisting of our entire executive leadership team. In all, we approved well over 400 ideas, which we will implement over the next two years. We plan to continue using this approach to build on the culture of gathering ideas and getting input from all of our people. In 2015, we said goodbye to our good friend and Chief Information Ofﬁcer, Kay Lewis. She served the company well in many roles during her career and made a lasting impact on both our technology culture and our people. Kay has earned great respect in the business community across the country for many aspects of her leadership and contributions to our company and the industry. We wish her the very best in her well-deserved retirement. We will all miss her. Taking her role as our new Chief Information Ofﬁcer and Executive Vice President of Technology and Engineering is Stuart Scott. Stuart comes to us with a strong leadership background at General Electric, Microsoft, Webvan and Sealy. We are excited to have Stuart with us and have high expectations for our strategic direction under his capable leadership. We embarked on an effort late in 2014 that gained momentum in 2015 known as the J.B. Hunt Experience. Our focus centers on enhancing the experience had by anyone who works for, sells to or buys from the company. Our priority during the initial phase has been on our driver force in hopes of improving the hiring and retention of these essential employees. Extensive focus on selection and recruiting, on boarding, manager training, communications, driver input, terminal renovations, mobile development and other ideas have driven us to our current state. Going forward, we will continue the efforts on our driver group and add a meaningful component of Customer Experience focus. The Enterprise We report publicly on four segments: Intermodal, Dedicated Contract Services, Integrated Capacity Solutions and Truckload. However, our strategic approach to the markets we serve utilizes a much more integrated approach than just selling each segment individually. Contained in each of these segments are a number of transportation solutions developed to meet the changing demands of our customers. We have spent several years reﬁning our customer interaction framework and we see growth opportunities in all of these offerings. 2 L e t t e r T o O u r S t o c k h o d e r s l Our sales and marketing teams receive extensive training on the full range of services in each segment and are well-equipped to develop comprehensive client relationships. All of our top-tier customers use at least three of our four segments regularly and many use all four. The primary goal of our approach is to gain access to as much information as possible about each customer’s supply-chain needs, then use our complementary service offerings to build intelligent solutions that are hard for our competitors to duplicate. These more deeply integrated relationships help us retain business and grow with our customers as their businesses evolve. The Supply-Chain Management Businesses Supply chain management encompasses the movement and storage of raw materials, work-in-process inventory, and ﬁnished goods from point of origin to point of consumption. Point of origin can include a manufacturing location, a port or crossing of international import, or a warehouse/distribution center where product is introduced for movement to a place where it can ultimately be consolidated with other inventory, sold and consumed. Our services range from the largest privately owned ﬂeet of intermodal containers in North America and all supporting assets, like chassis and dray equipment, to a ﬁnal-mile-services network with 89 cross-dock locations. Between the point of origin and the point of consumption, many activities can occur that we are well-positioned to handle and manage. Any type of movement – including truckload, less than truckload, bulk, parcel refrigerated, ﬂatbed and specialized equipment – is available through a combination of our segments. Our research supports a meaningful number of loads currently moving on the highway systems that are convertible to Intermodal with both our existing base of larger shippers and with a high number of mid-size and smaller shippers we have targeted. We hold a positive view on the potential this data presents to continue our organic growth trajectory in Intermodal. Our railroad partners made great progress in 2015 improving their respective infrastructure and service levels. The incremental nature of intermodal load volume will drive continued service and capacity improvements by our rail partners as they look to reprioritize a changing commodity dynamic in their more traditional business lines. This business serves the introductory and consolidation portions of Supply-Chain Management for our customers. Dedicated Contract Services focuses on long-term agreements for the exclusive use of a combination of assets and people that provide an extremely high level of service and reliability. Typically, DCS provides value in the later stages of Supply-Chain Management as inventory moves to the point of purchase and the point of consumption. Customers place a higher priority on the transportation services required as they move closer to the end consumer. Our retention rates in this business are very good and we see expansion possibilities in the conversion of more customer-owned and -operated private ﬂeets. Additionally, we offer a contract-based ﬁnal-mile/home-delivery system for big and bulky inventories and believe with the continued growth of e-commerce and online purchasing, these markets will grow in the coming years. The pairing of our Truckload segment and the Integrated Capacity Solutions segment emphasizes a wide range of highway-centric services. These include asset-based truckload capacity with dropped trailer pools, non-asset-based brokerage services for all types of highway equipment including dry van, temperature-controlled, ﬂatbed, bulk, less than truckload, oversize loads and a variety of managed services for customers of all sizes. We are especially proud of our Truckload group for completing a difﬁcult turnaround and returning to a fully sustainable and functional performance level in all categories. Although excellent work in our rate quality was accomplished during 2015 across all segments, the business plan in JBI was not entirely achieved, missing on the top and bottom line. Fortunately, as mentioned, DCS and JBT outperformed their plans, more than offsetting the shortfall in Intermodal. This is where we experience the power of our collective portfolio of services complementing the overall needs of our customers and our stockholders. We expect JBI will return to historical performance and delivering its plans and, at the same time, we are encouraged by the performance of DCS, JBT and ICS and by the power of our portfolio. We will continue our focus on building services that ﬁt together to present highly complex, scalable and differentiated solutions to our customers’ Supply-Chain Management challenges. A Final Word Since going public in 1983, we have built on each prior year’s successes and failures to be a better company. 2016 will be no exception as we press ahead in the “new economy” and make our way forward. Our businesses are all ﬁnancially healthy and running at improving levels of service. This is a unique situation, and we plan to take full advantage of our position. Our challenge lies in ﬁnding new customers to serve and in continuing to expand our offerings to meet their needs. We thank our employees for believing in our vision and strategy and for supporting it with their commitment every day. We exist because our customers trust us to deliver on our promises. And to our stockholders, we understand our duty to you and we take it quite seriously. John N. Roberts, III President & Chief Executive Ofﬁcer Kirk Thompson Chairman of the Board 3 g n i t e e M l a u n n A f o e c i t o N J.B. HUNT TRANSPORT SERVICES, INC. 615 J.B. Hunt Corporate Drive Lowell, Arkansas 72745 479-820-0000 Internet Site: www.jbhunt.com _____________________________________________________________________________ NOTICE OF ANNUAL MEETING OF STOCKHOLDERS To Be Held April 21, 2016 ____________________________________________________________________________ The Annual Meeting of Stockholders of J.B. Hunt Transport Services, Inc. (the “Company”) will be held April 21, 2016, at 10 a.m. (CDT) at the Company’s headquarters, located at 615 J.B. Hunt Corporate Drive in Lowell, Arkansas, for the following purposes: (1) To elect Directors for a term of one (1) year (2) To ratify the appointment of Ernst & Young LLP as the Company’s independent registered public accounting ﬁrm for the 2016 calendar year (3) To consider a stockholder proposal regarding sexual orientation nondiscrimination policy (4) To transact such other business as may properly come before the Annual Meeting or any adjournments thereof Only stockholders of record on February 16, 2016, will be entitled to vote at the meeting or any adjournments thereof. The stock transfer books will not be closed. The 2015 Annual Report to Stockholders is included in this publication. By Order of the Board of Directors DAVID G. MEE Corporate Secretary Lowell, Arkansas March 10, 2016 4 YOUR VOTE IS IMPORTANT PLEASE EXECUTE YOUR PROXY WITHOUT DELAY J.B. HUNT TRANSPORT SERVICES, INC. 615 J.B. Hunt Corporate Drive Lowell, Arkansas 72745 479-820-0000 Internet Site: www.jbhunt.com _____________________________________________________________________________ PROXY STATEMENT _____________________________________________________________________________ This Proxy Statement is furnished in connection with the solicitation of proxies by J.B. Hunt Transport Services, Inc. (the “Company”), on behalf of its Board of Directors (the “Board”), for the 2016 Annual Meeting of Stockholders (the “Annual Meeting”). The Proxy Statement and the related proxy card are being distributed on or about March 10, 2016. IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE STOCKHOLDERS MEETING TO BE HELD APRIL 21, 2016 This Proxy Statement and our 2015 Annual Report to Stockholders, which includes our Annual Report on Form 10-K, are available at www.jbhunt.com. QUESTIONS AND ANSWERS ABOUT THE PROXY MATERIALS AND THE ANNUAL MEETING P r o x y S t a t e m e n t When And Where Is The Annual Meeting? Date: Time: Location: Thursday, April 21, 2016 10 a.m. Central Daylight Time J.B. Hunt Transport Services, Inc. Corporate Ofﬁces First-Floor Auditorium 615 J.B. Hunt Corporate Drive Lowell, Arkansas 72745 What Matters Will Be Voted Upon At The Annual Meeting? At the Annual Meeting, you will be asked to: • Consider and vote upon a proposal to elect nominees Douglas G. Duncan, Francesca M. Edwardson, Wayne Garrison, Sharilyn S. Gasaway, Gary C. George, Bryan Hunt, Coleman H. Peterson, John N. Roberts, III, James L. Robo, and Kirk Thompson as directors to hold ofﬁce for a term of one year, expiring at the close of the Annual Meeting of Stockholders in 2017. • Consider and vote upon a proposal to ratify the appointment of Ernst & Young LLP (“E&Y”) as the Company’s independent registered public accounting ﬁrm for the 2016 calendar year. • Consider and vote upon a stockholder proposal to amend the Company’s equal employment opportunity policy to explicitly prohibit discrimination based on sexual orientation, gender identity or gender expression and to take substantial action to implement the policy. • Transact such other business as may properly come before the Annual Meeting or any adjournments thereof. 5 What Constitutes A Quorum? The presence, either in person or by proxy, of the holders of at least a majority of our issued and outstanding shares of common stock entitled to vote is required to constitute a quorum for the transaction of business at the Annual Meeting. Abstentions and broker non-votes, which are described in more detail below, are counted as shares present at the Annual Meeting for purposes of determining whether a quorum exists. Who Is Entitled To Vote? Only stockholders of record of the Company’s common stock at the close of business on Tuesday, February 16, 2016, which is the “record date,” are entitled to notice of, and to vote at, the Annual Meeting. Shares that may be voted include shares that are held: (1) directly by the stockholder of record, and (2) beneﬁcially through a broker, bank or other nominee. Each share of our common stock will be entitled to one vote on all matters submitted for a vote at the Annual Meeting. As of the record date, there were 112,774,244 shares of our common stock issued and outstanding and entitled to be voted at the Annual Meeting. What Is The Difference Between Holding Shares As A “Registered Owner” And A “Beneﬁcial Owner”? Most of the Company’s stockholders hold their shares through a broker, bank or other nominee rather than directly in their own name. As summarized below, there are some distinctions between registered shares and those owned beneﬁcially: • Registered Owners – If your shares are registered directly in your name with our transfer agent, Computershare Trust Company N.A., you are, with respect to those shares, the stockholder of record. As the stockholder of record, you have the right to grant your voting proxy directly to the Company or to vote in person at the Annual Meeting. • Beneﬁcial Owners – If your shares are held in a brokerage account, bank or by another nominee, you are, with respect to those shares, the “beneﬁcial owner” of shares held in “street name.” As the beneﬁcial owner, you have the right to direct your broker, bank or other nominee on how to vote or to vote in person at the Annual Meeting. However, since you are not a stockholder of record, you may not vote these shares in person at the Annual Meeting unless you obtain a “legal proxy” from your broker, bank or other nominee (who is the stockholder of record) giving you the right to vote the shares. t n e m e t a t S y x o r P What Stockholder Approval Is Necessary For Approval Of The Proposals? • Election of Directors Each director shall be elected by a vote of the majority of votes cast with respect to that director. This means that a director must receive “for” votes from more than 50% of the number of shares voted with respect to that director. However, if the number of nominees is greater than the number of directors to be elected, the directors will be elected by the vote of a plurality of the shares represented in person or by proxy at any stockholder meeting. • Ratiﬁcation of the appointment of E&Y as the Company’s independent registered public accounting ﬁrm Ratiﬁcation of the Audit Committee’s appointment of E&Y as the Company’s independent registered public accounting ﬁrm requires the afﬁrmative vote of a majority of the votes cast at the Annual Meeting. For purposes of this vote, a failure to vote, a vote to abstain or withholding your vote (or direction to your broker to do so) is not counted as a vote cast and, therefore, will have no effect on the outcome of this vote. Stockholder ratiﬁcation is not required for the appointment of the Company’s independent registered public accounting ﬁrm. However, we are submitting the proposal to solicit the opinion of our stockholders. • Vote on a stockholder proposal to amend the Company’s equal employment opportunity policy to explicitly prohibit discrimination based on sexual orientation, gender identity or gender expression and to take substantial action to implement the policy. Approval of this resolution requires the afﬁrmative vote of a majority of the votes cast at the Annual Meeting. For purposes of this vote, a failure to vote, a vote to abstain or withholding your vote (or direction to your broker to do so) is not counted as a vote cast and, therefore, will have no effect on the outcome of this vote. As of the record date, directors and executive ofﬁcers of the Company beneﬁcially owned an aggregate 5,062,065 shares of common stock representing 4.5% of our common stock issued and outstanding and, therefore, 4.5% of the voting power entitled to vote at the Annual Meeting. The Company believes that its directors and executive ofﬁcers currently intend to vote their shares as follows: • FOR the election of directors for one (1) year • FOR ratiﬁcation of the appointment of E&Y as the Company’s independent registered public accounting ﬁrm for the 2016 calendar year • AGAINST the stockholder proposal to amend the Company’s equal employment opportunity policy to explicitly prohibit discrimination based on sexual orientation, gender identity or gender expression and to take substantial action to implement the policy. 6 May I Vote My Shares In Person At The Annual Meeting? If you are the registered owner of shares of the Company’s common stock on the record date, you have the right to vote your shares in person at the Annual Meeting. If you are the beneﬁcial owner of shares of the Company’s common stock on the record date, you may vote these shares in person at the Annual Meeting if you request and obtain a legal proxy from your broker, bank or other nominee (the stockholder of record) giving you the right to vote the shares at the Annual Meeting, complete such legal proxy and present it to the Company at the Annual Meeting. Even if you plan to attend the Annual Meeting, we recommend that you submit your proxy card or voting instructions so that your vote will be counted if you later decide not to attend the Annual Meeting. How Can I Vote My Shares Without Attending The Annual Meeting? If you are a registered owner, you may instruct the named proxy holders on how to vote your shares by completing, signing, dating and returning the enclosed proxy card in the postage-paid envelope provided with this Proxy Statement, or by using the Internet voting site or the toll-free telephone number listed on the proxy card. Speciﬁc instructions for using the Internet and telephone voting systems are provided on the proxy card. The Internet and telephone voting systems will be available until 11:59 p.m. Central Daylight Time on Wednesday, April 20, 2016 (the day before the Annual Meeting). If you are the beneﬁcial owner of shares held in “street name,” you should instruct your broker, bank or other nominee on how to vote your shares. Your broker, bank or other nominee has enclosed with this Proxy Statement a voting instruction card for you to use in directing your nominee on how to vote your shares. The instructions from your nominee will indicate whether Internet or telephone voting is available and, if so, will provide details regarding how to use those systems. If My Shares Are Held In “Street Name,” Will My Broker, Bank Or Other Nominee Vote My Shares For Me? If you hold shares in street name through a broker, bank or other nominee, your broker, bank or nominee may not be permitted to exercise voting discretion with respect to some of the matters to be acted upon at the Annual Meeting. Under current stock exchange rules, brokers who do not have instructions from their customers may not use their discretion in voting their customers’ shares on certain speciﬁc matters that are not considered to be “routine” matters, including the election of directors, executive compensation and other signiﬁcant matters. The proposals in this Proxy Statement regarding the election of directors and sexual orientation nondiscrimination policy are not considered to be routine matters. Therefore, without your speciﬁc instructions, your shares will not be voted on these matters and will not be counted in determining the number of shares necessary for approval. Shares represented by such “broker non-votes,” however, will be counted in determining whether there is a quorum. You should follow the directions provided by your nominee regarding instructions on how to vote your shares. Ratiﬁcation of the appointment of E&Y as the Company’s independent registered public accounting ﬁrm is considered a routine matter and, therefore, if beneﬁcial owners fail to give voting instructions, brokers, banks and other nominees will have the discretionary authority to vote shares of our common stock with respect to this proposal. What Is A Broker Non-Vote? Generally, a “broker non-vote” occurs when a broker, bank or other nominee that holds shares in “street name” for a customer is precluded from exercising voting discretion on a particular proposal because: (1) the beneﬁcial owner has not instructed the nominee on how to vote, and (2) the nominee lacks discretionary voting power to vote such issues. Under NASDAQ rules, a nominee does not have discretionary voting power with respect to the approval of “nonroutine” matters absent speciﬁc voting instructions from the beneﬁcial owners of such shares. How Will My Proxy Be Voted? Shares represented by a properly executed proxy (in paper form, by Internet or by telephone) that is received in a timely manner, and not subsequently revoked, will be voted at the Annual Meeting or any adjournment or postponement thereof in the manner directed on the proxy. Kirk Thompson and John N. Roberts, III are named as proxies in the proxy form and have been designated by the Board as the directors’ proxies to represent you and vote your shares at the Annual Meeting. All shares represented by a properly executed proxy on which no choice is speciﬁed will be voted: (1) FOR the election of the nominees for director named in this Proxy Statement, (2) FOR ratiﬁcation of the appointment of E&Y as the Company’s independent registered public accounting ﬁrm for the 2016 calendar year, (3) AGAINST the stockholder proposal to amend the Company’s equal employment opportunity policy to explicitly prohibit discrimination based on sexual orientation, gender identity or gender expression and to take substantial action to implement the policy, and (4) in accordance with the proxy holders’ best judgment as to any other business that properly comes before the Annual Meeting. P r o x y S t a t e m e n t 7 t n e m e t a t S y x o r P This Proxy Statement is considered to be voting instructions for the trustees of the J.B. Hunt Transport Services, Inc. Employee Retirement Plan for our common stock allocated to individual accounts under this plan. If account information is the same, participants in the plan (who are stockholders of record) will receive a single proxy representing all of their shares. If a plan participant does not submit a proxy to us, the trustees of the plan in which shares are allocated to his or her individual account will vote such shares in the same proportion as the total shares in such plan for which directions have been received. May I Revoke My Proxy And Change My Vote? Yes. You may revoke your proxy and change your vote at any time prior to the vote at the Annual Meeting. If you are the registered owner, you may revoke your proxy and change your vote by: (1) submitting a new proxy bearing a later date (which automatically revokes the earlier proxy), (2) giving notice of your changed vote to us in writing mailed to the attention of David G. Mee, Corporate Secretary, at our executive ofﬁces, or (3) attending the Annual Meeting and giving oral notice of your intention to vote in person. You should be aware that simply attending the Annual Meeting will not in and of itself constitute a revocation of your proxy. Who Will Pay The Costs Of Soliciting Proxies? Proxies will be solicited initially by mail. Further solicitation may be made in person or by telephone, electronic mail or facsimile. The Company will bear the expense of preparing, printing and mailing this Proxy Statement and accompanying materials to our stockholders. Upon request, the Company will reimburse brokers, banks and other nominees for reasonable expenses incurred in forwarding copies of the proxy materials relating to the Annual Meeting to the beneﬁcial owners of our common stock. In 2015, the Company retained Broadridge, an independent proxy solicitation ﬁrm, to assist in soliciting proxies from stockholders. Broadridge received a fee of approximately $58,000 as compensation for its services and was reimbursed for its out-of-pocket expenses. The fee amount was not contingent on the number of stockholder votes cast in favor of any proposal, and Broadridge is prohibited from making any recommendation to our stockholders to either accept or reject any proposal or otherwise express an opinion concerning a proposal. Proxy solicitation fees in 2016 are expected to be comparable to those paid in 2015. What Other Business Will Be Presented At The Annual Meeting? As of the date of this Proxy Statement, the Board knows of no other business that may properly be, or is likely to be, brought before the Annual Meeting. If any other matters should arise at the Annual Meeting, the persons named as proxy holders, Kirk Thompson and John N. Roberts, III, will have the discretion to vote your shares on any additional matters properly presented for a vote at the meeting. If, for any unforeseen reason, any of the director nominees are not available to serve as a director, the named proxy holders will vote your proxy for such other director candidate or candidates as may be nominated by the Board. What Is The Deadline For Stockholder Proposals For The 2017 Annual Meeting? In order for a stockholder proposal to be eligible to be included in the Company’s Proxy Statement and proxy card for the 2017 Annual Meeting of Stockholders, the proposal: (1) must be received by the Company at its executive ofﬁces, 615 J.B. Hunt Corporate Drive, Lowell, Arkansas 72745, Attention: Corporate Secretary, on or before November 10, 2016, and (2) must concern a matter that may be properly considered and acted upon at the Annual Meeting in accordance with applicable laws, regulations and the Company’s Bylaws and policies, and must otherwise comply with Rule 14a-8 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Where Can I Find The Voting Results Of The Annual Meeting? The Company will publish ﬁnal voting results of the Annual Meeting on a Form 8-K within four days after the annual stockholders meeting on April 21, 2016. What Should I Do If I Receive More Than One Set Of Voting Materials? You may receive more than one set of voting materials, including multiple copies of this Proxy Statement and multiple proxies or voting instruction cards. For example, if you hold your shares in more than one brokerage account, you may receive a separate voting instruction card for each brokerage account. If you are a registered owner and your shares are registered in more than one name, you will receive more than one proxy card. Please vote each proxy and instruction card that you receive. What Is Householding? In an effort to reduce printing costs and postage fees, the Company has adopted a practice approved by the Securities and Exchange Commission (the “SEC”) called “householding.” Under this practice, certain stockholders who have the same address and last name will receive only one copy of this Proxy Statement and the Company’s Annual Report, unless one or more of these stockholders notiﬁes the Company that he or she wishes to continue receiving individual copies. Stockholders who participate in householding will continue to receive separate proxy cards. 8 If you share an address with another stockholder and received only one copy of this Proxy Statement and the Company’s Annual Report and would like to request a separate copy of these materials, or if you do not wish to participate in householding in the future, please: (1) mail such request to J.B. Hunt Transport Services, Inc., Attention: Corporate Secretary, 615 J.B. Hunt Corporate Drive, Lowell, Arkansas 72745, or (2) call the Corporate Secretary toll-free at 800-643-3622. Similarly, you may also contact the Company if you received multiple copies of the Company’s proxy materials and would prefer to receive a single copy in the future. What Do I Need To Do Now? First, read this Proxy Statement carefully. Then, if you are a registered owner, you should, as soon as possible, submit your proxy by executing and returning the proxy card or by voting electronically via the Internet or by telephone. If you are the beneﬁcial owner of shares held in “street name,” then you should follow the voting instructions of your broker, bank or other nominee. Your shares will be voted in accordance with the directions you specify. If you submit an executed proxy card to the Company, but fail to specify voting directions, your shares will be voted: (1) FOR the election of the director nominees, (2) FOR ratiﬁcation of the appointment of E&Y as the Company’s independent registered public accounting ﬁrm for the 2016 calendar year, and (3) AGAINST the stockholder proposal to amend the Company’s equal employment opportunity policy to explicitly prohibit discrimination based on sexual orientation, gender identity or gender expression and to take substantial action to implement the policy. Who Can Help Answer My Questions? If you have questions concerning a proposal or the Annual Meeting, if you would like additional copies of this Proxy Statement, or if you need directions to or special assistance at the Annual Meeting, please call the Corporate Secretary toll-free at 800-643-3622. In addition, information regarding the Annual Meeting is available via the Internet at our website, www.jbhunt.com. YOU SHOULD CAREFULLY READ THIS PROXY STATEMENT IN ITS ENTIRETY The summary information provided above in the question-and-answer format is for your convenience only and is merely a brief description of material information contained in this Proxy Statement. P r o x y S t a t e m e n t YOUR VOTE IS IMPORTANT IF YOU ARE A REGISTERED OWNER, YOU MAY VOTE BY INTERNET, TELEPHONE, OR BY COMPLETING, SIGNING AND DATING THE ENCLOSED PROXY CARD AND RETURNING IT TO US IN THE ACCOMPANYING ENVELOPE AS PROMPTLY AS POSSIBLE IF YOU ARE A BENEFICIAL OWNER, PLEASE FOLLOW THE VOTING INSTRUCTIONS OF YOUR BROKER, BANK OR OTHER NOMINEE AS PROVIDED WITH THIS PROXY STATEMENT AS PROMPTLY AS POSSIBLE 9 PROPOSALS TO BE VOTED AT THE ANNUAL MEETING PROPOSAL NUMBER ONE ELECTION OF DIRECTORS t n e m e t a t S y x o r P Our Board nominates Douglas G. Duncan, Francesca M. Edwardson, Wayne Garrison, Sharilyn S. Gasaway, Gary C. George, Bryan Hunt, Coleman H. Peterson, John N. Roberts, III, James L. Robo, and Kirk Thompson as directors to hold ofﬁce for a term of one year, expiring at the close of the 2017 Annual Meeting of Stockholders or until their successors are elected and qualiﬁed or until their earlier resignation or removal. The Board believes that these incumbent directors standing for re-election are well-qualiﬁed and experienced to direct and manage the Company’s operations and business affairs and will represent the interests of the stockholders as a whole. Biographical information on each of these nominees is set forth below in “Nominees for Director.” One of our directors, John A. White, will retire from the Board upon the expiration of his current term at the 2016 Annual Meeting. The Board has not nominated a candidate to replace him at this time. If any director nominee becomes unavailable for election, which is not anticipated, the named proxies will vote for the election of such other person as the Board may nominate, unless the Board resolves to reduce the number of directors to serve on the Board and thereby reduce the number of directors to be elected at the Annual Meeting. THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR EACH OF THE DIRECTOR NOMINEES LISTED HEREIN INFORMATION YOU NEED TO MAKE AN INFORMED DECISION DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY Number of Directors and Term of Directors and Executive Ofﬁcers The Company’s Bylaws provide that the number of directors shall not be less than three or more than 12, with the exact number to be ﬁxed by the Board. Directors serve a term of one year from their election date to the Annual Meeting of Stockholders. Directors are elected by a majority of votes cast with respect to each director, provided that the number of nominees does not exceed the number of directors to be elected. The stockholders of the Company elect at the Company’s Annual Meeting successors for directors whose terms have expired. The Board elects members to ﬁll new membership positions and vacancies in unexpired terms on the Board. No director will be eligible to stand for re-election or be elected to a vacancy once he or she has reached 72 years of age. Executive ofﬁcers are elected by the Board and hold ofﬁce until their successors are elected and qualiﬁed or until their earlier death, retirement, resignation or removal. 10 NOMINEES FOR DIRECTOR TERMS EXPIRE 2017 Douglas G. Duncan Mr. Duncan, 65, was elected to the Board in 2010. He is a member of the Audit Committee and the Nominating and Corporate Governance Committee. In February 2010, he retired as President and Chief Executive Ofﬁcer of FedEx Freight Corporation, a wholly owned subsidiary of FedEx Corporation. FedEx Freight Corporation is a leading provider of regional and national less-than-truckload (LTL) freight services. Mr. Duncan was the founding chief executive ofﬁcer of FedEx Freight. He also served on the Strategic Management Committee of FedEx Corporation. Before the formation of FedEx Freight, he served for two years as President and Chief Executive Ofﬁcer of Viking Freight. With 30 years of transportation experience, Mr. Duncan has held management positions in operations, sales and marketing with Caliber System and Roadway Express. He served on the Executive Committee of the American Trucking Associations and as Chairman of the American Transportation Research Institute. A graduate of Christopher Newport University, Mr. Duncan served on the university’s Board of Visitors. He currently serves on the Board of Directors of Benchmark Electronics, Inc. and served on the Board of Directors of Brambles LTD. Francesca M. Edwardson Ms. Edwardson, 58, was elected to the Board in 2011. She serves on the Company’s Executive Compensation Committee and the Nominating and Corporate Governance Committee. She retired as the Chief Executive Ofﬁcer of the American Red Cross of Chicago and Northern Illinois, a business unit of the American Red Cross, in 2016, a position she held since 2005. She previously served as Senior Vice President and General Counsel for UAL Corporation, a predecessor company to United Continental Holdings, Inc. She has also been a partner in the law ﬁrm of Mayer Brown and the Executive Director of the Illinois Securities Department. Ms. Edwardson is a graduate of Loyola University in Chicago, Illinois, holding degrees in economics and law. She serves on the Board of Directors of Duluth Holdings, Inc., where she chairs the Compensation Committee, and also serves on the Boards of Trustees for Rush University Medical Center and the Lincoln Park Zoo. Wayne Garrison Mr. Garrison, 63, was elected to the Board in 1981. He served as Chairman of the Board of the Company from 1995 to December 31, 2010, and continues to serve as a member of the Board of Directors. Joining the Company in 1976 as Plant Manager, Mr. Garrison has also served as Vice President of Finance in 1978, Executive Vice President of Finance in 1979, President in 1982, Chief Executive Ofﬁcer in 1987 and Vice Chairman of the Board from January 1986 until May 1991. P r o x y S t a t e m e n t Sharilyn S. Gasaway Mrs. Gasaway, 47, was elected to the Board in 2009. She is a member of the Audit Committee and the Nominating and Corporate Governance Committee. She served as Executive Vice President and Chief Financial Ofﬁcer of Alltel Corp., the Little Rock, Arkansas-based Fortune 500 wireless carrier, from 2006 to 2009. She was part of the executive team that spearheaded publicly traded Alltel’s transition through the largest private equity buyout in the telecom sector and was an integral part of the successful combination of Alltel and Verizon. She also served as Alltel’s Corporate Controller and Principal Accounting Ofﬁcer from 2002 to 2006. Joining Alltel in 1999, she served as Director of General Accounting, Controller, and Vice President of Accounting and Finance. Prior to joining Alltel, she worked for eight years at Arthur Andersen LLC. Mrs. Gasaway has a degree in accounting from Louisiana Tech University and is a Certiﬁed Public Accountant. She currently serves on the Board of Directors, chairs the Audit Committee and serves on the Governance, Compensation and Business Development Committee of Genesis Energy, LP. She also serves on the Board of Directors and the Audit, Investment, and Nominating and Corporate Governance Committees of Waddell & Reed Financial, Inc., as well as on the Louisiana Tech University College of Business Advisory Board and the Board of Directors of Arkansas Children’s Hospital. Gary C. George Mr. George, 65, was elected to the Board in 2006. He is Chairman of the Nominating and Corporate Governance Committee and a member of the Executive Compensation Committee. Mr. George is Chairman of George’s, Inc., a private, fully integrated poultry company in northwest Arkansas. He is a graduate of the University of Arkansas with a degree in business administration. He served on the Board of Trustees for the University of Arkansas from 1995 through 2005 and was Chairman of the Board of Trustees in 2005. He also serves as Chairman of the Board of Legacy National Bank in Springdale, Ark. 11 t n e m e t a t S y x o r P Bryan Hunt Mr. Hunt, 57, was elected to the Board in 1991. He is the Managing Member of Hunt Auto Group, a private company with operations in motor vehicle sales and service in Arkansas and Missouri; Best Buy Here Pay Here of Arkansas, a private company with used-car operations in Arkansas, Missouri and Oklahoma; Progressive Car Finance, a private company that provides subprime ﬁnancing for automobile dealers; and 71B Auto Auction and I-135 Auto Auction, both private companies engaged in the auction of automobiles, trucks, boats and other motor vehicles to dealers and the general public in Arkansas and Kansas. A graduate of the University of Arkansas, he has a degree in marketing and transportation. He is the son of co-founders J.B. and Johnelle Hunt. Coleman H. Peterson Mr. Peterson, 67, was elected to the Board in 2004. He is Chairman of the Executive Compensation Committee and a member of the Nominating and Corporate Governance Committee. Mr. Peterson is the President and CEO of Hollis Enterprises LLC, a human resources consulting ﬁrm founded in 2004. He is retired from Wal-Mart Stores, Inc. as Executive Vice President of its People Division. During his tenure, Mr. Peterson was responsible for recruitment, retention and development of the world’s largest corporate work force. Prior to his experience with Wal-Mart, Mr. Peterson spent 16 years with Venture Stores, with his last position being Senior Vice President of Human Resources. He holds bachelor’s and master’s degrees from Loyola University of Chicago. Mr. Peterson serves on the Board of Directors, chairs the Compensation Committee, and serves on the Nominating and Corporate Governance Committee of Build-A-Bear Workshop. He also serves on the Board of Directors, chairs the Compensation Committee, and serves on the Nominating and Corporate Governance Committee of Cracker Barrel Old Country Store, Inc. Locally, he served as Chairman of the Board of Trustees for Northwest Arkansas Community College until December 31, 2010. John N. Roberts, III Mr. Roberts, 51, was elected to the Board in 2010, and was elected to serve as the Company’s President and Chief Executive Ofﬁcer effective January 1, 2011. A graduate of the University of Arkansas, he served as Executive Vice President and President of Dedicated Contract Services from 1997 to December 31, 2010. Joining the Company in 1989, he began his career as a Management Trainee and subsequently served as an EDI Services Coordinator, Regional Marketing Manager for the Intermodal and Truckload business units, Business Development Executive for DCS and Vice President of Marketing Strategy for the Company. Mr. Roberts also serves on the Board of Directors and the Audit Committee of the Federal Reserve Bank of St. Louis. James L. Robo Mr. Robo, 53, was elected to the Board in 2002. He is Lead Independent Director, Chairman of the Audit Committee, and a member of the Nominating and Corporate Governance Committee. Mr. Robo is Chairman and Chief Executive Ofﬁcer of NextEra Energy, Inc. He served as President and Chief Operating Ofﬁcer of NextEra Energy until June 2012, as President of NextEra Energy Resources until December 2006 and as Vice President of Corporate Development and Strategy until July 2002. NextEra Energy is a leading clean energy company whose two main subsidiaries are Florida Power & Light Company and NextEra Energy Resources, LLC. Prior to joining NextEra Energy in 2002, Mr. Robo spent 10 years at General Electric Company. He served as President and Chief Executive Ofﬁcer of GE Mexico from 1997 until 1999 and as President and Chief Executive Ofﬁcer of the GE Capital TIP/Modular Space division from 1999 until February 2002. From 1984 through 1992, Mr. Robo worked for Mercer Management Consulting. He received a BA summa cum laude from Harvard College and an MBA from Harvard Business School, where he was a Baker Scholar. Kirk Thompson Mr. Thompson, 62, was elected to the Board in 1985. He was elected Chairman of the Board in 2010, assuming that ofﬁce on January 1, 2011. He served as President and Chief Executive Ofﬁcer from 1987 to December 31, 2010. A graduate of the University of Arkansas and a Certiﬁed Public Accountant, Mr. Thompson joined the Company in 1973. He served as Vice President of Finance from 1979 until 1984, Executive Vice President and Chief Financial Ofﬁcer until 1985, and President and Chief Operating Ofﬁcer from 1986 until 1987, when he was elected President and Chief Executive Ofﬁcer. In 2014, Mr. Thompson joined the Board of Directors of Rand Logistics, Inc., a leading provider of bulk freight shipping services in marine vessels throughout the Great Lakes region. 12 DIRECTOR COMPENSATION The Company pays only nonemployee directors for their services as directors. Directors who are also ofﬁcers or employees of the Company are not eligible to receive any of the compensation described below. For 2015, through the Company’s 2016 Annual Meeting, compensation for nonemployee directors serving on the Board, was as follows: • an annual retainer of $155,000 paid in Company stock, cash or any combination thereof • an annual retainer of $20,000, paid in cash, to the Audit Committee Chairman • an annual retainer of $13,500, paid in cash, to the Executive Compensation Committee Chairman • an annual retainer of $7,500, paid in cash, to the Nominating and Corporate Governance Committee Chairman • $4,500 for each Board meeting attended • $2,500 for each Audit Committee meeting attended • $2,000 for each Executive Compensation Committee meeting attended • $1,500 for each Nominating and Corporate Governance Committee meeting attended • reimbursement of expenses to attend Board and Committee meetings At the Executive Compensation Committee’s (the “Committee”) meeting on October 21, 2015, the Committee reviewed a summary of various compensation packages awarded to directors of the Company’s peer group compiled by Meridian Compensation Partners, LLC. The Committee determined that the Board’s compensation would be changed to the following, effective April 21, 2016. • an annual retainer of $200,000 paid in Company stock, cash or any combination thereof • an annual retainer of $25,000, paid in cash, to the Audit Committee Chairman • an annual retainer of $15,000, paid in cash, to the Executive Compensation Committee Chairman • an annual retainer of $10,000, paid in cash, to the Nominating and Corporate Governance Committee Chairman • an annual retainer of $20,000, paid in cash, to each member of the Audit Committee • an annual retainer of $15,000, paid in cash, to each member of the Executive Compensation Committee • an annual retainer of $10,000, paid in cash, to each member of the Nominating and Corporate Governance Committee • reimbursement of expenses to attend Board and Committee meetings Nonemployee Board of Director Compensation Paid in Calendar year 2015 Fees Paid in Cash ($) Board Member Douglas G. Duncan 196,000 Francesca M. Edwardson 29,000 173,000 Wayne Garrison 79,750 Sharilyn S. Gasaway 36,500 Gary C. George 18,000 Bryan Hunt 42,500 Coleman H. Peterson 61,000 James L. Robo 49,000 John A. White Fees Paid in Stock ($) – 155,000 – 116,250 155,000 155,000 155,000 155,000 155,000 Restricted Share or Stock Option Awards ($) – – – – – – – – – Non-Equity Incentive Plan Compensation ($) – – – – – – – – – (1) Reimbursement of expenses to attend Board and Committee meetings Change in Pension Value and Nonqualiﬁed Deferred All Other Compensation Compensation Earnings ($) – – – – – – – – – ($) (1) 3,785 4,341 – – – – 6,144 9,384 1,604 Total ($) 199,785 188,341 173,000 196,000 191,500 173,000 203,644 225,384 205,604 Each nonemployee member of the Board had the choice of receiving his or her annual retainer of $155,000 in Company stock, cash or any combination thereof. Those directors choosing to receive their full retainer in Company stock received 1,897 shares based on the $81.69 closing market price on July 23, 2015. Sharilyn S. Gasaway elected to receive a portion of her retainer in stock, totaling 1,423 shares, based on the closing market price shown above. Douglas G. Duncan and Wayne Garrison elected to receive their annual retainer in cash. To more closely align his or her interests with those of the stockholders, each Board member is required to own three times his/her estimated annual compensation in Company stock within ﬁve years of his/her initial stockholder election to the Board. All Board members are in compliance with this requirement. Nonemployee members of the Board did not participate in either a company-sponsored pension or deferred compensation plan in calendar year 2015. P r o x y S t a t e m e n t 13 EXECUTIVE OFFICERS OF THE COMPANY Kevin Bracy, 45, joined the Company in 1998 as a Financial Analyst and currently serves as Vice President, Treasurer and Assistant Secretary. Craig Harper, 58, joined the Company in 1992 as Vice President of Marketing and currently serves as Executive Vice President. Prior to joining the Company, he worked for Rineco Chemical Industries as its Chief Executive Ofﬁcer. Nicholas Hobbs, 53, joined the Company in 1984 as a Management Trainee and currently serves as Executive Vice President and President of Dedicated Contract Services. John Kuhlow, 45, joined the Company in 2006 as Assistant Corporate Controller. He currently serves as Senior Vice President Finance, Controller and Chief Accounting Ofﬁcer. Prior to joining the Company, he was a Senior Audit Manager for KPMG LLP. Mr. Kuhlow is a Certiﬁed Public Accountant. Terrence D. Matthews, 57, joined the Company in 1986 as a National Accounts Manager and currently serves as Executive Vice President and President of Intermodal. Prior to joining the Company, he worked as a National Accounts Manager for North American Van Lines. David G. Mee, 55, joined the Company in 1992 as Vice President Tax and currently serves as Executive Vice President of Finance and Administration and Chief Financial Ofﬁcer. He also serves as the Company’s Corporate Secretary. Prior to joining the Company, he was a Senior Tax Manager for KPMG LLP. Mr. Mee is a Certiﬁed Public Accountant. Stuart Scott, 49, joined the Company on January 1, 2016 as Executive Vice President and Chief Information Ofﬁcer. Prior to joining the Company, he served as Chief Information Ofﬁcer (“CIO”) at Tempur-Sealy International, CIO at Microsoft, and CIO for various General Electric businesses. Shelley Simpson, 44, joined the Company in 1994 as a Management Trainee and currently serves as Executive Vice President, Chief Marketing Ofﬁcer, and President of Integrated Capacity Solutions and Truckload. t n e m e t a t S y x o r P 14 SECURITY OWNERSHIP OF MANAGEMENT The following table sets forth the beneﬁcial ownership of the Company’s common stock as of February 16, 2016, by each of its current directors (including all nominees for director), the Named Executive Ofﬁcers (the “NEOs”), and all other executive ofﬁcers and directors as a group. Unless otherwise indicated in the footnotes below, “beneﬁcially owned” means the sole or shared power to vote or direct the voting of a security or the sole or shared power to dispose or direct the disposition of a security. Owner Douglas G. Duncan Francesca M. Edwardson Wayne Garrison Sharilyn S. Gasaway Gary C. George Nicholas Hobbs Bryan Hunt Terrence D. Matthews David G. Mee Coleman H. Peterson John N. Roberts, III James L. Robo Shelley Simpson Kirk Thompson John A. White Number of Shares Beneﬁcially Owned Directly (1) 8,500 12,064 2,420,917 17,262 40,980 65,306 68,469 80,816 120,963 31,845 299,511 36,967 66,484 80,346 43,891 Number of Shares Beneﬁcially Owned Indirectly (2) 2,600 – – 275 1,454,310 (4) 168 – 41,442 – – 70,000 (5) – 41,215 – – Percent of Class (%) (3) * * 2.1 * 1.3 * * * * * * * * * * All executive ofﬁcers and directors as a group (19) 3,452,055 1,610,010 4.5 * Less than 1 percent (1) Includes shares owned by the director or executive ofﬁcer that are: (a) held in a 401(k) or deferred compensation account (b) held in trusts for the beneﬁt of an immediate family member for which the director or executive ofﬁcer is the trustee (c) options that are currently exercisable or will become exercisable within 60 days from February 16, 2016 (d) pledged shares as shown below: David G. Mee John N. Roberts, III Kirk Thompson All other executive ofﬁcers and directors as a group 62,500 160,000 40,000 9,500 (2) Indirect beneﬁcial ownership includes shares owned by the director or executive ofﬁcer: (a) as beneﬁciary or trustee of a personal trust (b) by a spouse or as trustee or beneﬁciary of a spouse’s trust (c) held in trusts for the beneﬁt of an immediate family member for which the director or executive ofﬁcer’s spouse is the trustee (d) in a spouse’s retirement account (3) Calculated on the basis of 112,774,244 shares of common stock outstanding of the Company on February 16, 2016. (4) The reporting person disclaims beneﬁcial ownership of these shares, which are held in limited partnerships or trusts. This report shall not be deemed an admission that the reporting person is the beneﬁcial owner of such securities for the purposes of Section 16 or for any other purposes. Includes 40,320 shares currently pledged by the reporting person. (5) The reporting person disclaims beneﬁcial ownership of these shares, which are held in an irrevocable trust for the beneﬁt of immediate family members and managed by a third-party trustee. This report shall not be deemed an admission that the reporting person is the beneﬁcial owner of such securities for the purposes of Section 16 or for any other purposes. P r o x y S t a t e m e n t 15 CORPORATE GOVERNANCE We believe that good corporate governance helps to ensure that the Company is managed for the long-term beneﬁt of our stockholders. We continually review and consider our corporate governance policies and practices, the SEC’s corporate governance rules and regulations, and the corporate governance listing standards of NASDAQ, the stock exchange on which our common stock is traded. You can access and print the Charters of our Audit Committee, Executive Compensation Committee (“Compensation Committee”), and Nominating and Corporate Governance Committee (“Corporate Governance Committee”), as well as our Corporate Code of Ethical and Professional Standards for Directors, Ofﬁcers and Employees, Whistleblower Policy, and other Company policies and procedures required by applicable law, regulation or NASDAQ corporate governance listing standards on the “Corporate Governance” page of the “Investors” section of our website at www.jbhunt.com. Additionally, you can request copies of any of these documents by writing to our Corporate Secretary at the following address: J.B. Hunt Transport Services, Inc. Attention: Corporate Secretary 615 J.B. Hunt Corporate Drive Lowell, Arkansas 72745 t n e m e t a t S y x o r P Director Independence The Board is composed of a majority of directors who satisfy the criteria for independence under the NASDAQ corporate governance listing standards. In determining independence, each year the Board afﬁrmatively determines, among other items, whether the directors have no material relationship with the Company or any of its subsidiaries pursuant to the NASDAQ corporate governance listing standards. When assessing the “materiality” of a director’s relationship with the Company, if any, the Board considers all relevant facts and circumstances, not merely from the director’s standpoint, but from that of the persons or organizations with which the director has an afﬁliation and the frequency or regularity of the services, whether the services are being carried out at arm’s length in the ordinary course of business, and whether the services are being provided substantially on the same terms to the Company as those prevailing at the time from unrelated parties for comparable transactions. Material relationships can include commercial, banking, industrial, consulting, legal, accounting, charitable and familial relationships. The Board also considers any other relationship that could interfere with the exercise of independence or judgment in carrying out the duties of a director. Applying these independence standards, the Board has determined that Douglas G. Duncan, Francesca M. Edwardson, Sharilyn S. Gasaway, Gary C. George, Coleman H. Peterson, James L. Robo and John A. White are all independent directors. After due consideration, the Board has determined that none of these nonemployee directors has a material relationship with the Company or any of its subsidiaries (either directly or indirectly as a partner, stockholder or ofﬁcer of any organization that has a relationship with the Company or any of its subsidiaries) and that they all meet the criteria for independence under the NASDAQ corporate governance listing standards. Risk Management and Oversight As previously described in their biographies, current members of our Board represent diverse backgrounds of business and academic experience. The Board, as a whole, performs the risk oversight of the Company and does not assign the task or responsibility to any one member or a committee. Therefore, the Board believes that the members each possess unique yet complementary experiences and backgrounds that create diverse points of view, opinions, personalities and management styles that allow for the proper risk management and oversight of the Company. Lead Director The Board has established the position of Lead Director, to which James L. Robo was appointed. The Lead Director directs the executive sessions of independent directors at the Board meetings at which the Chairman is not present and has authority to call meetings of independent directors. The Lead Director facilitates communication between the Chairman and CEO and the independent directors, as appropriate, and performs such other functions as the Board directs. Independent Director Meetings Independent directors generally meet in executive session as part of each regularly scheduled Board meeting, with discussion led by the Lead Director. 16 Director Recommendations by Stockholders In addition to recommendations from Board members, management or professional search ﬁrms, the Corporate Governance Committee will consider director candidates properly submitted by stockholders who individually or as a group have beneﬁcially owned at least 2% of the outstanding shares of the Company’s common stock for at least one year from the date the recommendation is submitted. Stockholders must submit director candidate recommendations in writing by Certiﬁed Mail to the Company’s Corporate Secretary not less than 120 days prior to the ﬁrst anniversary of the date of the Proxy Statement relating to the Company’s previous Annual Meeting. Accordingly, for the 2017 Annual Meeting of Stockholders, director candidates must be submitted to the Company’s Corporate Secretary by November 10, 2016. Director candidates submitted by stockholders must contain at least the following information: • the name and address of the recommending stockholder, • the number of shares of the Company’s common stock beneﬁcially owned by the recommending stockholder and the dates such shares were purchased, • the name, age, business address and residence of the candidate, • the principal occupation or employment of the candidate for the past ﬁve years, • a description of the candidate’s qualiﬁcations to serve as a director, including ﬁnancial expertise and why the candidate does or does not qualify as “independent” under the NASDAQ corporate governance listing standards, • the number of shares of the Company’s common stock beneﬁcially owned by the candidate, if any, and • a description of the arrangements or understandings between the recommending stockholder and the candidate, if any, or any other person pursuant to which the recommending stockholder is making the recommendation. In addition, the recommending stockholder and the candidate must submit, with the recommendation, a signed statement agreeing and acknowledging that: • the candidate consents to being a director candidate and, if nominated and elected, he or she will serve as a director representing all of the Company’s stockholders in accordance with applicable laws and the Company’s Articles of Incorporation and Bylaws, • the candidate, if elected, will comply with the Company’s Corporate Governance Guidelines and any other applicable rule, regulation, policy or standard of conduct applicable to the Board and its individual members, • the recommending stockholder will maintain beneﬁcial ownership of at least 2% of the Company’s issued and outstanding common stock through the date of the Annual Meeting for which the candidate is being recommended for nomination and that, upon the candidate’s nomination and election to the Board, the recommending stockholder intends to maintain such ownership throughout the candidate’s term as director, and • the recommending stockholder and the candidate will promptly provide any additional information requested by the Corporate Governance Committee and/or the Board to assist in the consideration of the candidate, including a completed and signed Questionnaire for Directors and Ofﬁcers on the Company’s standard form and an interview with the Corporate Governance Committee or its representative. For a complete list of the information that must be included in director recommendations submitted by stockholders, please see the “Director Recommendations by Stockholders Policy” on the “Corporate Governance” page of the “Investors” section of our website at www.jbhunt.com. The Corporate Governance Committee will consider all director candidates submitted through its established processes and will evaluate each of them, including incumbents, based on the same criteria. However, the Corporate Governance Committee may prefer incumbent directors and director candidates whom they know personally or who have relevant industry experience and in-depth knowledge of the Company’s business and operations. The policies and procedures as set forth above are intended to provide ﬂexible guidelines for the effective functioning of the Company’s director nomination process. The Board intends to review these policies and procedures periodically and anticipates that modiﬁcations may be necessary from time to time as the Company’s needs and circumstances change. Board Composition and Director Qualiﬁcations The Corporate Governance Committee periodically assesses the appropriate size and composition of the Board and whether any vacancies on the Board are expected. In the event that vacancies are anticipated or otherwise arise, the Corporate Governance Committee will review and assess potential director candidates. The Corporate Governance Committee utilizes various methods for identifying and evaluating candidates for director. Candidates may come to the attention of the Corporate Governance Committee through recommendations of Board members, management, stockholders or professional search ﬁrms. Generally, director candidates should, at a minimum: • possess relevant business and ﬁnancial expertise and experience, including a basic understanding of fundamental ﬁnancial statements, • have exemplary character and integrity and be willing to work constructively with others, • have sufﬁcient time to devote to Board meetings and consultation on Board matters, and • be free from conﬂicts of interest that violate applicable law or interfere with director performance. P r o x y S t a t e m e n t 17 In addition, the Corporate Governance Committee seeks director candidates who possess the following qualities and skills: • the capacity and desire to represent the interests of the Company’s stockholders as a whole, • occupational experience and perspective that, together with other directors, enhances the quality of the Board, • leadership experience and sound business judgment, • accomplishments in their respective ﬁeld, with superior credentials and recognition, • knowledge of the critical aspects of the Company’s business and operations, and • the ability to contribute to the mix of skills, core competencies and qualiﬁcations of the Board through expertise in one or more of the following areas: – accounting and ﬁnance – mergers and acquisitions – investment management – law – academia – strategic planning – investor relations – executive leadership development – executive compensation – service as a senior ofﬁcer of, or a trusted adviser to senior management of, a publicly held company. t n e m e t a t S y x o r P The independent members of the Board each possess the general skills, experience, attributes and qualiﬁcations that make them a proper ﬁt for the Company’s Board as described above. Speciﬁc strengths and qualities possessed by each member that makes him or her eligible to serve on the Company’s Board include: Douglas G. Duncan – 30 years of experience in the transportation industry Francesca M. Edwardson – business experience in the transportation industry, law, human resources, and corporate governance Sharilyn S. Gasaway – accounting, ﬁnance, mergers and acquisitions, and regulatory experience Gary C. George – business experience related to managing a diversiﬁed business located in northwest Arkansas Coleman H. Peterson – human resource experience with a large international workforce, corporate governance, and retail experience James L. Robo – ﬁnancial expertise, leadership experience, and business experience related to equipment and the transportation industry Messrs. Garrison, Hunt, Roberts and Thompson, as nonindependent directors, have extensive work experience and history with the Company from its origins, which the Board believes are critical to its composition. Board Diversity As indicated by the criteria above, the Board prefers a mix of background and experience among its members. Furthermore, the Board is diverse both in gender and ethnic representation, with more than 25% of our current members reﬂecting demographic minorities. The Board does not follow any ratio or formula to determine the appropriate mix. Rather, it uses its judgment to identify nominees whose backgrounds, attributes and experiences, taken as a whole, will contribute to the high standards of Board service to the Company. The effectiveness of this approach is evidenced by the directors’ participation in insightful and robust yet mutually respectful deliberation that occurs at Board and Committee meetings. Board Leadership Structure The Company split the titles, roles and responsibilities of the Chairman of the Board and Chief Executive Ofﬁcer in 1985. The Company and the Board believe that, while the duties may be performed by the same person without consequence to either Company operations or stockholders’ interest, separation of duties allows the Chairman to focus more on active participation by the Board and oversight of management, while the Chief Executive Ofﬁcer is better able to focus on day-to-day operations of the Company. 18 Communications With The Board Stockholders and other interested parties may communicate with the Board, Board Committees, the independent or the nonmanagement directors, each as a group or any director individually by submitting their communications in writing to the attention of the Company’s Corporate Secretary. All communications must identify the recipient and author, state whether the author is a stockholder of the Company, and be forwarded to the following address via Certiﬁed Mail: J.B. Hunt Transport Services, Inc. Attention: Corporate Secretary 615 J.B. Hunt Corporate Drive Lowell, Arkansas 72745 The directors of the Company have instructed the Corporate Secretary not to forward to the intended recipient any communications that are reasonably determined in good faith by the Corporate Secretary to relate to improper or irrelevant topics or that are substantially incomplete. Board Meetings The Board held four scheduled meetings during the 2015 calendar year. All directors attended all of the Board meetings and committee meetings on which each served during 2015. All members of the Board attended the 2015 Annual Meeting of Stockholders. The Company has adopted a Director Attendance Policy to stress the importance of attendance, director preparedness, and active and effective participation at Board and Board Committee meetings. Board Committees Standing committees of the Board include the Audit, Executive Compensation, and Nominating and Corporate Governance committees. Committee members are elected annually by the Board and serve until their successors are elected and qualiﬁed or until their earlier death, retirement, resignation or removal. The following table summarizes the membership of the Board and each of its committees and the number of times each met during calendar year 2015: Director Douglas G. Duncan Francesca M. Edwardson Sharilyn S. Gasaway Gary C. George Coleman H. Peterson James L. Robo John A. White Number of Meetings in 2015 Audit X X Chair X 8 Compensation X X Chair X 4 Corporate Governance X X X Chair X X X 2 On January 28, 2016, the Corporate Governance Committee recommended, and the Board approved, the same committee assignments as 2015 for 2016, with the exception of the appointment of Sharilyn S. Gasaway to the Executive Compensation Committee effective upon her re-election to the Board at the Company’s 2016 Annual Meeting. John A. White will retire from the Board upon the expiration of his current term at the 2016 Annual Meeting. P r o x y S t a t e m e n t 19 t n e m e t a t S y x o r P AUDIT COMMITTEE Under the terms of its charter, the Audit Committee represents and assists the Board in fulﬁlling its oversight responsibility relating to the integrity of the Company’s ﬁnancial statements and the ﬁnancial reporting process, the systems of internal accounting and ﬁnancial controls, the internal audit function, the annual independent audit of the Company’s ﬁnancial statements, the Company’s compliance with legal and regulatory requirements, the independent auditor’s qualiﬁcations and independence, the performance of the Company’s internal audit function, and the performance of its independent auditors. In fulﬁlling its duties, the Audit Committee, among other things, shall: • appoint, terminate, retain, compensate and oversee the work of the independent registered public accounting ﬁrm, • preapprove all services provided by the independent registered public accounting ﬁrm, • oversee the performance of the Company’s internal audit function, • review the qualiﬁcations, performance and independence of the independent registered public accounting ﬁrm, • review external and internal audit reports and management’s responses thereto, • monitor the integrity of the ﬁnancial reporting process, system of internal accounting controls, and ﬁnancial statements and reports of the Company, • oversee the Company’s compliance with legal and regulatory requirements, • review the Company’s annual and quarterly ﬁnancial statements, including disclosures made in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” set forth in periodic reports ﬁled with the SEC, • discuss with management earnings news releases, • meet with management, the internal auditors, the independent auditors and the Board, • provide the Board with information and materials as it deems necessary to make the Board aware of signiﬁcant ﬁnancial accounting and internal control matters of the Company, • oversee the receipt, investigation, resolution and retention of all complaints of a ﬁnancial nature submitted under the Company’s Whistleblower Policy, and • otherwise comply with its responsibilities and duties as set forth in the Company’s Audit Committee Charter. The Board has determined that each member of the Audit Committee satisﬁes the independence and other requirements for audit committee membership of the NASDAQ corporate governance listing standards and SEC requirements. The Board has also determined that all members of the Audit Committee have the attributes of an audit committee ﬁnancial expert as deﬁned by the SEC. The Board determined that these members acquired such attributes through their experience in preparing, auditing, analyzing or evaluating ﬁnancial statements, or actively supervising one or more persons engaged in such activities, and their experience of overseeing or assessing the performance of companies and public accountants with respect to preparation, auditing or evaluation of ﬁnancial statements. In 2015, the Audit Committee met eight times. All members attended each of the Audit Committee meetings. For additional information concerning the Audit Committee, see “Report of the Audit Committee” set forth below. EXECUTIVE COMPENSATION COMMITTEE The Executive Compensation Committee (the “Compensation Committee”) shall: • determine and approve base salary compensation of the Company’s senior executive ofﬁcers, • determine and approve annual equity-based awards for the Company’s “insiders” as deﬁned in Section 16 of the Securities Exchange Act of 1934, with the exception of the Chairman of the Board and the Chief Executive Ofﬁcer, • evaluate and recommend to the independent members of the Board for their approval base salary and annual equity-based awards for the Chairman of the Board and the Chief Executive Ofﬁcer, • review and approve the annual performance goals and objectives of the Company’s senior executive ofﬁcers, including the Chief Executive Ofﬁcer, • establish and certify the achievement of performance goals, • oversee the Company’s incentive compensation and equity-based compensation plans, • assess the adequacy and competitiveness of the Company’s executive and director compensation programs, • review and discuss with management the Compensation Discussion and Analysis (“CD&A”) and recommend whether such analysis should be included in the Proxy Statement ﬁled with the SEC, • produce an Annual Report on executive compensation for inclusion in the Company’s Proxy Statement, • review and approve any employment agreements, severance agreements or arrangements, retirement arrangements, change in control agreements/provisions, and any special or supplemental beneﬁts for each ofﬁcer of the Company, • approve, disapprove, modify or amend any non-equity compensation plans designed and intended to provide compensation primarily for ofﬁcers, • make recommendations to the Board regarding adoption of equity-based compensation plans, • administer, modify or amend equity-based compensation plans, • review the Company’s plan for succession of management, • monitor the diversity of the Company’s workforce, and • otherwise comply with its responsibilities and duties as set forth in the Company’s Compensation Committee Charter. 20 None of the individuals serving on the Compensation Committee has ever been an ofﬁcer or employee of the Company. The Board has determined that all members of the Compensation Committee satisfy the independence requirements of the NASDAQ corporate governance listing standards. All members of the Compensation Committee qualify as “nonemployee directors” for purposes of Rule 16b-3 of the Exchange Act and as “outside directors” for purposes of Section 162(m) of the Internal Revenue Code, as amended. The Compensation Committee met four times in 2015. All members attended each of the Compensation Committee meetings. NOMINATING AND CORPORATE GOVERNANCE COMMITTEE The Nominating and Corporate Governance Committee (the “Corporate Governance Committee”) shall: • annually review the Company’s Corporate Governance Guidelines, • assist the Board in identifying, screening and recruiting qualiﬁed individuals to become Board members, • propose nominations for Board membership and committee membership, • assess the composition of the Board and its committees, • oversee the performance of the Board and committees thereof, • review and approve all related-party transactions (as required by law, NASDAQ rules, or SEC regulations), and • otherwise comply with its responsibilities and duties as set forth in the Company’s Corporate Governance Committee Charter. The Board has determined that all members of the Corporate Governance Committee satisfy the independence requirements of the NASDAQ corporate governance listing standards. The Corporate Governance Committee met two times during 2015. All members attended each of the Corporate Governance Committee meetings. Code of Business Conduct and Ethics The Board has adopted a Corporate Code of Ethical and Professional Standards for Directors, Ofﬁcers and Employees (the “Code of Ethics”) that applies to all of the Company’s directors, ofﬁcers and employees. The purpose and role of this Code of Ethics is to focus our directors, ofﬁcers and employees on areas of ethical risk, provide guidance to help them recognize and deal with ethical issues, provide mechanisms to report unethical or unlawful conduct, and help enhance and formalize our culture of integrity, honesty and accountability. As required by applicable law, the Company will post on the “Corporate Governance” page of the “Investors” section of its website at www.jbhunt.com any amendments or waivers of any provision of this Code of Ethics made for the beneﬁt of executive ofﬁcers or directors of the Company. P r o x y S t a t e m e n t Corporate Governance Guidelines The Board has adopted Corporate Governance Guidelines to assist it in exercising its responsibilities to the Company and its stockholders. These guidelines address, among other items, director responsibilities, Board Committees and nonemployee director compensation. Section 16(a) Beneﬁcial Ownership Reporting Compliance Section 16(a) of the Exchange Act requires each director, ofﬁcer and any individual beneﬁcially owning more than 10% of the Company’s common stock to ﬁle with the SEC reports of security ownership and reports on subsequent changes in ownership. These reports are generally due within two business days of the transaction giving rise to the reporting obligation. To the Company’s knowledge, based solely on a review of the copies of such reports furnished to the Company and written representations that no other reports were required, all Section 16(a) ﬁlings were made in a timely manner. Certain Relationships and Related Transactions The Corporate Governance Committee is charged with the responsibility of reviewing and preapproving all related-party transactions (as deﬁned in SEC regulations) and periodically reassessing any related-party transaction entered into by the Company. Bryan Hunt is the son of Johnelle Hunt, a principal stockholder of the Company. There are no other family relationships among the foregoing directors. Two sons-in-law of Kirk Thompson, Chairman of the Board of the Company, were employed by the Company in calendar year 2015. The ﬁrst earned $333,775 and the second earned $164,093 in 2015 compensation. Shelley Simpson’s husband was employed by the Company in calendar year 2015 and earned $543,065 in 2015 compensation. In the ordinary course of business, the Company has entered into a contractual service agreement with George’s, Inc., which is considered a related party. The customer agreement consists primarily of a ﬂeet of tractors and specialty trailers delivering feed and live poultry to and from processing plants located in Cassville, Missouri, as well as other agreed-upon services on an as-needed basis. Gary C. George is Chairman of George’s, Inc. Mr. George was not involved in the establishment of this service agreement, nor did he solicit the Company’s services on behalf of George’s, Inc. Total revenue earned in calendar year 2015 under this service agreement was $5.2 million. Services provided under this contract are and will be carried out at arm’s length in the ordinary course of business and are being provided substantially on the same terms as those of unrelated parties for comparable transactions. 21 In October 2015, in the ordinary course of business, the Company entered into an agreement with 5431 Pinnacle Point LLC for the lease of ofﬁce space located in Rogers, Arkansas. Bryan Hunt, a director of the Company, has a 50% ownership interest in 5431 Pinnacle Point LLC. The lease has a term of 24 months and an annual base rent of $216,000. The Company paid $67,355 under this lease agreement during calendar year 2015 and considers this a transaction carried out at arm’s length in the ordinary course of business and consistent with the same terms as those of unrelated parties for comparable lease agreements. In August 2010, the Company made a gift of $5 million to Arkansas Children’s Hospital. The gift is payable in equal increments over a 10-year period beginning in calendar year 2011. Sharilyn S. Gasaway is currently a member of the Board of Directors of Arkansas Children’s Hospital. However, at the time of the gift, Mrs. Gasaway was not associated with the hospital, nor was she instrumental in the Company’s decision to support the medical facility. In December 2008, the Company made a gift of $250,000 to Northwest Arkansas Community College. The gift is payable in equal increments over a 10-year period beginning in calendar year 2009. At the time of the gift, Coleman H. Peterson served as Chairman of the Board of Trustees of this organization. Mr. Peterson did not solicit the contribution on behalf of the organization, nor was he instrumental in the Company’s decision to support the local junior college. Compensation Committee Interlocks and Insider Participation During the 2015 calendar year, none of the Company’s executive ofﬁcers served on the Board of Directors or Compensation Committees of any entity whose directors or ofﬁcers served on the Company’s Board or Compensation Committee. No current or past executive ofﬁcers or employees of the Company served on the Compensation Committee. Involvement in Certain Legal Proceedings On February 1, 2016, one of our directors, Bryan Hunt, entered into an order with the Circuit Court of Benton County, Arkansas, to divert for six months a case brought against him in June 2015 by the State of Arkansas for alleged aggravated assault, a felony offense. Mr. Hunt pleaded not guilty to the charges. The charges relate to an incident in which Mr. Hunt’s vehicle was hit by a motorist who ﬂed the scene, and as Mr. Hunt pursued the motorist, the two vehicles were involved in a subsequent accident where Mr. Hunt is alleged to have used his vehicle to block the other motorist from leaving the scene. Under the diversion order, Mr. Hunt must not commit any further violations of the law during the diversion period and must pay restitution to the City of Rogers, Arkansas, for a street light damaged in the incident. If Mr. Hunt complies with these conditions, the case will be dismissed. If Mr. Hunt fails to comply, the State may resume prosecution of the allegations. PRINCIPAL STOCKHOLDERS OF THE COMPANY The following table sets forth all persons known to be the beneﬁcial owner of more than 5% of the Company’s common stock as of December 31, 2015. Unless otherwise indicated in the footnotes below, “beneﬁcially owned” means the sole or shared power to vote or direct the voting of a security or the sole or shared power to dispose or direct the disposition of a security. t n e m e t a t S y x o r P Name and Address Johnelle Hunt 3333 Pinnacle Hills Parkway Rogers, AR 72756 FMR LLC 245 Summer Street Boston, MA 02210 Vanguard Group, Inc. 100 Vanguard Blvd. Malvern, PA 19355 T. Rowe Price Associates, Inc. 100 East Pratt Street Baltimore, MD 21202 BlackRock, Inc. 40 East 52nd Street New York, NY 10022 Number of Shares 19,353,421 Percent of Class 17.0% 12,587,783 11.0% 8,426,289 6,697,881 5,749,602 7.4% 5.8% 5.0% Information relating to Johnelle Hunt is based on the stockholder’s Form 5, ﬁled with the SEC on February 16, 2016. Information pertaining to the ownership of FMR LLC, Vanguard Group, Inc., T. Rowe Price Associates, Inc., and BlackRock, Inc. are based on the organization’s Schedule 13G ﬁled with the SEC on February 12, 2016, February 10, 2016, February 11, 2016, and January 28, 2016, respectively. The Company makes no representation as to the accuracy of the information reported in such beneﬁcial ownership reports. 22 REPORT OF THE EXECUTIVE COMPENSATION COMMITTEE The 2015 Executive Compensation Committee (the “Compensation Committee”) was composed of Coleman H. Peterson, Chairman, Francesca M. Edwardson, Gary C. George and John A. White, none of whom is an ofﬁcer or employee of the Company and all of whom have been determined by the Board of Directors of the Company (the “Board”) to be independent. Additionally, all members of the Compensation Committee qualify as “nonemployee directors” for purposes of Rule 16b-3 of the Exchange Act and as “outside directors” for purposes of Section 162(m) of the Internal Revenue Code, as amended (the “Code”). The Compensation Committee operates under a written charter adopted by the Board, a copy of which is available on the “Corporate Governance” page of the “Investors” section of the Company’s website at www.jbhunt.com. In carrying out its responsibilities, the Compensation Committee, among other things: • evaluates and recommends to the independent Board members, for their approval, the annual salaries and bonuses of the Chairman of the Board and the Chief Executive Ofﬁcer, • reviews and approves annual corporate goals and objectives of the Chairman of the Board and the Chief Executive Ofﬁcer and other Section 16 reporting ofﬁcers, • recommends for approval to the independent Board members equity-based compensation awards under the Company’s Management Incentive Plan (the “MIP”), as amended and restated, for the Chairman of the Board and the Chief Executive Ofﬁcer, • reviews and approves equity-based compensation awards under the Company’s MIP, as amended and restated, for the Section 16 reporting ofﬁcers, • establishes and certiﬁes the achievement of performance goals under the Company’s incentive and performance-based compensation plans, • reviews and approves compensation recommendations for the Company’s directors, • reviews other Company executive compensation programs, and • reviews and approves the Compensation Committee report to the stockholders and the Compensation Discussion and Analysis (the “CD&A”) report included in the Proxy Statement. The Chairman of the Board recommends to the Compensation Committee the form and amount of compensation to be paid to the Chief Executive Ofﬁcer. The Chief Executive Ofﬁcer provides recommendations to the Compensation Committee regarding the form and amount of compensation to be paid to executive ofﬁcers who report directly to him. Additionally, the Chairman of the Board, the Chief Executive Ofﬁcer and the Chief Financial Ofﬁcer regularly attend Compensation Committee meetings, except for executive sessions. Upon request, management has provided to the Compensation Committee historical and prospective breakdowns of primary compensation components for each executive ofﬁcer, as well as tally sheets, wealth accumulation analyses and internal pay equity analyses as described in more detail below. At our 2014 Annual Meeting, the stockholders approved, on an advisory basis, the compensation of the named executive ofﬁcers (99.5% of votes cast). Previously, at our 2011 Annual Meeting, the stockholders voted for approval of a frequency of holding advisory votes every three years with respect to named executive ofﬁcer compensation (51% of votes cast). The Compensation Committee believes this level of stockholder support reﬂects a strong endorsement of the Company’s compensation policies and decisions. The Compensation Committee has considered the results of the last advisory vote on executive compensation in determining the Company’s compensation policies and decisions for 2016, and has determined that these policies and decisions are appropriate and in the best interests of the Company and its stockholders at this time. In 2015, the Compensation Committee engaged Meridian Compensation Partners, LLC (“Meridian”) to review the Company’s executive compensation policies and practices. Meridian was also directed to determine a comparable peer group for executive compensation purposes and to report considerations regarding changes in compensation levels for the NEOs to bring them into the 50th percentile of total direct compensation of the peer group. Meridian is retained by, and reports to, the Compensation Committee to provide compensation analyses and consultation at the Committee’s request. Meridian was paid approximately $101,000 for the consulting engagement and provides no other services to the Company. The Compensation Committee met four times in 2015 to discuss, among other items, the salaries, bonuses and other compensation of the senior executive ofﬁcers and other key employees of the Company, including the Chairman of the Board and the Chief Executive Ofﬁcer. The Compensation Committee did not act by unanimous consent at any time in 2015. Historically, the Compensation Committee meets each February to ﬁnalize discussion regarding the Company’s performance goals for the previous and current year with respect to performance-based compensation to be paid to executive ofﬁcers and to approve its report for the Proxy Statement. These goals are approved within 90 days of the beginning of the year, pursuant to the Code. During the third quarter of each year, the Compensation Committee generally discusses any new compensation issues, the base compensation, bonus and MIP award analyses, and the engagement of the compensation consultant for annual executive and director compensation surveys. The Compensation Committee also meets during the fourth quarter to: • review and discuss information provided by the compensation consultant and the recommendations made by the Chairman of the Board and the Chief Executive Ofﬁcer, • review the performance of the Company and the individual ofﬁcers, • review the extent to which the Company’s performance goals were attained and approve short-term cash bonus and long-term incentive awards, and • determine executives’ base salaries for the following year. P r o x y S t a t e m e n t 23 Management also advises the full Board, including the Compensation Committee members, throughout the year of any new issues and developments regarding executive compensation. The Compensation Committee has reviewed and discussed the following CD&A with management, and based upon such review and discussions, the Compensation Committee recommended to the Board that the CD&A be included in the Company’s Proxy Statement. J.B. Hunt Transport Services, Inc. 2015 Executive Compensation Committee Coleman H. Peterson, Chairman Francesca M. Edwardson Gary C. George John A. White t n e m e t a t S y x o r P COMPENSATION DISCUSSION AND ANALYSIS Introduction The Compensation Discussion and Analysis provides information regarding the compensation paid to our President and Chief Executive Ofﬁcer, Chief Financial Ofﬁcer and certain other executive ofﬁcers who were the most highly compensated in calendar year 2015. These individuals, referred to collectively as “named executive ofﬁcers” or NEOs, are identiﬁed below: • John N. Roberts, III – President and Chief Executive Ofﬁcer • David G. Mee – Executive Vice President, Finance/Administration, Chief Financial Ofﬁcer and Corporate Secretary • Terrence D. Matthews – Executive Vice President and President of Intermodal • Kirk Thompson – Chairman of the Board • Shelley Simpson – Executive Vice President, Chief Marketing Ofﬁcer and President of Integrated Capacity Solutions and Truckload • Nicholas Hobbs – Executive Vice President and President of Dedicated Contract Services Compensation Philosophy and Principles The Compensation Committee acknowledges that the transportation industry is highly competitive and that experienced professionals have career mobility. The Company believes that it competes for executive talent with a large number of companies, some of which have signiﬁcantly larger market capitalizations and others of which are privately owned. Retention of key talent remains critical to our success. The Company’s need to focus on retention is compounded by its size and geographic location. The Company’s compensation program is structured to attract, retain and develop executive talent with the ability to assume a broad span of responsibilities and successfully lead complex business units to market-leading positions in the industry. The Compensation Committee believes that the ability to attract, retain and provide appropriate incentives for professional personnel, including the senior executive ofﬁcers and other key employees of the Company, is essential to maintaining the Company’s leading competitive position, thereby providing for the long-term success of the Company. The Compensation Committee’s goal is to maintain compensation programs that are competitive within the transportation industry. Each year, the Compensation Committee reviews the executive compensation program with respect to external competitiveness and linkage between executive compensation and creation of stockholder value and determines what changes, if any, are appropriate. The overall compensation philosophy of the Compensation Committee and management is guided by the following principles: • Compensation levels should be sufﬁciently competitive to attract and retain key talent. The Company aims to attract, motivate and retain high-performance talent to achieve and maintain a leading position in its industry. Our total compensation package should be strongly competitive with other transportation companies. • Compensation should relate directly to performance and responsibility. Total compensation should be tied to and vary with performance and responsibility, both at the Company and individual level, in achieving ﬁnancial, operational and strategic objectives. Differentiated pay for high-performing individuals should be proportional to their contributions to the Company’s success. • Short-term incentive compensation should constitute a signiﬁcant portion of total executive compensation. A large portion of total compensation should be tied to performance, and therefore at risk, as position and responsibility increase. Individuals with greater roles and the ability to directly impact strategic direction and long-term results should bear a greater proportion of the risk. • Long-term incentive compensation, the Company’s Management Incentive Plan (the “MIP”), should be closely aligned with stockholders’ interests. Awards of long-term compensation encourage executive ofﬁcers to focus on the Company’s long-range growth and development and incent them to manage from the perspective of stockholders with a meaningful stake in the Company, as well as to focus on long-term career orientation. Participants in the MIP are required to own Company stock. The requirements are discussed in this CD&A under the caption “Stock Ownership Guidelines.” The Company’s executive compensation program is designed to reward the achievement of initiatives regarding growth, productivity and people, including: • setting, implementing and communicating strategies, goals and objectives to ensure that the Company grows revenue and earnings at rates that are comparable to or greater than those of our peers and that create value for our stockholders, • motivating and exhibiting leadership that aligns the interests of our employees with those of our stockholders, • developing a grasp of the competitive environment and taking steps to position the Company for growth and as a competitive force in the industry, • constantly renewing the Company’s business model and seeking strategic opportunities that beneﬁt the Company and its stockholders, and • implementing a discipline of compliance and focusing on the highest standards of professional conduct. 24 PROCESS OF SETTING COMPENSATION Benchmarking Against a Peer Group The Compensation Committee engaged Meridian to perform a competitive market assessment for the NEOs to evaluate base salary, target annual incentives, target total cash compensation, long-term incentives and total direct compensation. The assessment involved the use of a peer group, as noted below, consisting of 13 transportation and logistics companies in the national marketplace. This peer group was updated in 2015 to more closely align the Company’s peer group with peers suggested by Institutional Shareholder Services. These companies represent both business competition and the most relevant labor market for our executives. Avis Budget Group, Inc. CSX Corporation Hub Group, Inc. Norfolk Southern Corporation UTI Worldwide, Inc. CH Robinson Worldwide, Inc. Expeditors Int’l of Washington, Inc. Kansas City Southern Ryder System, Inc. CON-Way, Inc. Hertz Global Holdings, Inc. Landstar System, Inc. Swift Transportation Company The Compensation Committee has decided that the appropriate comparative total compensation target should be at the 50th percentile of the respective peer groups. In 2015, the Compensation Committee concluded that a representative peer group for the role of the Executive Chairman/Non-CEO position of the Company could not be compiled. Therefore, the Committee used its best business judgment to determine the compensation of the Chairman of the Board, which the Committee concluded was more reﬂective of his role within the daily management of the Company. Compensation Analysis Tools In addition to the competitive compensation survey information for each ofﬁcer that was compiled, the Compensation Committee also reviewed a three-year history of executive compensation tally sheets. The Compensation Committee anticipates that pertinent compensation information will continue to be developed and enhanced to allow the Committee to perform the most relevant analyses practicable. Our objective for total executive compensation is to provide compensation at the 50th percentile of the respective peer groups. We believe that a sizeable portion of overall compensation should be at risk and tied to stockholder value. Our bonuses are tied to earnings per share (“EPS”); as EPS increases, so do executive bonuses. Long-term incentives are used as tools to reward executives for current and future performance, to encourage an executive to remain with the Company and to align the executive’s interests with those of our stockholders. As part of our long-term incentive strategy, executives are expected to maintain stock ownership values as a multiple of their base salaries. Long-term incentives for NEOs are performance-based. While certain components of compensation are directly tied to the Company’s reported ﬁnancial performance, sufﬁcient accounting and operational controls are in place and tested effectively to ensure that the Company’s compensation practices and policies, including those for nonexecutives, are not reasonably likely to have a material adverse effect on the Company. P r o x y S t a t e m e n t Our Company has a 401(k) plan that assists participants in providing for retirement. The Company contributes to each NEO’s account per year based on the NEO’s voluntary contribution amount. The equity buildup in unvested equity-based awards and stock owned currently is critical to each executive’s ability to adequately provide for his or her retirement. As previously mentioned and explained in detail later, we have a Company stock ownership policy for our executives, but we do not have a “hold until retirement” restriction. We do not believe that such a restriction is prudent for the employee or necessary to protect our Company. Tally Sheets A compensation tally sheet for each NEO was prepared and reviewed by the Compensation Committee in 2015. These tally sheets detail a three-year history of dollar amounts for components of the NEO’s total compensation, including current salary and estimated cash bonus, equity-based awards, change in control severance payments, if any, personal beneﬁts, if any, and other perquisites. Long-Term Compensation Analyses and Policies With respect to long-term, equity-based awards, the Company maintains the MIP. The MIP was originally adopted and approved by the Board on March 17, 1989, and an amended and restated MIP was subsequently approved by the stockholders on May 11, 1995. The MIP has been amended and restated since the time of its adoption, and all amendments requiring approval of the stockholders have been approved, with the last approval occurring at our Annual Meeting of Stockholders held in 2012. Currently, there are 44 million shares of common stock authorized for issuance under the MIP, of which approximately 7.5 million shares are available for future options and other awards. Performance-based restricted share units, time-vested restricted share units and stock options of the Company are granted under the MIP in an effort to link future compensation to the long-term ﬁnancial success of the Company. These equity-based awards are granted to executive ofﬁcers, including the NEOs, and other key employees (approximately 380 individuals) and are intended to attract and retain employees, to provide incentives to enhance job performance, and to enable those persons to participate in the long-term success and growth of the Company through an equity interest in the Company. The Compensation Committee typically grants time-vested restricted share units under the MIP to non-NEO employees of the Company, while granting performance-based restricted share units to the NEOs of the Company. The future vesting of performance-based awards is contingent on the 25 t n e m e t a t S y x o r P Company’s attainment of predetermined performance metrics established by the Compensation Committee. The Compensation Committee believes that restricted share units, both time-vested and performance-based, are currently more effective than stock options in achieving the Company’s compensation objectives, as these grants are subject to less market volatility and are less dilutive to stockholders. Employees realize immediate value as restricted share units vest, with such value increasing as the Company’s stock performance increases. Cash dividends are not paid and there are no voting rights on unvested restricted share units. The Company does not have a formal policy, but has an established practice described below, with respect to the granting of any form of equity compensation. The Company does not have a policy or practice of either timing equity-based compensation grants to current or new executive ofﬁcers, or timing the release of material, nonpublic information to affect the value of executive compensation. Recommendations for all Section 16 ﬁlers, except for the Chairman of the Board and the Chief Executive Ofﬁcer, are presented to the Compensation Committee by the Chief Executive Ofﬁcer. The Chairman of the Board recommends to the Compensation Committee the award for the Chief Executive Ofﬁcer. The Compensation Committee approves or adjusts the award using the above tools for all Section 16 ﬁlers, except for the Chairman of the Board and the Chief Executive Ofﬁcer. The awards for the Chairman of the Board and Chief Executive Ofﬁcer are recommended by the Compensation Committee and submitted for ﬁnal approval to the Company’s independent Board members. This process occurs in late October or early November of each year to coincide with our third-quarter Board meeting. We consider this our annual award date. The Compensation Committee does not expect to delegate approval authority to grant awards to management or any subcommittee at this time or in the near future. The grant date is typically set by the Compensation Committee. Historically, annual awards of equity compensation have been granted to all awardees, including the NEOs, in October. In 2015, 419,801 grants were made on October 21, and 82,814 grants were made on October 22, the date of the third-quarter Board meeting. Grants have been made in months other than the annual award date on a very limited basis. The limited exceptions to this grant-date practice have included, for example, the hiring of a key employee or the promotion of an employee to an executive ofﬁce. The Compensation Committee anticipates that it will continue adhering to these general grant dates for the foreseeable future for administrative ease and consistency. Awards are made in the fourth quarter because the Compensation Committee has a good view as to the Company’s ﬁnancial performance and the executive’s individual performance for the current year and has the most recently available competitive market data. Pursuant to the provisions of the MIP, all stock options are granted with an exercise price equal to 100% of the fair market value of the Company’s common stock on the grant date. Stock options are generally exercisable over ﬁve to 10 years from the grant date. The exercise price of stock options may be satisﬁed with payment of cash or previously owned Company stock or through a cashless simultaneous exercise and sale. In response to emerging changes in the area of accounting for equity-based compensation and to position ourselves competitively with our peers, the Compensation Committee began granting restricted share units in lieu of stock options under the MIP in 2005. The Compensation Committee anticipates granting restricted share units in lieu of stock options for the foreseeable future, but in the event stock options are granted, such stock options will be granted under the terms discussed above. Similar to stock options, the total number of restricted share units that may be awarded to an individual is within the discretion of the Compensation Committee but also limited by the MIP and is generally based on the Company’s performance and the individual’s current level of compensation, individual performance, potential for promotion and marketability outside the Company. The number of restricted share units or stock options previously granted to an individual may be, but is not always, a consideration in determining the amount of awards granted to that individual in the future. Generally, restricted share units vest over three to 10 years. As stated above, the Company does not have a policy or practice of timing the grant of equity-based awards and the release of material, nonpublic information in a manner that would affect compensation for new or current executive ofﬁcers, nor has it deliberately or knowingly done so. In the event that material, nonpublic information becomes known to the Compensation Committee, the Company or its employees at a time when such information could affect or otherwise impact the imminent grant of equity-based compensation, management and the Compensation Committee will take the existence of such information under advisement and determine whether to delay the grant of such equity-based compensation to a later date to avoid the appearance of any impropriety. Deductibility of Compensation and Other Regulatory Considerations The Code places a limit of $1 million on the amount of compensation the Company may deduct for federal income tax purposes in any one year with respect to the Company’s Chief Executive Ofﬁcer and the next three most highly compensated executive ofﬁcers whose compensation is required to be disclosed in the Company’s annual Proxy Statement, other than the Chief Financial Ofﬁcer (the “Covered Employees”). There is an exception to this $1 million limitation for performance-based compensation that meets certain requirements. In reviewing the effectiveness of the Company’s compensation program, the Compensation Committee considers the anticipated tax treatment to the Company and to its executives of various payments and beneﬁts. Additionally, the deductibility of certain compensation payments depends upon the timing of an executive’s vesting or exercise of previously granted awards, as well as interpretations and changes in the tax laws and other factors beyond the Compensation Committee’s control. For these and other reasons, including the need to maintain ﬂexibility in compensating executive ofﬁcers in a manner designed to promote varying corporate goals, the Compensation Committee will not necessarily, nor in all circumstances, limit executive compensation to that which is deductible under the Code. The Company has not adopted a policy requiring all compensation to be deductible. The MIP contains speciﬁc language and requirements regarding performance-based awards granted to a Covered Employee intended to be “qualiﬁed performance-based compensation” as deﬁned by the Code. These awards shall be based on the attainment of one or more objective performance goals established in writing by the Committee. Performance goals must be based on one or more criteria approved by the MIP (e.g., revenue, operating income, return on assets) and be based on an objective formula or standard. Prior to any vesting of an award, the Committee must certify in writing that all of the necessary performance goals have been met. Material terms of the performance goals must be disclosed to and reapproved by the stockholders every ﬁve years. In October 2015, 160,574 grants of “qualiﬁed performance-based compensation” restricted share units were made 26 to Covered Employees and vest, under the provisions of the MIP, upon the Company’s attainment of predetermined performance metrics established and approved by the Compensation Committee. The Compensation Committee will continue to consider various alternatives to preserving the deductibility of compensation payments and beneﬁts to the extent reasonably practicable and to the extent consistent with its other compensation objectives. Base salary, bonuses or the vesting of non-performance-based restricted share units do not qualify as performance-based compensation under the Code. In 2015, the following NEO compensation paid was not deductible by the Company: John N. Roberts, III Terrence D. Matthews Kirk Thompson $ 1,844,763 1,557,807 4,652,775 Derivative Trading It is the Company’s policy that ofﬁcers and directors not engage in any put or call transactions on Company stock. Such transactions create a signiﬁcant enticement for abusive trading and, in many instances, give the unwelcome appearance of the ofﬁcer or director betting against the Company. There is no Company policy, other than required by law, that would prohibit the Company’s executive ofﬁcers from entering into a forward-sale or forward-purchase contract. Stock Ownership Guidelines To motivate the Company’s ofﬁcers and senior management to emulate its stockholders, the Company expects its management to own Company stock at levels described in the table shown below. Stock ownership is deﬁned as stock owned: • directly or indirectly, and/or • through the Company’s 401(k) Employee Retirement Plan. Position Chief Executive Ofﬁcer Executive Vice Presidents Senior Vice Presidents Vice Presidents Ownership Multiple of Base Salary 6 times 3.5 times 2.75 times 2.5 times The Compensation Committee has determined that as of the annual award dates, October 21 and October 22, 2015, all of the Company’s ofﬁcers and members of senior management covered by these guidelines had met their ownership goals. Stock Retention Policy Other than indicated above, the Company does not have any other stock retention policy. Recovery of Awards The Company does not have a policy, other than required by law, requiring replacement of awards or payments as a result of an ofﬁcer’s illegal transactions or restatements. However, the Compensation Committee has formally adopted and explicitly communicated the “clawback” provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act with regard to annual cash bonus awards paid to the Company’s executive ofﬁcers. Since becoming a public company in 1983, the Company has had no illegal actions by its ofﬁcers or restatements of ﬁnancial information. Summary The Company intends to continue its practice of compensating its executives through programs that emphasize performance. To that end, executive compensation is tied directly to the performance of the Company and is structured to ensure that, due to the nature of the business and the degree of competitiveness for executive talent, there is an appropriate balance between: • base salary and incentive compensation, • short-term and long-term compensation, and • cash and noncash compensation. Each is determined and measured by: • competitive compensation data, • ﬁnancial, operational and strategic goals, • long-term and short-term performance of the Company compared with its peer group, and • individual contribution to the success of the Company. P r o x y S t a t e m e n t 27 t n e m e t a t S y x o r P 2015 COMPENSATION Elements of Compensation The Company’s primary compensation components are summarized below. Generally, the Company’s compensation program consists of an annual base salary, a short-term cash incentive award, and an annual long-term, equity-based award. Primary beneﬁts for executives include participation in the Company’s 401(k) plan, health, dental and vision plans, and various insurance plans, including disability and life insurance, all of which are available to all employees on a nondiscriminatory basis. The Company provides limited perquisites to executive ofﬁcers and other key employees as described in more detail on page 31 under the section titled “Other Perquisites.” Total direct compensation for executive ofﬁcers, including the NEOs, consists of one or more of the following components: • base salary, • annual performance-based incentive cash bonus awards, • long-term incentive/equity-based compensation, • health and welfare beneﬁts, and • other beneﬁts. The Compensation Committee, with recommendations from management, works to create what it believes is the best mix of these components in delivering total direct compensation. In determining annual compensation, the Compensation Committee reviews all elements of compensation separately and in the aggregate. These compensation components are comparable to those of the Company’s competitors and peer group. In its review of executive compensation, and, in particular, in determining the amount and form of incentive awards discussed below, the Compensation Committee generally considers several factors. Among these factors are: • market information with respect to cash and long-term compensation for its peer group, • amounts paid to the executive ofﬁcer in prior years as salary, • annual bonus and other compensation, • the ofﬁcer’s responsibilities and performance during the calendar year, and • the Company’s overall performance during prior calendar years and its future objectives and challenges. At transportation companies, generally the largest elements of compensation are paid in the form of annual short-term incentives and long-term compensation. Compensation mix and industry proﬁtability vary as the industry faces many risk factors, such as the economy and fuel prices. Cash compensation for our NEOs varies as the EPS of the Company changes, due to the nature of our bonus plan described below. Grants of performance-based restricted share units or stock options are made annually. Performance-based restricted share units and stock options are based on each employee’s level of responsibility and are generally computed as a multiple of base salary. It has been the policy of the Company to put a signiﬁcant portion of the executive’s compensation at risk. This is accomplished by our cash bonus plan, which is directly tied to EPS, and the issuance of performance-based restricted share units. Equity-based awards from the MIP may also vary in vesting from three to 10 years. These awards are subject to forfeiture if the employee leaves the Company. Furthermore, the future vesting of performance-based equity awards is contingent on the Company’s attainment of predetermined performance metrics established by the Committee. The Committee and management believe that the proportion of compensation at risk should rise as the employee’s level of responsibility increases. The Compensation Committee has retained Meridian as its compensation consultant. Meridian reports directly to the Compensation Committee and has no other engagements with the Company. In 2015, Meridian prepared a study providing information and an independent analysis of the Company’s executive compensation program and practices. The results of this study included observations about the Company’s target 2015 executive compensation. The Compensation Committee does not rely solely on predetermined formulas or a limited set of criteria when it evaluates the individual performances of the NEOs. The Compensation Committee considers actual results against deliverables and also bases its compensation decisions for the NEOs on: • leadership, • the execution of business plans, • strategic results, • operating results, • growth in EPS, • size and complexity of the business, • experience, • strengthening of competitive position, • analysis of competitive compensation practices, and • assessment of the Company’s performance. Where possible, the above criteria were compared with the peer group selected as well as the Chief Executive Ofﬁcer’s input for his direct reports and the Chairman of the Board’s input for the Chief Executive Ofﬁcer. 28 Base Salary The Compensation Committee believes that competitive levels of cash compensation, together with equity-based and other incentive programs, are necessary for motivating and retaining the Company’s executives. Salaries provide executives with a base level of monthly income and help achieve the objectives outlined above by attracting and retaining strong talent. Base salaries are evaluated annually for all executive ofﬁcers, including the Chairman of the Board and the Chief Executive Ofﬁcer. Generally, base salaries are not directly related to speciﬁc measures of corporate performance, but are determined by the relevance of experience, the scope and complexity of the position, current job responsibilities, retention and relative salaries of the peer group members. The Compensation Committee may elect not to increase an executive ofﬁcer’s annual salary, and has so elected in prior years. However, if warranted, the Compensation Committee may increase base salary where an executive ofﬁcer takes on added responsibilities or is promoted. Annual Bonus Award As previously mentioned, the Company has had in place for several years a bonus plan that is tied to EPS. At its fall meeting when management presents its budget for the following year, the Compensation Committee establishes a matrix of EPS results with bonus payout levels. These forecasted earnings results are based on customer freight trends, strategies for growth and controlling costs, and corporate strategies to maximize stockholder return. Once presented to the Board, the EPS budget and bonus plan matrix remain ﬁxed, though management continually reforecasts expectations based on actual results and on changing facts and assumptions. Changes in uncontrollable factors such as general economic conditions, railroad or port authority service issues, or rapidly ﬂuctuating fuel costs can have a signiﬁcant impact on the Company’s actual EPS. Therefore, as the Company performs against the original budget, the executive’s bonus performs against the pre-established matrix. The bonus plan is based on annual EPS; however, quarterly EPS targets are established. If the Company meets a quarterly EPS target, the executive is eligible to receive a “progress payment” equal to approximately 12.5% of his or her projected annual bonus payout. The annual bonus earned is reduced by the progress payments received during the year. We consider a single quarterly progress payment, computed at approximately 12.5% of the executive’s lowest possible annual bonus amount, to be the threshold bonus amounts described below. The Company’s bonus plan has no reimbursement or “clawback” feature if a progress payment is made in a plan year where an annual bonus is not earned. However, the Compensation Committee has formally adopted and explicitly communicated the “clawback” provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act with regard to annual cash bonus awards paid to the Company’s executive ofﬁcers. For 2015, the established matrix consisted of EPS ranging from $3.10 to $4.35, translating to annual bonus payout percentages ranging from 5% to 170% of an executive’s base salary. The 2015 quarterly and annual bonus payout targets compared with actual reported EPS and actual payout percentages were as follows: P r o x y S t a t e m e n t Period 1Q 15 2Q 15 3Q 15 Annual Minimum 0.58 0.81 0.84 3.10 EPS Target 0.67 0.92 0.96 3.55 Reported EPS 0.78 0.88 0.99 3.66 Actual earned bonus amounts by quarter for each NEO: Bonus Payout % of Salary Target 3.4 3.4 3.4 27.0 Minimum 0.6 0.6 0.6 5.0 Actual 15.0 2.5 3.1 30.0 John N. Roberts, III David G. Mee Terrence D. Matthews Kirk Thompson (1) Shelley Simpson Nicholas Hobbs 1Q 15 $112,500 67,500 67,500 – 60,000 56,250 2Q 15 $18,750 11,250 11,250 – 10,000 9,375 3Q 15 $23,438 14,063 14,063 – 12,500 11,719 4Q 15 $70,312 42,187 42,187 – 37,500 35,156 Total Annual $225,000 135,000 135,000 – 120,000 112,500 (1) The position of Chairman of the Board is not eligible to participate in the Company’s EPS bonus plan. Long-Term, Equity-Based Award Each executive is eligible to receive a long-term incentive award of performance-based restricted share units. Performance-based restricted share units are intended to help achieve the objectives of the compensation program, including the retention of high-performing and experienced talent, a career orientation and strong alignment with stockholders’ interests. The performance-based restricted share units are awarded and settled from shares reserved for issuance under the MIP. The Compensation Committee approves or adjusts the award based on the above criteria for all Section 16 ﬁlers who are employees of the Company. The awards for the Company’s Chairman of the Board and Chief Executive Ofﬁcer are presented for ﬁnal approval to the Company’s independent Board members. The Compensation Committee believes that performance-based restricted share units must be sufﬁcient in size to provide a strong, long-term performance and retention incentive for executives and to increase their vested interest in the Company. Performance-based restricted share units are used as long-term incentives because they are less dilutive to shares outstanding and to proﬁts. Performance-based restricted share units generally vest from three to 10 years. In administering the MIP and awarding long-term incentive awards, we are sensitive to the potential for dilution of future EPS. The MIP is a broad-based equity compensation program. We focus the program on employees who will have the greatest impact on strategic direction and long-term results of the Company by virtue of their senior roles and responsibilities. A total of 550,717 performance-based and time-vested restricted share 29 t n e m e t a t S y x o r P units were granted in 2015. Approximately 29% of the total share units granted were performance-based restricted share units to the NEOs, and approximately 31% of the total share units granted were to the executive ofﬁcer group as a whole. As described above, MIP participants who hold the title of director and above have an ownership requirement in Company stock. In determining the number of performance-based restricted share unit grants for each NEO, the Compensation Committee reviewed peer market data provided by Meridian and a detailed analysis of each NEO’s vested and unvested stock holdings. In considering unvested stock holdings, the Committee reviewed a forecast of the timing of potential future restricted stock unit vesting for each NEO over the next 10 years. The Compensation Committee subjectively considered the following objectives (without any particular weighting) when determining the form and amount of performance-based restricted share units granted to NEOs in 2015: • align NEOs’ long-term interests with those of the Company’s stockholders, • strengthen retention hooks for NEOs over the long term, • ensure competitiveness of NEOs’ total compensation opportunity through an emphasis on performance-based long-term stock compensation, • reinforce share holdings of NEOs, • align NEOs’ compensation with the Company’s long-term leadership succession planning initiatives, and • bolster the continuity of the entire management team through an upcoming period of critical strategic goals and milestones for the Company. For 2015, the Compensation Committee and/or independent directors approved the following performance-based restricted share unit grants to the NEOs: John N. Roberts, III David G. Mee Terrence D. Matthews Kirk Thompson Shelley Simpson Nicholas Hobbs 58,457 24,300 14,580 24,357 19,440 19,440 The 2015 NEO awards shown above are performance-based restricted share units. These grants vest from three to ﬁve years annually, beginning July 15, 2016, upon the Company’s attainment of predetermined operating metrics established and approved by the Compensation Committee, and are deemed “qualiﬁed performance-based compensation” awards under Section 162(m) of the Code. The Compensation Committee acknowledges that the separate components of total direct compensation are not always in the 50th percentile of their respective peer groups, as determined earlier, but it believes that its mix of current and long-term compensation is more appropriate to align the NEO’s compensation with the stockholders’ interests in both the near and longer term. The Committee also reviewed its compensation strategy in general and speciﬁc components of total direct compensation and determined that none of the Company’s compensation programs, individually or as a whole, would create risks that are reasonably likely to have a material adverse effect on the Company. The Committee presented its review and conclusion to the entire Board. Deferred Compensation The Company administers a Deferred Compensation Plan for certain of its ofﬁcers. The employee participant may elect on an annual basis to defer part of his or her salary and/or bonus. This plan assists key employees in planning for retirement. The Company contributes nothing to the plan, and participants are not permitted to defer shares of Company stock. Health and Welfare Beneﬁts The Company provides beneﬁts such as medical, vision, life insurance, long-term disability coverage, and 401(k) plan opportunities to all eligible employees, including the NEOs. The Company provides up to $750,000 in life insurance coverage and up to $10,000 per month in long-term disability coverage. The value of these beneﬁts is not required to be included in the Summary Compensation Table since they are available to all employees on a nondiscriminatory basis. The Company matches certain employee contributions to the 401(k) plan. The Company provides no postretirement medical or supplemental retirement beneﬁts to its employees. The Company also provides vacation, sick leave and other paid holidays to employees, including the NEOs, that are comparable to those provided at other transportation companies. The Company’s commitment to provide employee beneﬁts is due to our recognition that the health and well-being of our employees contributes directly to a productive and successful work life that produces better results for the Company and for its employees. Personal Beneﬁts The Company provides certain perquisites to management employees, including the NEOs, as summarized below. Company Aircraft The Company actively participates in shared ownership of aircraft services with NetJets and CitationAir. With the approval of the Chief Executive Ofﬁcer, the NEOs and other management employees use Company aircraft services for business purposes. Personal use of Company aircraft services is provided to executive ofﬁcers on a very limited basis and to other management employees in the event of emergency or other urgent situations. 30 P r o x y S t a t e m e n t Company Vehicles The Company does not provide Company-owned cars to executives. Other Perquisites The Company provides executive ofﬁcers a taxable allowance of up to $10,000 a year for ﬁnancial counseling services, which may include legal, ﬁnancial, estate and/or tax planning, and tax return preparation. This beneﬁt is based on actual cost to the Company. The Company also provides country club memberships to certain of its executive ofﬁcers. These memberships are valued based on the actual costs of the membership, including dues, regardless of whether use was personal or business. The Company believes that these clubs provide a quiet venue for negotiations and entertainment of clients, bankers, investment bankers, stockholders, etc. Severance Agreements The Company does not have employment contracts or predetermined personal severance agreements with any of its executives. However, according to the terms of the awards granted under the previously mentioned MIP, all outstanding non-incentive-based options and restricted share units immediately vest upon a “change in control.” Generally, a “change in control” is deemed to occur when more than 30% of the outstanding shares of common stock of the Company change ownership in a transaction that is a merger, reorganization or consolidation, when the persons who constitute the Company’s incumbent board of directors cease to constitute a majority of the board, or when the stockholders approve a transaction that is a merger, reorganization or consolidation where more than 50% of the outstanding shares change ownership or a complete liquidation or dissolution of the Company or the sale or disposition of all or substantially all of the assets of the Company. SUMMARY COMPENSATION The following table summarizes the total compensation earned by or paid to the Chief Executive Ofﬁcer, Chief Financial Ofﬁcer and the next four most highly compensated executive ofﬁcers of the Company who served in such capacities as of December 31, 2015, for services rendered to the Company. These six ofﬁcers are referred to as the NEOs in this Proxy Statement. Name and Principal Position John N. Roberts, III President and CEO Year 2015 2014 2013 2015 David G. Mee EVP, Finance 2014 & Administration 2013 and CFO Terrence D. Matthews 2015 2014 EVP and President 2013 of Intermodal Salary ($) (1) 796,132 695,000 642,692 476,846 437,845 401,077 Share Units ($) (2) 4,342,186 3,465,876 3,244,500 1,809,378 1,143,300 2,152,800 478,946 442,589 408,436 1,085,627 762,200 3,229,200 2015 2014 2013 2015 2014 448,077 450,000 492,308 1,809,238 1,636,672 1,658,300 429,808 371,635 1,447,502 1,143,300 Kirk Thompson Chairman of the Board Shelley Simpson EVP, CMO and President of ICS & Truckload Nicholas Hobbs EVP and President of Dedicated Contract Services Non-Equity Incentive Plan Compensation ($) (1) 225,000 157,550 146,050 Option Awards ($) (2) – – – – – – – – – – – – – – 135,000 99,935 90,850 135,000 101,200 92,000 – – – 120,000 80,500 Deferred All Other Compensation Compensation ($) – – – – – – – – – – – – – – – ($) 19,053 28,044 25,001 16,078 17,654 18,061 19,590 19,438 26,315 12,650 5,003 9,453 17,793 24,391 Total ($) 5,382,371 4,346,470 4,058,243 2,437,302 1,698,734 2,662,788 1,719,163 1,325,427 3,755,951 2,269,965 2,091,675 2,160,061 2,015,103 1,619,826 14,998 1,978,846 2015 403,846 1,447,502 – 112,500 (1) Non-equity incentive plan compensation (paid as a bonus) and salary amounts shown above are reported as gross earnings. Totals may include amounts transferred into the deferred compensation plan and/or into the Company’s 401(k) plan. All non-equity awards are reported in the year in which they are earned. The position of Chairman of the Board is currently not eligible to participate in the Company’s non-equity incentive plan. (2) Amounts reﬂect grant date fair value of each individual’s speciﬁc award, which will be earned over the vesting period (3 to 8 years) and the achievement of performance metrics established by the Compensation Committee at the time of grant. No stock options were granted during 2015, 2014 or 2013. 31 Components of All Other Compensation for Calendar year 2015 Name John N. Roberts, III David G. Mee Terrence D. Matthews Kirk Thompson Shelley Simpson Nicholas Hobbs Components of Perquisites for Calendar year 2015 Perquisites and Other Personal Beneﬁts ($) 19,053 10,716 11,640 10,000 9,843 10,235 Company Contributions to 401(k) Plan ($) – 5,362 7,950 2,650 7,950 4,763 Name John N. Roberts, III David G. Mee Terrence D. Matthews Kirk Thompson Shelley Simpson Nicholas Hobbs Personal Use of Company Plane ($) (1) – – – – – Legal and Accounting Fees ($) 8,780 – 1,245 10,000 1,770 2,675 Club Dues ($) 10,273 10,716 10,395 – 8,073 7,560 Total ($) 19,053 16,078 19,590 12,650 17,793 14,998 Total Perquisites and Other Personal Beneﬁts ($) 19,053 10,716 11,640 10,000 9,843 10,235 (1) The value of personal aircraft usage reported above is based on the Company’s actual invoiced amount from NetJets or CitationAir for the variable costs incurred on each trip. Since the Company’s aircraft is used primarily for business travel, this methodology excludes ﬁxed costs that do not change based on usage, such as depreciation and management fees. On certain occasions, an executive’s spouse or other family member may accompany the executive on a ﬂight when such person is invited to attend the event for appropriate business purposes. No additional direct operating cost is incurred in such situations under the foregoing methodology; however, the value of personal use of Company aircraft is imputed for federal income tax purposes as income to the NEO. Messrs. Roberts, Mee and Matthews, and Ms. Simpson had such imputed income in 2015. This value is calculated pursuant to Internal Revenue Service guidelines using Standard Industry Fare Level rates, which are determined by the U.S. Department of Transportation, and included in the NEO’s base salary in the Summary Compensation Table shown on page 31 of this Proxy Statement. t n e m e t a t S y x o r P 32 Grants of Plan-Based Awards The following table reﬂects estimated possible payouts under equity and non-equity incentive plans to the NEOs during 2015. The Company’s equity-based and non-equity incentive-based awards are granted to the NEOs based upon pre-established performance goals set annually by the Compensation Committee with a performance period equal to the calendar year for which the performance goals are set. The MIP is an annual plan consisting of equity-based awards only. The number of performance-based restricted share units awarded is measured based on the executive’s level of responsibility and other matters described on page 29 under “Long-Term, Equity-Based Award.” Dividends are not paid on awards of performance-based or time-vested restricted share units. NEOs are eligible to earn cash bonuses under the non-equity incentive award plan based on the Company’s EPS for the calendar year. Please refer to page 29 under “Annual Bonus Award” for further detail. Estimated Possible Payouts Under Non-Equity Incentive Awards Estimated Possible Payouts Under Equity Incentive Plan Awards Grant Threshold Target Maximum Threshold Target Maximum ($) (1) Date (#) (2) (#) (#) ($) ($) 10/22/2015 4,688 202,500 1,275,000 11,691 58,457 58,457 10/21/2015 2,813 121,500 765,000 3,110 24,300 24,300 10/21/2015 2,813 121,500 765,000 4,860 14,580 14,580 Name John. N. Roberts, III David G. Mee Terrence D. Matthews Kirk Thompson (4) 10/22/2015 – – – 24,357 24,357 24,357 Shelley Simpson Nicholas Hobbs 10/21/2015 2,500 108,000 680,000 3,888 19,440 19,440 10/21/2015 2,344 101,250 637,500 3,888 19,440 19,440 Option Stock Awards: Awards: Exercise Number Number or Base of of Shares Price of Securities of Stock Underlying Option Options or Units (#) (#) Grant Date Fair Value of Stock and Option Awards Awards ($) (3) ($/Sh) – – – – – – – – – – – – – – – – – – 74.28 74.46 74.46 74.28 74.46 74.46 P r o x y S t a t e m e n t (1) This column reﬂects the maximum non-equity incentive award each NEO was eligible to receive for 2015 under the percentage assigned to each NEO for the cash bonus pool. The actual awards earned are reported in the Summary Compensation Table shown on page 31 of this Proxy Statement. (2) This column reﬂects the number of performance-based restricted share units that were granted to the NEOs in 2015. (3) The fair value of the awards was based on a 3.5% discount from the Company’s closing stock price of $77.16 on October 21, 2015, or $76.98 on October 22, 2015. The discount represents the present value of expected dividends to be paid on the Company’s common stock, using the current dividend rate and the risk-free interest rate, over the vesting period. The Company believes that this discount is appropriate to value the performance-based restricted share units, as the units do not collect or accrue dividends until the awards vest and are settled with Company stock. (4) The position of Chairman of the Board is not eligible to participate in the Company’s EPS bonus plan. 33 Outstanding Equity Awards at Calendar year-end As of December 31, 2015, there were no outstanding stock options held by the NEOs. The following table sets forth information concerning restricted share units held by the NEOs as of December 31, 2015. Name John N. Roberts, III Number of Shares or Units of Stock That Have Not Vested (#) (1) Market Value of Shares or Units of Stock That Have Not Vested ($) (2) David G. Mee 10,000 733,600 Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) (1) 45,000 18,000 27,000 36,378 58,457 Equity Incentive Plan Awards: Market Value of Unearned Shares, Units or Other Rights That Have Not Vested ($) (2) 3,301,200 1,320,480 1,980,720 2,668,690 4,288,406 3,000 3,125 26,000 12,000 24,300 18,000 3,125 41,000 6,667 14,580 12,000 15,200 13,800 17,179 24,357 220,080 229,250 1,907,360 880,320 1,782,648 1,320,480 229,250 3,007,760 489,091 1,069,589 880,320 1,115,072 1,012,368 1,260,251 1,786,830 12,000 19,440 880,320 1,426,118 19,440 1,426,118 t n e m e t a t S y x o r P Terrence D. Matthews Kirk Thompson 10,000 733,600 Shelley Simpson Nicholas Hobbs 1,200 18,000 3,125 26,000 1,200 2,000 15,000 3,000 3,125 26,000 12,000 88,032 1,320,480 229,250 1,907,360 88,032 146,720 1,100,400 220,080 229,250 1,907,360 880,320 34 (1) Restricted share units are time-vested or performance-based awards. Effective vesting dates, pending achievement of required performance goals set for performance-based awards, are noted below. Time-Based Awards David G. Mee Kirk Thompson Shelley Simpson Nicholas Hobbs Shares Vesting 10,000 10,000 1,200 3,000 3,000 3,000 3,000 3,000 3,000 1,200 1,000 1,000 3,000 3,000 3,000 3,000 3,000 3,000 3,125 Vesting Date 7/15/16 7/15/16 7/15/16 7/15/16 7/15/17 7/15/18 7/15/19 7/15/20 7/15/21 7/15/16 7/15/16 7/15/17 7/15/16 7/15/17 7/15/18 7/15/19 7/15/20 7/15/16 7/15/16 Shares Vesting Vesting Date 3,125 2,000 2,000 2,000 6,666 6,667 6,667 2,000 2,000 2,000 6,666 6,667 6,667 3,000 3,000 3,000 3,000 7/15/16 7/15/16 7/15/17 7/15/18 7/15/21 7/15/22 7/15/23 7/15/16 7/15/17 7/15/18 7/15/21 7/15/22 7/15/23 7/15/16 7/15/17 7/15/18 7/15/19 P r o x y S t a t e m e n t 35 Performance-Based Awards John N. Roberts, III David G. Mee Terrence D. Matthews Kirk Thompson Shelley Simpson Nicholas Hobbs Shares Vesting Vesting Date Shares Vesting Vesting Date 15,000 15,000 15,000 9,000 9,000 9,000 9,000 9,000 9,094 3,000 3,125 2,000 2,000 2,000 10,000 10,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,125 19,500 12,000 7,600 7,600 4,600 4,600 4,600 3,000 3,000 3,000 3,000 3,888 3,888 3,888 3,888 7/15/16 7/15/17 7/15/18 7/15/16 7/15/17 7/15/16 7/15/17 7/15/18 7/15/16 7/15/16 7/15/16 7/15/16 7/15/17 7/15/18 7/15/20 7/15/21 7/15/16 7/15/16 7/15/17 7/15/18 7/15/19 7/15/20 7/15/21 7/15/16 7/15/16 7/15/16 7/15/16 7/15/17 7/15/16 7/15/17 7/15/18 7/15/16 7/15/17 7/15/18 7/15/19 7/15/16 7/15/16 7/15/17 7/15/18 9,094 9,095 9,095 11,691 11,691 11,691 11,692 11,692 3,000 3,000 3,000 3,110 6,026 6,026 6,027 3,111 19,500 2,000 3,333 3,334 4,860 4,860 4,860 4,294 4,295 4,295 4,295 24,357 3,888 3,888 3,888 3,888 3,888 3,888 7/15/17 7/15/18 7/15/19 7/15/16 7/15/17 7/15/18 7/15/19 7/15/20 7/15/17 7/15/18 7/15/19 7/15/16 7/15/17 7/15/18 7/15/19 7/15/20 7/15/17 7/15/18 7/15/16 7/15/17 7/15/16 7/15/17 7/15/18 7/15/16 7/15/17 7/15/18 7/15/19 7/15/20 7/15/17 7/15/18 7/15/19 7/15/20 7/15/19 7/15/20 (2) Values are based on the last closing market price of $73.36 on December 31, 2015. t n e m e t a t S y x o r P 36 Restricted Share Units Vested Name John N. Roberts, III Total David G. Mee Total Terrence D. Matthews Total Kirk Thompson Total Shelley Simpson Total Nicholas Hobbs Total P r o x y S t a t e m e n t Number of Shares Acquired on Vesting (#) 5,100 990 15,000 15,000 9,000 9,000 9,094 63,184 3,300 990 17,000 10,000 7,000 3,000 3,125 2,000 3,000 49,415 4,200 990 17,000 3,600 3,000 3,125 2,000 3,333 37,248 17,500 10,000 23,000 12,000 12,000 7,600 4,600 4,294 90,994 1,800 1,200 3,400 3,000 3,125 2,000 3,000 17,525 1,650 1,200 1,000 3,880 3,000 3,125 2,000 3,000 18,855 Value Realized on Vesting ($) (1) (2) 431,460 83,754 1,269,000 1,269,000 761,400 761,400 769,352 5,345,366 279,180 83,754 1,438,200 846,000 592,200 253,800 264,375 169,200 253,800 4,180,509 355,320 83,754 1,438,200 304,560 253,800 264,375 169,200 281,972 3,151,181 1,480,500 846,000 1,945,800 1,015,200 1,015,200 642,960 389,160 363,272 7,698,092 152,280 101,520 287,640 253,800 264,375 169,200 253,800 1,482,615 139,590 101,520 84,600 328,248 253,800 264,375 169,200 253,800 1,595,133 (1) Value realized on the acquired shares shown above is gross earnings. Values are earned over multiple years. The receipt of vested shares in calendar year 2015 should not be interpreted to mean that all value was earned in the year the shares were received. Each executive retained a portion of the available vested shares as shown below: John N. Roberts, III David G. Mee Terrence D. Matthews 35,158 26,508 31,156 Kirk Thompson Shelley Simpson Nicholas Hobbs 52,455 9,750 9,735 (2) Values represent the fair market value of the underlying common stock on the date of vesting. 37 Components of Nonqualiﬁed Deferred Compensation for Calendar year 2015 We have a nonqualiﬁed deferred compensation plan that allows eligible employees to defer a portion of their compensation. Participants can elect to defer up to a maximum of 50% of their base salary as well as up to 85% of their bonus for the year. The compensation deferred under this plan is credited with earnings or losses of investments elected by plan participants. Each participant is fully vested in all deferred compensation and earnings; however, these amounts are subject to general creditor claims until actually distributed to the employee. A participant may elect to receive deferred amounts in one payment or in quarterly installments payable over a period of two to 25 years upon reaching the age of 55, having 15 years of service, or becoming disabled. Our total liability under this plan was $13,569,119 as of December 31, 2015, and $13,515,042 as of December 31, 2014. These amounts are included in other long-term liabilities in our Consolidated Balance Sheets. Participant withholdings are held by a trustee and invested as directed by participants. These investments are included in “other assets” in our Consolidated Balance Sheets and totaled $13,569,119 as of December 31, 2015, and $13,515,042 as of December 31, 2014. Name John N. Roberts, III David G. Mee Terrence D. Matthews Kirk Thompson Shelley Simpson Nicholas Hobbs Executive Contributions in 2015 ($) (1) – – 226,923 85,192 – – Registrant Contributions in 2015 ($) – – – – – – Aggregate Earnings in 2015 ($) – – (7,754) 10,325 – – Aggregate Withdrawals and Distributions ($) – – – – – – Aggregate Balance at 2015 ($) (1) – – 3,123,274 1,137,070 – – (1) Amounts of executive contributions are included as part of the NEO’s salary in the Summary Compensation Table detailed above. Total executive contributions for the three-year period ending December 31, 2015, were $177,500 for Mr. Thompson and $657,924 for Mr. Matthews. Potential Post-Employment Beneﬁts The Company does not have employment contracts or predetermined personal severance agreements with any of its executives. However, according to the terms of the awards granted under the previously mentioned MIP, all outstanding options and restricted share units would immediately vest upon a “change in control.” Generally, a “change in control” is deemed to occur when more than 30% of the outstanding shares of common stock of the Company change ownership in a transaction that is a merger, reorganization or consolidation, when the persons who constitute the Company’s incumbent board of directors cease to constitute a majority of the board, or when the stockholders approve a transaction that is a merger, reorganization or consolidation where more than 50% of the outstanding shares change ownership or a complete liquidation or dissolution of the Company or the sale or disposition of all or substantially all of the assets of the Company. Potential beneﬁts of the NEOs due to a “change in control” are shown below. The amounts represent the immediate vesting of all outstanding restricted share units and are valued using the last closing market price of $73.36 on December 31, 2015. t n e m e t a t S y x o r P John N. Roberts, III David G. Mee Terrence D. Matthews Kirk Thompson Shelley Simpson Nicholas Hobbs $ 13,559,496 5,753,258 6,116,170 6,788,441 5,851,560 5,998,280 38 REPORT OF THE AUDIT COMMITTEE The Audit Committee The 2015 Audit Committee was composed of James L. Robo, Chairman, Douglas G. Duncan, Sharilyn S. Gasaway, and John A. White. Each served as a member of the Audit Committee during the full 2015 calendar year. The Company’s Board has determined that all members of the Audit Committee satisfy the independence and other requirements for audit committee membership pursuant to the NASDAQ corporate governance listing standards and has also determined that Messrs. Robo, Duncan and White, and Mrs. Gasaway each has the attributes of an audit committee ﬁnancial expert as deﬁned by SEC requirements. The Audit Committee operates under a written charter adopted by the Board. A copy of the Audit Committee Charter is available on the “Corporate Governance” page of the “Investors” section of the Company’s website at www.jbhunt.com. In carrying out its responsibilities, the Audit Committee, among other things: • monitors the integrity of the ﬁnancial reporting process, systems of internal accounting controls, and ﬁnancial statements and reports of the Company, • appoints, retains, compensates and oversees the Company’s independent auditors, including reviewing the qualiﬁcations, performance and independence of the independent auditors, • reviews and preapproves all audit, attest and review services and permitted nonaudit services, • oversees the performance of the Company’s internal audit function, and • oversees the Company’s compliance with legal and regulatory requirements. In 2015, the Audit Committee met eight times. The Audit Committee schedules its meetings with a view to ensure that it devotes appropriate attention to all of its responsibilities and duties. The Audit Committee’s meetings include, whenever appropriate, executive sessions with the Company’s independent auditors and the Company’s internal auditors, in each case outside the presence of the Company’s management. In performing its oversight role, the Audit Committee reviewed the audited consolidated ﬁnancial statements for the 2015 calendar year and met and held discussions with management, the Company’s internal auditors and E&Y, the Company’s independent registered public accounting ﬁrm, to discuss those ﬁnancial statements and the audit related thereto. Management has represented to the Audit Committee that the Company’s consolidated ﬁnancial statements were prepared in accordance with generally accepted accounting principles. The Audit Committee discussed with the independent auditors matters required to be discussed by Auditing Standard No. 16 of the Public Company Accounting Oversight Board, as may be modiﬁed, supplemented or amended, which includes, among other items, matters related to the conduct of the audit of the Company’s consolidated ﬁnancial statements. The independent auditors also provided the Audit Committee with written disclosures and the letter required by Rule 3526 of the Public Company Accounting Oversight Board, as may be modiﬁed, supplemented or amended, which relates to the auditors’ independence from the Company and its related entities, and the Audit Committee discussed with the independent auditors their independence. Based on the Audit Committee’s discussions with management, the internal auditors and the independent auditors as described above, and upon its review of the representation of management and the independent auditors and the reports of the independent auditors, the Audit Committee recommended to the Board that the Company’s audited consolidated ﬁnancial statements be included in the Company’s Annual Report on Form 10-K for the calendar year ended December 31, 2015, as ﬁled with the SEC. P r o x y S t a t e m e n t J.B. Hunt Transport Services, Inc. 2015 Audit Committee Members James L. Robo, Chairman Douglas G. Duncan Sharilyn S. Gasaway John A. White 39 t n e m e t a t S y x o r P PROPOSAL NUMBER TWO RATIFICATION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM The Audit Committee has selected E&Y as the Company’s independent registered public accounting ﬁrm to examine the consolidated ﬁnancial statements of the Company for the 2016 calendar year. The Board seeks an indication from our stockholders of their approval or disapproval of the Audit Committee’s selection of E&Y as the Company’s independent registered public accounting ﬁrm for the 2016 calendar year. E&Y has been our independent auditor since 2005. No relationships exist other than the usual relationships between auditor and client. Representatives of E&Y are expected to be present at the Annual Meeting to respond to appropriate questions and will have the opportunity to make a statement if they desire to do so. If our stockholders do not ratify the appointment of E&Y at the Annual Meeting, the Audit Committee will consider such event in its selection of the Company’s independent registered public accounting ﬁrm for the 2016 calendar year. Additionally, even if the appointment is ratiﬁed, the Audit Committee, at its discretion, may direct the appointment of a different independent registered public accounting ﬁrm at any time during the 2016 calendar year if it determines that such a change would be in the best interests of the Company and its stockholders. THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR RATIFICATION OF THE APPOINTMENT OF ERNST & YOUNG LLP AS THE COMPANY’S INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR THE 2016 CALENDAR year AUDIT AND NONAUDIT FEES The Audit Committee preapproves the audit and nonaudit services to be rendered to the Company, as well as the fees associated with such services. Generally, management will submit to the Audit Committee a detailed list of services that it recommends the Audit Committee engage the independent auditors to provide for the calendar year. The Audit Committee preapproves certain audit and nonaudit services and establishes a dollar limit on the amount of fees the Company will pay for each category of services. The Audit Committee is informed from time to time regarding the nonaudit services actually provided pursuant to the preapproval process. During the year, the Audit Committee periodically reviews the types of services and dollar amounts approved and adjusts such amounts, as it deems appropriate. Unless a service to be provided by the independent auditors has received general preapproval, it will require speciﬁc preapproval by the Audit Committee. The Audit Committee also periodically reviews all nonaudit services to ensure that such services do not impair the independence of the Company’s independent registered public accounting ﬁrm. The Audit Committee approved all services provided by E&Y for the 2015, 2014, and 2013 calendar years. These services included the audit of the Company’s annual ﬁnancial statements, audit of the Company’s internal control over ﬁnancial reporting, review of the Company’s quarterly ﬁnancial statements, audit of the Company’s employee beneﬁt plan, due diligence, consent for and review of registration statements ﬁled by the Company with the SEC, and tax consultation services. See “Report of Audit Committee” set forth earlier for a discussion of auditor independence. The following table shows the fees billed by E&Y for audit and other services provided to the Company for the 2015, 2014, and 2013 calendar years, respectively: Audit fees (1) Audit-related fees (2) Tax fees (3) All other fees 2015 ($) 1,060,000 34,000 – – 2014 ($) 1,035,000 288,275 10,667 – 2013 ($) 975,000 32,000 48,766 – (1) Audit fees consisted of the audit of the Company’s annual ﬁnancial statements, including the audit of the effectiveness of internal control over ﬁnancial reporting, the review of the Company’s quarterly reports on Form 10-Q, and consent for and review of registration statements ﬁled by the Company with the SEC. (2) Audit-related fees consisted of due diligence and an audit of the Employee Beneﬁt Plan. (3) Tax fees consisted principally of federal and state income tax consulting. The Audit Committee has considered whether the nonaudit services provided by E&Y, including the services rendered in connection with income tax consultation, were compatible with maintaining E&Y’s independence and has determined that the nature and substance of the limited nonaudit services did not impair the status of E&Y as the Company’s independent registered public accounting ﬁrm. E&Y did not bill the Company for any other services during calendar years 2015, 2014, and 2013. 40 Policy on Audit Committee Preapproval of Audit and Permissible Nonaudit Services of Independent Auditor The Audit Committee has the responsibility of appointing, setting compensation for and overseeing the work of the independent auditor and has established a policy to preapprove all audit and permissible nonaudit services provided by the independent auditor. Prior to the engagement of the independent auditor for next year’s audit, management will submit to the Audit Committee for approval an aggregate of services expected to be rendered during that year for each of four categories of services: • Audit services include audit work performed related to the ﬁnancial statements, as well as work that generally only the independent auditor can reasonably be expected to provide, including comfort letters, statutory audits, attestation services, and consultation regarding ﬁnancial accounting and/or reporting standards. • Audit-related services are for assurance and related services that are traditionally performed by the independent auditor, including due diligence related to mergers and acquisitions, employee beneﬁt plan audits, and special procedures required to meet certain regulatory requirements. • Tax services include all services performed by the independent auditor’s tax personnel except those services speciﬁcally related to the audit of the ﬁnancial statements, including fees in the areas of tax compliance, tax planning and tax advice. • Other services are those not captured in the other categories. The Company generally doesn’t request such services from the independent auditor. Prior to the engagement, the Audit Committee preapproves these services by category of service. The fees are budgeted and the Audit Committee requires the independent auditor and management to report actual fees versus the budget periodically throughout the year by category of service. During the year, circumstances may arise that make it necessary to engage the independent auditor for additional services not contemplated in the original preapproval. In those instances, the Audit Committee requires speciﬁc preapproval before engaging the independent auditor. The Audit Committee may delegate preapproval authority to one or more of its members. The member(s) to whom such authority is delegated must report, for informational purposes only, the preapproval decisions to the Audit Committee at its next scheduled meeting. PROPOSAL NUMBER THREE STOCKHOLDER PROPOSAL REGARDING SEXUAL ORIENTATION NONDISCRIMINATION POLICY In accordance with SEC rules, we have set forth below a stockholder proposal, along with the supporting statement of the stockholder proponents, for which we and the Board accept no responsibility. Trillium Asset Management, LLC on behalf of the Conny Lindley Revocable Living Trust, at Two Financial Center, 60 South Street, Suite 1100, Boston, MA 02111, is the proponent of the following stockholder proposal and has advised us that the Conny Lindley Revocable Living Trust holds shares of the Company’s common stock with a market value in excess of $2,000 and they intend to present the following proposal for a vote at the 2016 Annual Meeting. RESOLVED: Stockholders request that the Company amend its written equal employment opportunity policy to explicitly prohibit discrimination based on sexual orientation, gender identity or gender expression and to take substantial action to implement the policy. Supporting Statement The Company does not explicitly prohibit discrimination based on sexual orientation, gender identity or gender expression in its written employment policy. According to the Human Rights Campaign Foundation’s 2014 survey, 61 percent of Fortune 500 companies prohibit discrimination based on sexual orientation, gender identity or expression, a historic high. We believe that corporations that prohibit discrimination on the basis of gender identity or gender expression have a competitive advantage in recruiting and retaining employees from the widest talent pool. According to an analysis of surveys conducted by the Williams Institute at the UCLA School of Law, 16 to 60 percent of lesbian, gay, bisexual and transgender (“LGBT”) people report experiencing employment discrimination. Ninety percent of transgender individuals have encountered some form of harassment or mistreatment in the workplace. Public opinion polls consistently ﬁnd more than three-quarters of people in the United States support equal rights in the workplace. In a 2011 nationwide survey conducted by Greenberg Quinlan Rosner Research, the vast majority (79 percent) of the 900 respondents supported protecting LGBT people from discrimination in employment. P r o x y S t a t e m e n t 41 Although federal law does not provide sexual orientation and gender identity employment discrimination protection, seventeen states, the District of Columbia, and more than 114 cities and counties have laws prohibiting employment discrimination based on gender identity or expression. In July 2014, the White House signed an amendment to an existing Executive Order covering companies that are federal contractors. The Executive Order explicitly prohibits federal contractors from discriminating on the basis of sexual orientation or gender identity. In issuing the order the President stated, “Equality in the workplace is not only the right thing to do, it turns out to be good business. That’s why a majority of Fortune 500 companies already have nondiscrimination policies in place.” We are concerned the Company may be lagging behind peers with comprehensive equal employment opportunity policies. According to the Human Rights Campaign, many companies in the transportation services space, such as CSX, Union Paciﬁc, United Parcel Service, and FedEx Corp. explicitly prohibit discrimination based on sexual orientation, gender identity or gender expression in their written policies. We believe employment discrimination on the basis of sexual orientation, gender identity or gender expression diminishes employee morale and productivity. Because state and local laws are not comprehensive with respect to prohibiting employment discrimination, the Company would beneﬁt from a comprehensive, consistent, corporate-wide policy to enhance efforts to prevent discrimination, resolve complaints internally, access employees from the broadest talent pool, and ensure a respectful and supportive atmosphere for all employees. We believe the Company will enhance its competitive edge by joining the growing ranks of companies guaranteeing equal opportunity for all employees. t n e m e t a t S y x o r P Board of Directors Statement in Opposition to the Stockholder Proposal The Board of Directors believes this stockholder proposal is unnecessary and that the Company’s current policy and practice more than achieve the objectives of this proposal. The Board of Directors therefore unanimously recommends voting against this proposal. As an equal opportunity employer, the Company is ﬁrmly committed to operating its business in full compliance with applicable employment laws and providing each of our employees with a workplace free from unlawful discrimination or harassment of any kind. Indeed, the Company’s EEO Harassment and Discrimination Policy states as follows: “Harassment of J.B. Hunt personnel, sexual or otherwise, will not be tolerated at J.B. Hunt from anyone, including supervisors, co-workers, managers, vendors, clients or customers. All J.B. Hunt Directors, Ofﬁcers, and Employees are responsible for discouraging harassment in the workplace. We discourage any behavior whatsoever that can be construed to be in poor taste and/or offensive. J.B. Hunt is committed to investigating all complaints thoroughly and promptly. All complaints and their terms of resolutions are kept as conﬁdential as possible. Should an investigation conﬁrm the occurrence of harassment, J.B. Hunt will take prompt disciplinary action. We reserve the right to take disciplinary action for behavior that interferes in any way with any individual’s ability to perform their job duties. Retaliation against those who reported harassment is forbidden. J.B. Hunt will not tolerate discrimination in employment on the basis of race, sex, age, religion, protected veteran’s status, color, national origin, disability or other legally protected status. J.B. Hunt is committed to equal opportunity in all aspects of employment, including hiring, promotion, training, compensation, termination, and disciplinary action.” The Company’s existing policy protects employees against discriminatory practices that are prohibited by existing federal law. Additionally, the Company’s policy provides protections beyond the basic legal requirements to extend equal opportunity in employment, promotion, training, compensation, termination and disciplinary action. The policy expressly dictates that the Company will not tolerate any harassment, sexual or otherwise, by not only the Company’s employees, but also vendors, clients and customers. Indeed, the Company’s policy discourages any behavior whatsoever that can be construed to be in poor taste and/or offensive. The stockholder proposal resolution implies that additional action is necessary to implement the resolution. The Company disagrees. The Company has not received indications from its employees that discrimination on the basis of sexual orientation, gender identity or gender expression is practiced within the Company, nor has the Company received notice from its employees, vendors, clients or customers that the Company’s employment policies or practices jeopardize its relationship with any of them. Thus it is the opinion of the Board of Directors that this stockholder resolution is both unwarranted and unnecessary. THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE AGAINST PROPOSAL NUMBER THREE 42 STOCKHOLDERS WHO DO NOT EXPECT TO ATTEND THE MEETING ARE URGED TO VOTE BY TELEPHONE, MAIL OR INTERNET IF YOU VOTE BY TELEPHONE OR THE INTERNET, DO NOT RETURN YOUR PROXY CARD By Order of the Board of Directors DAVID G. MEE Corporate Secretary P r o x y S t a t e m e n t 43 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the ﬁscal year ended December 31, 2015 Commission ﬁle number 0-11757 J.B. HUNT TRANSPORT SERVICES, INC. (Exact name of registrant as speciﬁed in its charter) Arkansas (State or other jurisdiction of incorporation or organization) 615 J.B. Hunt Corporate Drive Lowell, Arkansas (Address of principal executive ofﬁces) 71-0335111 (I.R.S. Employer Identiﬁcation No.) 72745-0130 (ZIP Code) Registrant’s telephone number, including area code: 479-820-0000 Securities registered pursuant to Section 12(b) of the Act: None Securities registered pursuant to Section 12(g) of the Act: Common Stock, $0.01 Par Value t r o p e R l a u n n A 5 1 0 2 Indicate by check mark if the registrant is a well-known seasoned issuer, as deﬁned in Rule 405 of the Securities Act. Yes __X__ No _____ Indicate by check mark if the registrant is not required to ﬁle reports pursuant to Section 13 or 15(d) of the Act. Yes _____ No __X__ 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 such 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 website, 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 if disclosure of delinquent ﬁlers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of the registrant’s knowledge, in deﬁnitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ X ] Indicate by check mark whether the registrant is a large accelerated ﬁler, an accelerated ﬁler, a non-accelerated ﬁler, or a smaller reporting company. See the deﬁnitions of “large accelerated ﬁler,” “accelerated ﬁler” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. Large accelerated ﬁler __X__ Accelerated ﬁler _____ Non-accelerated ﬁler _____ Smaller reporting company _____ 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 aggregate market value of 91,793,241 shares of the registrant’s $0.01 par value common stock held by non-afﬁliates as of June 30, 2015, was $7.5 billion (based upon $82.09 per share). As of February 16, 2016, the number of outstanding shares of the registrant’s common stock was 112,774,244. DOCUMENTS INCORPORATED BY REFERENCE Certain portions of the Notice and Proxy Statement for the Annual Meeting of Stockholders, to be held April 21, 2016, are incorporated by reference in Part III of this Form 10-K. 44 FORWARD-LOOKING STATEMENTS This report, including documents which are incorporated by reference and other documents which we ﬁle periodically with the Securities and Exchange Commission (SEC), contains statements that may be considered to be “forward-looking statements.” Such statements relate to our predictions concerning future events or operations and are within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements are inherently uncertain, subject to risks, and should be viewed with caution. These statements are based on our belief or interpretation of information currently available. Stockholders and prospective investors are cautioned that actual results and future events may differ materially from these forward-looking statements as a result of many factors. Some of the factors and events that are not within our control and that could have a material impact on future operating results include: general economic and business conditions, competition and competitive rate ﬂuctuations, cost and availability of diesel fuel, ability to attract and retain qualiﬁed drivers and delivery personnel, a loss of one or more major customers, interference with or termination of our relationships with certain railroads, rail service delays, insurance costs and availability, claims expense, retention of key employees, terrorist attacks or actions, acts of war, adverse weather conditions, disruption or failure of information systems, new or different environmental or other laws and regulations, increased costs for new revenue equipment or decreases in the value of used equipment, and the ability of revenue equipment manufacturers to perform in accordance with agreements for guaranteed equipment trade-in values. You should understand that many important factors, in addition to those listed above, could impact us ﬁnancially. Our operating results may ﬂuctuate as a result of these and other risk factors or events as described in our ﬁlings with the SEC. Some important factors that could cause our actual results to differ from estimates or projections contained in the forward-looking statements are described under “Risk Factors” in Item 1A. We assume no obligation to update any forward-looking statement to the extent we become aware that it will not be achieved for any reason. PART I ITEM 1. BUSINESS OVERVIEW We are one of the largest surface transportation, delivery, and logistics companies in North America. J.B. Hunt Transport Services, Inc. is a publicly held holding company that, together with our wholly owned subsidiaries, provides safe and reliable transportation and delivery services to a diverse group of customers and consumers throughout the continental United States, Canada, and Mexico. Unless otherwise indicated by the context, “we,” “us,” “our,” and “JBHT” refer to J.B. Hunt Transport Services, Inc. and its consolidated subsidiaries. We were incorporated in Arkansas on August 10, 1961, and have been a publicly held company since our initial public offering in 1983. Our service offerings include transportation of full-truckload containerized freight, which we directly transport utilizing our company-controlled revenue equipment and company drivers or independent contractors. We have arrangements with most of the major North American rail carriers to transport freight in containers or trailers. We also provide customized freight movement, revenue equipment, labor, systems, and delivery services that are tailored to meet individual customers’ requirements and typically involve long-term contracts. These arrangements are generally referred to as dedicated services and may include multiple pickups and drops, local and home deliveries, freight handling, specialized equipment, and freight network design. Our local and home delivery services typically are provided through a network of cross-dock service centers throughout the continental United States. Utilizing a network of thousands of reliable third-party carriers, we also provide comprehensive transportation and logistics services. In addition to full-load, dry-van operations, these unrelated outside carriers also provide ﬂatbed, refrigerated, less-than-truckload (LTL), and other specialized equipment, drivers, and services. Our customers’ business activities are extremely diverse, and our customer base includes a large number of Fortune 500 companies. We believe our ability to offer multiple services, utilizing our four business segments and a full complement of logistics services through third parties, represents a competitive advantage. These segments include Intermodal (JBI), Dedicated Contract Services® (DCS), Integrated Capacity Solutions (ICS), and Truck (JBT). Our business is somewhat seasonal, with slightly higher freight volumes typically experienced during August through early November. Our DCS segment is subject to somewhat less seasonal variation than our other segments. For the calendar year ended December 31, 2015, our consolidated revenue totaled $6.2 billion, after the elimination of intersegment business. Of this total, 59% was generated by our JBI business segment, 24% by DCS, 11% by ICS, and 6% by JBT. For the year ended December 31, 2014, JBI represented 60%, DCS 22%, ICS 12%, and JBT 6% of our consolidated revenue. For the year ended December 31, 2013, JBI represented 62%, DCS 22%, ICS 9%, and JBT 7% of our consolidated revenue. Additional general information about us is available at www.jbhunt.com. We make a number of reports and other information available free of charge on our website, including our annual report on Form 10-K, our proxy statement, and our earnings releases. Our website also contains corporate governance guidelines, our code of ethics, our whistleblower policy, Board committee charters, and other corporate policies. The information on our website is not, and shall not be deemed to be a part of this annual report on Form 10-K or incorporated into any other ﬁlings we make with the SEC. OUR MISSION AND STRATEGY We forge long-term partnerships with key customers that include supply-chain management as an integral part of their strategies. Working in concert, we strive to drive out excess cost, add value and function as an extension of their enterprises. Our strategy is based on utilizing an integrated, multimodal approach to provide capacity-oriented solutions centered on delivering customer value and industry-leading service. We believe our unique operating strategy can add value to customers and increase our proﬁts and returns to stockholders. We continually analyze where we believe additional capital should be invested and management’s resources should be focused to provide added beneﬁts to our customers. These actions should, in turn, yield increasing returns to our stockholders. 2 0 1 5 A n n u a l R e p o r t 45 Increasingly, our customers are seeking energy-efﬁcient transportation solutions to reduce both cost and greenhouse-gas emissions. Our intermodal service addresses both demands. Further, we are customizing dedicated solutions aimed at minimizing transportation-related carbon emissions. Efforts to improve ﬂeet fuel efﬁciency are ongoing, and we are an Environmental Protection Agency (EPA) SmartWaySM Transport Partner. As always, we continue to ingrain safety into our corporate culture and strive to conduct all of our operations as safely as possible. OPERATING SEGMENTS Segment information is also included in Note 11 to our Consolidated Financial Statements. JBI Segment The transportation service offerings of our JBI segment utilize arrangements with most major North American rail carriers to provide intermodal freight solutions for our customers throughout the continental United States, Canada, and Mexico. Our JBI segment began operations in 1989, forming a unique partnership with what is now the BNSF Railway Company; this was a watershed event in the industry and the ﬁrst agreement that linked major rail and truckload carriers in a joint service environment. JBI draws on the intermodal services of rail carriers for the underlying linehaul movement of its equipment between rail ramps. The origin and destination pickup and delivery services (“drayage”) are handled by our company-owned tractors for the majority of our intermodal loads, while third-party dray carriers are used where economical. By performing our own drayage services, we are able to provide a cost-competitive, seamless coordination of the combined rail and dray movements for our customers. JBI operates 78,957 pieces of company-owned trailing equipment systemwide. The ﬂeet primarily consists of 53-foot, high-cube containers and is designed to take advantage of intermodal double-stack economics and superior ride quality. We own and maintain our own chassis ﬂeet, consisting of 68,076 units. The containers and chassis are uniquely designed so that they may only be paired together, which we feel creates an operational competitive advantage. JBI also manages a ﬂeet of 4,276 company-owned tractors, 805 independent contractor trucks, and 5,172 company drivers. At December 31, 2015, the total JBI employee count was 5,838. Revenue for the JBI segment in 2015 was $3.66 billion. DCS Segment DCS focuses on private ﬂeet conversion and creation in replenishment, specialized equipment, and ﬁnal-mile delivery services. We specialize in the design, development, and execution of supply-chain solutions that support a variety of transportation networks. Our ﬁnal-mile delivery services are supported with a network of approximately 89 cross-dock locations nationwide, with 98% of the continental U.S. population living within 150 miles of a cross-dock location. Contracts with our customers are long-term, ranging from three to ten years, with the average being approximately ﬁve years. Pricing of our contracts typically involves cost-plus arrangements, with our ﬁxed costs being recovered regardless of equipment utilization, but is customized based on invested capital and duration. At December 31, 2015, this segment operated 6,762 company-owned trucks, 436 customer-owned trucks, and 10 independent contractor trucks. DCS also operates 15,020 owned pieces of trailing equipment and 6,652 customer-owned trailers. The DCS segment employed 9,948 people, including 8,256 drivers, at December 31, 2015. DCS revenue for 2015 was $1.45 billion. ICS Segment ICS provides traditional freight brokerage and transportation logistics solutions to customers through relationships with thousands of third-party carriers and integration with our owned equipment. By leveraging the J.B. Hunt brand, systems, and network, we provide a broader service offering to customers by providing ﬂatbed, refrigerated, expedited, and LTL, as well as a variety of dry-van and intermodal solutions. ICS provides single-source logistics management for customers desiring to outsource their transportation functions and utilize our proven supply-chain technology and design expertise to improve efﬁciency. ICS operates 34 remote sales ofﬁces or branches, as well as on-site logistics personnel working in direct contact with customers. At December 31, 2015, the ICS segment employed 670 people, with a carrier base of approximately 45,700. ICS revenue for 2015 was $699 million. JBT Segment The service offering in this segment is full-load, dry-van freight, utilizing tractors operating over roads and highways. We typically pick up freight at the dock or speciﬁed location of the shipper and transport the load directly to the location of the consignee. We use our company-owned tractors and employee drivers or independent contractors who agree to transport freight in our trailers. At December 31, 2015, the JBT segment operated 1,462 company-owned tractors and employed 1,847 people, 1,615 of whom were drivers. At December 31, 2015, we had 687 independent contractors operating in the JBT segment. JBT revenue for 2015 was $386 million. Marketing and Operations We transport, or arrange for the transportation of, a wide range of freight, including general merchandise, specialty consumer items, appliances, forest and paper products, food and beverages, building materials, soaps and cosmetics, automotive parts, agricultural products, electronics, and chemicals. Our customers’ business activities are extremely diverse, and our customer base includes a large number of Fortune 500 companies. We provide a broad range of transportation services to shippers seeking to use a variety of transportation options to optimize their supply-chain logistics needs. t r o p e R l a u n n A 5 1 0 2 46 We generally market all of our service offerings through a nationwide sales and marketing network. We use a speciﬁc sales force in DCS due to the length, complexity, and specialization of the sales cycle. In addition, ICS utilizes its own local branch salespeople. In accordance with our typical arrangements, we bill the customer for all services, and we, in turn, pay all third parties for their portion of transportation services provided. People We believe that one of the factors differentiating us from our competitors is our service-oriented people. As of December 31, 2015, we had 21,562 employees, which consisted of 15,043 company drivers, 5,397 ofﬁce personnel, and 1,122 maintenance technicians. We also had arrangements with approximately 1,502 independent contractors to transport freight in our trailing equipment. None of our employees are represented by unions or covered by collective bargaining agreements. Revenue Equipment Our JBI segment utilizes uniquely designed high-cube containers and chassis, which can only be paired with each other and can be separated to allow the containers to be double-stacked on rail cars. The composition of our DCS trailing ﬂeet varies with speciﬁc customer requirements and may include dry-vans, ﬂatbeds, temperature-controlled, curtain-side vans, straight trucks, and dump trailers. We primarily utilize third-party carriers’ tractor and trailing equipment for our ICS segment. Our JBT segment operates primarily with 53-foot dry-van trailers. As of December 31, 2015, our company-owned tractor and truck ﬂeet consisted of 12,500 units. In addition, we had 1,502 independent contractors who operate their own tractors but transport freight in our trailing equipment. We operate with standardized tractors in as many ﬂeets as possible, particularly in our JBI and JBT ﬂeets. Due to our customers’ preferences and the actual business application, our DCS ﬂeet is extremely diversiﬁed. We believe operating with relatively newer revenue equipment provides better customer service, attracts quality drivers, and lowers maintenance expense. At December 31, 2015, the average age of our combined tractor ﬂeet was 1.9 years, while our containers averaged 5.6 years of age and our trailers averaged 8.6 years. We perform routine servicing and preventive maintenance on our equipment at our regional terminal facilities. Competition and the Industry The freight transportation markets in which we operate are frequently referred to as highly fragmented and competitive. Our JBI segment competes with other intermodal marketing companies; other full-load carriers that utilize railroads for a portion of the transportation service; and, to a certain extent, some railroads directly. The diversiﬁed nature of the services provided by our DCS segment attracts competition from customers’ private ﬂeets, other private ﬂeet outsourcing companies, equipment leasing companies, local and regional delivery service providers, and some truckload carriers. Our ICS segment utilizes the fragmented nature of the truck industry and competes with other non-asset-based logistics companies and freight brokers, as well as full-load carriers. The full-load freight competition of our JBT segment includes thousands of carriers, many of which are very small. While we compete with a number of smaller carriers on a regional basis, only a limited number of companies represent competition in all markets across the country. We compete with other transportation service companies primarily in terms of price, on-time pickup and delivery service, availability and type of equipment capacity, and availability of carriers for logistics services. Regulation Our operations as a for-hire motor carrier are subject to regulation by the U.S. Department of Transportation (DOT) and the Federal Motor Carrier Safety Administration (FMCSA), and certain business is also subject to state rules and regulations. The DOT periodically conducts reviews and audits to ensure our compliance with federal safety requirements, and we report certain accident and other information to the DOT. Our operations into and out of Canada and Mexico are subject to regulation by those countries. In 2013, the remaining provisions of the FMCSA’s amendment to the hours-of-service (HOS) safety requirements for commercial truck drivers became effective, and we experienced some negative impact on our productivity as a result. However, in December 2014, as a result of the Consolidated and Further Continuing Appropriations Act of 2015, the FMCSA was required to rescind the 34-hour restart provision of the amended HOS rules to the pre-July 1, 2013 requirements. Furthermore, the FMCSA was required to conduct a ﬁeld study measuring the safety beneﬁt of the amended HOS rules before and after this rule change. This rule rescission is considered temporary pending the outcome of the study. We continue to evaluate and adjust the various segments of our operations toward the ultimate impact of these changes in HOS safety requirements. In December 2015, the FMCSA published a Final Rule requiring logging drivers to complete their logs using an Electronic Logging Device (ELD). Since the issuance of the initial proposal of this rule change, we have successfully implemented a plan to replace any legacy on-board recording equipment within our ﬂeets. At December 31, 2015, we had replaced approximately 96% of this equipment and anticipate replacing the remaining equipment within the mandated timetable. We do not anticipate a negative impact on our operations. In 2013, the FMCSA, in conjunction with the National Highway Trafﬁc Safety Administration, submitted a Notice of Proposed Rulemaking to require the installation of speed-limiting devices on heavy trucks. The ﬁnal rule regarding this proposal is expected to be published in the ﬁrst quarter of 2016. We believe this rule will have minimal implementation cost, as all of our heavy trucks subject to this rule already have these devices installed. We do not anticipate a negative impact on our operations or productivity. We continue to monitor the actions of the FMCSA and other regulatory agencies and evaluate all proposed rules to determine their impact on our operations. 47 2 0 1 5 A n n u a l R e p o r t ITEM 1A. RISK FACTORS In addition to the forward-looking statements outlined previously in this Form 10-K and other comments regarding risks and uncertainties, the following risk factors should be carefully considered when evaluating our business. Our business, ﬁnancial condition or ﬁnancial results could be materially and adversely affected by any of these risks. Our business is dependent upon a number of factors that may have a material adverse effect on the results of our operations, many of which are beyond our control. In addition to general U.S. economic trends, and to a lesser extent global economic trends, these factors include interference with or termination of our relationships with certain railroads; rail service delays; disruptions to U.S. port-of-call activity; signiﬁcant increases or rapid ﬂuctuations in fuel prices, fuel taxes, interest rates, insurance premiums, self-insurance levels, excess capacity in the intermodal or trucking industries, or license and registration fees; terrorist attacks or actions; acts of war; adverse weather conditions; disruption or failure of information technology systems; increased costs for new revenue equipment or decreases in the value of used equipment; increased tariffs assessed on or disruptions in the procurement of imported revenue equipment; volatile ﬁnancial credit markets; and difﬁculty in attracting and retaining qualiﬁed drivers, independent contractors, and third-party carriers. We are also affected by recessionary economic cycles and downturns in customers’ business cycles, particularly in market segments and industries where we have a signiﬁcant concentration of customers. Economic conditions represent a greater potential for loss, and we may be required to increase our reserve for bad debt losses. In addition, our results of operations may be affected by seasonal factors. Customers tend to reduce shipments after the winter holiday season, and our operating expenses tend to be higher in the winter months, primarily due to colder weather, which causes higher fuel consumption from increased idle time and higher maintenance costs. We depend on third parties in the operation of our business. Our JBI business segment utilizes railroads in the performance of its transportation services. The majority of these services are provided pursuant to contractual relationships with the railroads. While we have agreements with a number of Class I railroads, the majority of our business travels on the Burlington Northern Santa Fe and the Norfolk Southern railways. A material change in the relationship with or the inability to utilize one or more of these railroads or the overall service levels provided by these railroads could have a material adverse effect on our business and operating results. In addition, a portion of the freight we deliver is imported to the United States through ports of call that are subject to labor union contracts. Work stoppages or other disruptions at any of these ports could have a material adverse effect on our business. We also utilize independent contractors and third-party carriers to complete our services. These third parties are subject to similar regulation requirements, which may have a more signiﬁcant impact on their operations, causing them to exit the transportation industry. Aside from when these third parties may use our trailing equipment to fulﬁll loads, we do not own the revenue equipment or control the drivers delivering these loads. The inability to obtain reliable third-party carriers and independent contractors could have a material adverse effect on our operating results and business growth. Rapid changes in fuel costs could impact our periodic ﬁnancial results. Fuel costs can be very volatile. We have a fuel surcharge revenue program in place with the majority of our customers, which has historically enabled us to recover the majority of higher fuel costs. Most of these programs automatically adjust weekly depending on the cost of fuel. However, there can be timing differences between a change in our fuel cost and the timing of the fuel surcharges billed to our customers. In addition, we incur additional costs when fuel price increases cannot be fully recovered due to our engines being idled during cold or warm weather and empty or out-of-route miles that cannot be billed to customers. Rapid increases in fuel costs or shortages of fuel could have a material adverse effect on our operations or future proﬁtability. As of December 31, 2015, we had no derivative ﬁnancial instruments to reduce our exposure to fuel-price ﬂuctuations. Insurance and claims expenses could signiﬁcantly reduce our earnings. Our future insurance and claims expenses might exceed historical levels, which could reduce our earnings. If the number or severity of claims for which we are self-insured increases, our operating results could be adversely affected. We have policies in place for 2016 with substantially the same terms as our 2015 policies for personal injury, property damage, workers’ compensation, and cargo loss or damage. We purchase insurance coverage for the amounts above which we are self-insured. If these expenses increase and we are unable to offset the increase with higher freight rates, our earnings could be materially and adversely affected. We derive a signiﬁcant portion of our revenue from a few major customers, the loss of one or more of which could have a material adverse effect on our business. For the calendar year ended December 31, 2015, our top 10 customers, based on revenue, accounted for approximately 29% of our revenue. Our JBI, ICS, and JBT segments typically do not have long-term contracts with their customers. While our DCS segment business may involve a long-term written contract, those contracts may contain cancellation clauses, and there is no assurance that our current customers will continue to utilize our services or continue at the same levels. A reduction in or termination of our services by one or more of our major customers could have a material adverse effect on our business and operating results. t r o p e R l a u n n A 5 1 0 2 48 We operate in a regulated industry, and increased direct and indirect costs of compliance with, or liability for violation of, existing or future regulations could have a material adverse effect on our business. The DOT and various state agencies exercise broad powers over our business, generally governing matters including authorization to engage in motor carrier service, equipment operation, safety, and ﬁnancial reporting. We are audited periodically by the DOT to ensure that we are in compliance with various safety, hours-of-service, and other rules and regulations. If we were found to be out of compliance, the DOT could restrict or otherwise impact our operations. Difﬁculty in attracting and retaining drivers and delivery personnel could affect our proﬁtability and ability to grow. If we are unable to attract and retain the necessary quality and number of employees, we could be required to signiﬁcantly increase our employee compensation package, let revenue equipment sit idle, dispose of the equipment altogether, or rely more on higher-cost third-party carriers, which could adversely affect our growth and proﬁtability. In addition, our growth could be limited by an inability to attract third-party carriers upon whom we rely to provide transportation services. 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 rely on information technology throughout all areas of our business to initiate, track, and complete customer orders; process ﬁnancial and nonﬁnancial data; compile results of operations for internal and external reporting; and achieve operating efﬁciencies and growth. Our information technology systems may be susceptible to various interruptions, including equipment or network failures, failed upgrades or replacement of software, user error, power outages, natural disasters, cyber-attacks, terrorist attacks, computer viruses, hackers, or other security breaches. We have mitigated our exposure to these risks through the establishment and maintenance of technology security programs and disaster recovery plans, but these mitigating activities may not be sufﬁcient. A signiﬁcant disruption, failure or security breach in our information technology systems could have a material adverse effect on our business, which could include operational disruptions, loss of conﬁdential information, external reporting delays or errors, legal claims, or damage to our business reputation. We operate in a competitive and highly fragmented industry. Numerous factors could impair our ability to maintain our current proﬁtability and to compete with other carriers and private ﬂeets. We compete with many other transportation service providers of varying sizes and, to a lesser extent, with LTL carriers and railroads, some of which have more equipment and greater capital resources than we do. Additionally, some of our competitors periodically reduce their freight rates to gain business, especially during times of reduced growth rates in the economy, which may limit our ability to maintain or increase freight rates or to maintain our proﬁt margins. In an effort to reduce the number of carriers it uses, a customer often selects so-called “core carriers” as approved transportation service providers, and in some instances, we may not be selected. Many customers periodically accept bids from multiple carriers for their shipping needs, and this process may depress freight rates or result in the loss of some business to competitors. Also, certain customers that operate private ﬂeets to transport their own freight could decide to expand their operations, thereby reducing their need for our services. Extreme or unusual weather conditions can disrupt our operations, impact freight volumes, and increase our costs, all of which could have a material adverse effect on our business results. Certain weather conditions such as ice and snow can disrupt our operations. Increases in the cost of our operations, such as towing and other maintenance activities, frequently occur during the winter months. Natural disasters such as hurricanes and ﬂooding can also impact freight volumes and increase our costs. Our operations are subject to various environmental laws and regulations, the violation of which could result in substantial ﬁnes or penalties. We are subject to various environmental laws and regulations dealing with the handling of hazardous materials, underground fuel storage tanks, and discharge and retention of storm water. We operate in industrial areas, where truck terminals and other industrial activities are located and where groundwater or other forms of environmental contamination have occurred. Our operations involve the risks of fuel spillage or seepage, environmental damage, and hazardous waste disposal, among others. We also maintain bulk fuel storage and fuel islands at several of our facilities. If a spill or other accident involving hazardous substances occurs, or if we are found to be in violation of applicable laws or regulations, it could have a material adverse effect on our business and operating results. If we should fail to comply with applicable environmental regulations, we could be subject to substantial ﬁnes or penalties and to civil and criminal liability. ITEM 1B. UNRESOLVED STAFF COMMENTS None. 2 0 1 5 A n n u a l R e p o r t 49 ITEM 2. PROPERTIES Our corporate headquarters are in Lowell, Arkansas. We occupy a number of buildings in Lowell that we utilize for administrative support, customer service, freight dispatch, data processing and warehousing, and data backup and disaster recovery. We also own or lease approximately 42 other signiﬁcant facilities across the United States where we perform maintenance on our equipment, provide bulk fuel, and employ personnel to support operations. These facilities vary in size from 1 to 35 acres. Each of our business segments utilizes these facilities for various services, including bulk fueling, maintenance, and driver support activities. In addition, we have approximately 89 leased facilities in our DCS cross-dock and delivery system network and 34 leased or owned remote sales ofﬁces or branches in our ICS segment. We also own or lease multiple small facilities, ofﬁces and parking yards throughout the country that support our customers’ business needs. A summary of our principal facilities in locations throughout the U.S. follows: Type Maintenance and support facilities Cross-dock and delivery system facilities Corporate headquarters, Lowell, Arkansas Ofﬁces and data center, Lowell, Arkansas Branch sales ofﬁces Other facilities, ofﬁces, and parking yards Acreage 461 – 158 8 – 205 Maintenance Shop/ Cross-dock Facility (square feet) 803,000 1,317,000 – – – 63,000 Ofﬁce Space (square feet) 197,000 120,000 262,000 40,000 59,000 71,000 ITEM 3. LEGAL PROCEEDINGS We are a defendant in certain class-action lawsuits in which the plaintiffs are current and former California-based drivers who allege claims for unpaid wages, failure to provide meal and rest periods, and other items. During the ﬁrst half of 2014, the Court in the lead class-action granted judgment in our favor with regard to all claims. The plaintiffs have appealed the case to the Ninth Circuit Court of Appeals where it is currently pending. The overlapping claims in the remaining action have been stayed pending a decision in the lead class-action case. We cannot reasonably estimate at this time the possible loss or range of loss, if any, that may arise from these lawsuits. We are involved in certain other claims and pending litigation arising from the normal conduct of business. Based on present knowledge of the facts and, in certain cases, opinions of outside counsel, we believe the resolution of these claims and pending litigation will not have a material adverse effect on our ﬁnancial condition, results of operations or liquidity. ITEM 4. MINE SAFETY DISCLOSURES Not applicable. t r o p e R l a u n n A 5 1 0 2 50 PART II ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Our common stock is traded in the over-the-counter market under the symbol “JBHT.” At December 31, 2015, we were authorized to issue up to 1 billion shares of our common stock, and 167.1 million shares were issued. We had 113.9 million and 116.6 million shares outstanding as of December 31, 2015 and 2014, respectively. The high and low sales prices of our common stock as reported by the National Association of Securities Dealers Automated Quotations National Market system (NASDAQ) and the quarterly dividends paid per share on our common shares were: 2015 First Quarter Second Quarter Third Quarter Fourth Quarter 2014 First Quarter Second Quarter Third Quarter Fourth Quarter Dividends Paid $ 0.21 0.21 0.21 0.21 Dividends Paid $ 0.20 0.20 0.20 0.20 High $ 90.46 93.50 86.32 79.73 High $ 79.89 78.07 79.79 85.54 Low $ 77.50 82.06 70.92 69.69 Low $ 69.33 71.45 71.73 71.00 On February 16, 2016, the high and low sales prices for our common stock as reported by NASDAQ were $75.99 and $73.89, respectively, and we had 1,053 stockholders of record. DIVIDEND POLICY Our dividend policy is subject to review and revision by the Board of Directors, and payments are dependent upon our ﬁnancial condition, liquidity, earnings, capital requirements, and any other factors the Board of Directors may deem relevant. On January 28, 2016, we announced an increase in our quarterly cash dividend from $0.21 to $0.22 per share, which will be paid February 26, 2016, to stockholders of record on February 12, 2016. We currently intend to continue paying cash dividends on a quarterly basis. However, no assurance can be given that future dividends will be paid. PURCHASES OF EQUITY SECURITIES The following table summarizes purchases of our common stock during the three months ended December 31, 2015: Period October 1 through October 31, 2015 November 1 through November 30, 2015 December 1 through December 31, 2015 Total Number of Common Shares Purchased – 672,500 – 672,500 Average Price Paid Per Common Share Purchased $ – 74.42 – $ 74.42 Total Number of Shares Purchased as Part of a Publicly Announced Plan (1) – 672,500 – 672,500 Maximum Dollar Amount of Shares That May Yet Be Purchased Under the Plan (in millions) $ 501 451 451 $ 451 (1) On October 27, 2011, our Board of Directors authorized the purchase of up to $500 million of our common stock. On October 22, 2015, our Board of Directors authorized an additional purchase of up to $500 million of our common stock. 2 0 1 5 A n n u a l R e p o r t 51 STOCK PERFORMANCE GRAPH The following graph compares the cumulative 5-year total return of stockholders of our common stock with the cumulative total returns of the S&P 500 index and two customized peer groups. The peer group labeled “Prior Peer Group” consists of 15 companies: Amerco, ArcBest Corporation, Avis Budget Group Inc., C.H. Robinson Worldwide Inc., CSX Corporation, Expeditors International Of Washington Inc., Hertz Global Holdings Inc., Hub Group Inc., Kansas City Southern, Landstar System Inc., Norfolk Southern Corporation, Old Dominion Freight Line Inc., Ryder System Inc., Swift Transportation Company, and UTI Worldwide Inc. The peer group labeled “Current Peer Group” consists of 12 companies: Avis Budget Group Inc., C.H. Robinson Worldwide Inc., CSX Corporation, Expeditors International Of Washington Inc., Hertz Global Holdings Inc., Hub Group Inc., Kansas City Southern, Landstar System Inc., Norfolk Southern Corporation, Ryder System Inc., Swift Transportation Company, and UTI Worldwide Inc. The graph assumes the value of the investment in our common stock, in the index, and in each of the peer groups (including reinvestment of dividends) was $100 on December 31, 2010, and tracks it through December 31, 2015. The stock price performance included in this graph is not necessarily indicative of future stock price performance. COMPARISON OF 5-YEAR CUMULATIVE TOTAL RETURN Among J.B. Hunt Transport Services, Inc., the S&P 500 Index, Prior Peer Group and Current Peer Group $250 $200 $150 $100 $50 $0 2010 2011 2012 2013 2014 2015 J.B. Hunt Transport Services, Inc. S&P 500 Prior Peer Group Current Peer Group J.B. Hunt Transport Services, Inc. S&P 500 Prior Peer Group Current Peer Group Years Ended December 31, 2010 $ 100.00 100.00 100.00 100.00 2011 $ 111.74 102.11 99.68 99.51 2012 $ 149.94 118.45 100.94 99.43 2013 $ 195.31 156.82 146.52 142.17 2014 $ 215.08 178.29 173.24 166.23 2015 $ 189.21 180.75 131.29 122.04 t r o p e R l a u n n A 5 1 0 2 52 SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS Plan Category(1) Equity compensation plans approved by security holders Number of Securities To Be Issued Upon Exercise of Outstanding Options, Warrants and Rights (A) Weighted Average Exercise Price of Outstanding Options, Warrants and Rights (B) Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Securities Reﬂected in Column (A)) (C) 2,009,423 $ 20.76(2) 7,521,753 (1) We have no equity compensation plans that are not approved by security holders. (2) Upon vesting, restricted share units are settled with shares of our common stock on a one-for-one basis. Accordingly, the restricted share units have been excluded for purposes of computing the weighted-average exercise price. ITEM 6. SELECTED FINANCIAL DATA (Dollars in millions, except per share amounts) Earnings data for the years ended December 31, Operating revenues Operating income Net earnings Basic earnings per share Diluted earnings per share Cash dividends per share Operating expenses as a percentage of operating revenues: Rents and purchased transportation Salaries, wages and employee beneﬁts Fuel and fuel taxes Depreciation and amortization Operating supplies and expenses Insurance and claims General and administrative expenses, net of asset dispositions Operating taxes and licenses Communication and utilities Total operating expenses Operating income Net interest expense Earnings before income taxes Income taxes Net earnings Balance sheet data as of December 31, Working capital ratio Total assets (millions) Stockholders’ equity (millions) Current portion of long-term debt (millions) Total debt (millions) Total debt to equity Total debt as a percentage of total capital 2015 $ 6,188 716 427 3.69 3.66 0.84 2014 $ 6,165 632 375 3.20 3.16 0.80 2013 $ 5,585 577 342 2.92 2.87 0.45 2012 $ 5,055 530 310 2.64 2.59 0.71 2011 $ 4,527 444 257 2.16 2.11 0.52 48.4% 22.5 5.1 5.5 3.6 1.2 1.1 0.7 0.3 88.4 11.6 0.4 11.2 4.3 6.9% 50.0% 20.9 7.4 4.8 3.5 1.3 0.8 0.7 0.4 89.8 10.2 0.4 9.8 3.7 6.1% 50.2% 20.4 8.2 4.5 3.6 1.0 0.8 0.7 0.3 89.7 10.3 0.4 9.9 3.8 6.1% 49.2% 20.5 9.2 4.5 3.5 1.1 0.6 0.6 0.3 89.5 10.5 0.5 10.0 3.9 6.1% 46.9% 22.1 10.2 4.7 3.6 1.0 0.7 0.6 0.4 90.2 9.8 0.6 9.2 3.5 5.7% 2015 1.61 $ 3,637 $ 1,300 $ – $ 1,005 0.77 2014 1.12 $ 3,378 $ 1,205 $ 250 $ 934 0.78 2013 0.96 $ 2,819 $ 1,012 $ 250 $ 708 0.70 2012 1.10 $ 2,465 $ 792 $ 100 $ 685 0.87 2011 1.16 $ 2,262 $ 568 $ 50 $ 749 1.32 44% 44% 41% 46% 57% 2 0 1 5 A n n u a l R e p o r t 53 ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion of our results of operations and ﬁnancial condition should be read in conjunction with our ﬁnancial statements and related notes in Item 8. This discussion contains forward-looking statements. Please see “Forward-looking Statements” and “Risk Factors” for a discussion of items, uncertainties, assumptions and risks associated with these statements. CRITICAL ACCOUNTING POLICIES AND ESTIMATES The preparation of our ﬁnancial statements in accordance with U.S. generally accepted accounting principles requires us to make estimates and assumptions that impact the amounts reported in our Consolidated Financial Statements and accompanying notes. Therefore, the reported amounts of assets, liabilities, revenues, expenses and associated disclosures of contingent liabilities are affected by these estimates. We evaluate these estimates on an ongoing basis, utilizing historical experience, consultation with third parties and other methods considered reasonable in the particular circumstances. Nevertheless, actual results may differ signiﬁcantly from our estimates. Any effects on our business, ﬁnancial position or results of operations resulting from revisions to these estimates are recognized in the accounting period in which the facts that give rise to the revision become known. We consider our critical accounting policies and estimates to be those that require us to make more signiﬁcant judgments and estimates when we prepare our ﬁnancial statements and include the following: Workers’ Compensation and Accident Costs We purchase insurance coverage for a portion of expenses related to employee injuries, vehicular collisions, accidents, and cargo damage. Certain insurance arrangements include a level of self-insurance (deductible) coverage applicable to each claim. We have umbrella policies to limit our exposure to catastrophic claim costs. We are substantially self-insured for loss of and damage to our owned and leased revenue equipment. The amounts of self-insurance change from time to time based on measurement dates, policy expiration dates, and claim type. We have policies in place for 2016 with substantially the same terms as our 2015 policies for personal injury, property damage, workers’ compensation, and cargo loss or damage. Our claims accrual policy for all self-insured claims is to recognize a liability at the time of the incident based on our analysis of the nature and severity of the claims and analyses provided by third-party claims administrators, as well as legal, economic, and regulatory factors. Our safety and claims personnel work directly with representatives from the insurance companies to continually update the estimated cost of each claim. The ultimate cost of a claim develops over time as additional information regarding the nature, timing, and extent of damages claimed becomes available. Accordingly, we use an actuarial method to develop current claim information to derive an estimate of our ultimate claim liability. This process involves the use of loss-development factors based on our historical claims experience and includes a contractual premium adjustment factor, if applicable. In doing so, the recorded liability considers future claims growth and, if applicable, conversion to fully insured status and provides a reserve for incurred-but-not-reported claims. We do not discount our estimated losses. At December 31, 2015, we had an accrual of approximately $95 million for estimated claims. In addition, we are required to pay certain advanced deposits and monthly premiums. At December 31, 2015, we had an aggregate prepaid insurance asset of approximately $87 million, which represented prefunded premiums and deposits. Revenue Equipment We operate a signiﬁcant number of tractors, trucks, containers, chassis, and trailers in connection with our business. This equipment may be purchased or acquired under lease agreements. In addition, we may rent revenue equipment from various third parties under short-term rental arrangements. Purchased revenue equipment is depreciated on the straight-line method over the estimated useful life to an estimated salvage or trade-in value. We periodically review the useful lives and salvage values of our revenue equipment and evaluate our long-lived assets for impairment. We have not identiﬁed any impairment to our assets at December 31, 2015. We have agreements with our primary tractor suppliers for residual or trade-in values for certain new equipment. We have utilized these trade-in values, as well as other operational information such as anticipated annual miles, in accounting for depreciation expense. If our suppliers were unable to perform under the terms of our agreements for trade-in values, it could have a material adverse effect on our ﬁnancial results. Revenue Recognition We recognize revenue based on the relative transit time of the freight transported and as other services are provided. Accordingly, a portion of the total revenue that will be billed to the customer once a load is delivered is recognized in each reporting period based on the percentage of the freight pickup and delivery service that has been completed at the end of the reporting period. We record revenues on the gross basis at amounts charged to our customers because we are the primary obligor, we are a principal in the transaction, we invoice our customers and retain all credit risks, and we maintain discretion over pricing. Additionally, we are responsible for the selection of third-party transportation providers. Our trade accounts receivable includes amounts due from customers that have been reduced by an allowance for uncollectible accounts and revenue adjustments. The allowance for uncollectible accounts and revenue adjustments is based on historical experience, as well as any known trends or uncertainties related to customer billing and account collectability. The adequacy of our allowance is reviewed quarterly. t r o p e R l a u n n A 5 1 0 2 54 Income Taxes We account for income taxes under the liability method. Our deferred tax assets and liabilities represent items that will result in a tax deduction or taxable income in future years for which we have already recorded the related tax expense or beneﬁt in our statement of earnings. Deferred tax accounts arise as a result of timing differences between when items are recognized in our Consolidated Financial Statements and when they are recognized in our tax returns. We assess the likelihood that deferred tax assets will be recovered from future taxable income or the reversal of temporary timing differences. To the extent we believe recovery does not meet the more-likely-than-not threshold, a valuation allowance is established. To the extent we establish a valuation allowance, we include an expense as part of our income tax provision. Signiﬁcant judgment is required in determining and assessing the impact of complex tax laws and certain tax-related contingencies on our provision for income taxes. As part of our calculation of the provision for income taxes, we assess whether the beneﬁts of our tax positions are at least more likely than not of being sustained upon audit based on the technical merits of the tax position. For tax positions that are not more likely than not of being sustained upon audit, we accrue the largest amount of the beneﬁt that is not more likely than not of being sustained in our Consolidated Financial Statements. Such accruals require us to make estimates and judgments, whereby actual results could vary materially from these estimates. Further, a number of years may elapse before a particular matter for which we have established an accrual is audited and resolved. See Note 7, Income Taxes, in our Consolidated Financial Statements for a discussion of our current tax contingencies. RESULTS OF OPERATIONS The following table sets forth items in our Consolidated Statements of Earnings as a percentage of operating revenues and the percentage increase or decrease of those items compared with the prior year. Operating revenues Operating expenses: Rents and purchased transportation Salaries, wages and employee beneﬁts Fuel and fuel taxes Depreciation and amortization Operating supplies and expenses Insurance and claims General and administrative expenses, net of asset dispositions Operating taxes and licenses Communication and utilities Total operating expenses Operating income Net interest expense Earnings before income taxes Income taxes Net earnings 2015 COMPARED WITH 2014 Consolidated Operating Revenues Percentage of Operating Revenues 2014 100.0% 2015 100.0% 2013 100.0% Percentage Change Between years 2015 vs. 2014 0.4% 2014 vs. 2013 10.4% 48.4 22.5 5.1 5.5 3.6 1.2 1.1 0.7 0.3 88.4 11.6 0.4 11.2 4.3 6.9% 50.0 20.9 7.4 4.8 3.5 1.3 0.8 0.7 0.4 89.8 10.2 0.4 9.8 3.7 6.1% 50.2 20.4 8.2 4.5 3.6 1.0 0.8 0.7 0.3 89.7 10.3 0.4 9.9 3.8 6.1% (2.9) 8.1 (31.0) 15.3 0.9 (9.1) 43.3 11.1 (1.1) (1.1) 13.3 (5.4) 14.2 14.4 14.0% 10.0 13.4 (0.4) 16.2 7.8 47.0 11.3 20.1 8.7 10.5 9.5 16.4 9.2 8.8 9.5% 2 0 1 5 A n n u a l R e p o r t Our total consolidated operating revenues were $6.19 billion in 2015, remaining relatively ﬂat when compared to $6.17 billion in 2014. Overall customer rate increases and load growth, and increased ﬂeet counts in our JBI, DCS, and JBT segments, were offset by a 38.0% decrease in fuel surcharge revenue to $671 million in 2015 when compared to $1.08 billion in 2014, due to decreases in the price of fuel during the year. If fuel surcharge revenues were excluded from both years, our 2015 revenue increased 8.5% over 2014. Consolidated Operating Expenses Our 2015 consolidated operating expenses decreased 1.1% from 2014, while year-over-year revenue remained ﬂat, resulting in a 2015 operating ratio of 88.4% compared to 89.8% in 2014. Rents and purchased transportation costs decreased 2.9% in 2015, primarily the result of the lower fuel component in the cost of services provided by third-party rail and truck carriers within JBI, DCS, and ICS segments. Salaries, wages and employee beneﬁt costs increased 8.1% in 2015 from 2014. This increase was primarily related to increases in driver pay and ofﬁce personnel compensation due to an increase in the number of employees and a tighter supply of qualiﬁed drivers. Fuel and fuel taxes expense decreased 31.0% in 2015 compared with 2014, due to decreases in the price of fuel during 2015, partially offset by increased road miles. We have fuel surcharge programs in place with the majority of our customers. These programs typically involve a speciﬁed computation based on the change in national, regional or local fuel prices. While these programs may address fuel cost changes as frequently as weekly, 55 most also reﬂect a speciﬁed miles-per-gallon factor and require a certain minimum change in fuel costs to trigger a change in fuel surcharge revenue. As a result, some of these programs have a time lag between when fuel costs change and when this change is reﬂected in revenues. Due to these programs, this lag negatively impacts operating income in times of rapidly increasing fuel costs and positively impacts operating income when fuel costs decrease rapidly. It is not meaningful to compare the amount of fuel surcharge revenue or the change in fuel surcharge revenue between reporting periods to fuel and fuel taxes expense, or the change of fuel expense between periods, as a signiﬁcant portion of fuel cost is included in our payments to railroads, dray carriers and other third parties. These payments are classiﬁed as purchased transportation expense. Depreciation and amortization expense increased 15.3% in 2015, primarily due to additions to our JBI segment tractor, container and chassis ﬂeets to support additional business demand, equipment purchased related to new DCS long-term customer contracts, and new replacement equipment in JBT. Operating supplies and expenses increased 0.9%, driven primarily by increased toll rates and activity, partially offset by decreased general equipment maintenance and repair costs. Insurance and claims expense decreased 9.1% in 2015, primarily due to decreased accident severity and fewer incidents. General and administrative expenses increased 43.3% from 2014, due primarily to costs related to corporate-wide streamlining and technology redevelopment efforts. Net gains from sale or disposal of assets were $1 million in 2015, compared with $6 million in 2014. Net interest expense for 2015 decreased by 5.4% compared with 2014, primarily due to lower effective interest rates. Our effective income tax rate was 38.10% in 2015 and 38.01% in 2014. The increase in 2015 was primarily related to an increase in state income tax expense. We expect our effective income tax rate to be in the range of 38.00% to 38.10% for calendar year 2016. Segments We operated four business segments during calendar year 2015. The operation of each of these businesses is described in our Notes to Consolidated Financial Statements. The following tables summarize ﬁnancial and operating data by segment: Operating Revenue by Segment JBI DCS ICS JBT Total segment revenues Intersegment eliminations Total JBI DCS ICS JBT Total t r o p e R l a u n n A 5 1 0 2 Operating Income by Segment Years Ended December 31, (in millions) 2015 $ 3,665 1,451 699 386 6,201 (13) $ 6,188 2014 $ 3,687 1,394 718 386 6,185 (20) $ 6,165 2013 $ 3,456 1,231 537 391 5,615 (30) $ 5,585 Years Ended December 31, (in millions) 2015 $ 477 163 36 40 $ 716 2014 $ 461 117 30 24 $ 632 2013 $ 447 110 16 4 $ 577 56 Operating Data by Segment JBI Loads Average length of haul (miles) Revenue per load Average tractors during the period(1) Tractors (end of period) Company-owned Independent contractor Total tractors Trailing equipment (end of period) Average effective trailing equipment usage DCS Loads Average length of haul (miles) Revenue per truck per week(2) Average trucks during the period(3) Trucks (end of period) Company-owned Independent contractor Customer-owned (Dedicated-operated) Total trucks Trailing equipment (end of period) Average effective trailing equipment usage ICS Loads Revenue per load Gross proﬁt margin Employee count (end of period) Approximate number of third-party carriers (end of period) JBT Loads Average length of haul (miles) Loaded miles (000) Total miles (000) Average nonpaid empty miles per load Revenue per tractor per week(2) Average tractors during the period(1) Tractors (end of period) Company-owned Independent contractor Total tractors Trailing equipment (end of period) Average effective trailing equipment usage (1) Includes company-owned and independent contractor tractors (2) Using weighted workdays (3) Includes company-owned, independent contractor, and customer-owned trucks Years Ended December 31, 2015 2014 2013 1,772,808 1,652 $ 2,067 4,949 1,700,374 1,656 $ 2,169 4,502 1,593,511 1,694 $ 2,169 3,916 4,276 805 5,081 78,957 72,622 3,916 761 4,677 73,298 68,683 3,448 646 4,094 65,979 60,612 2,250,099 175 $ 4,028 7,012 2,101,707 177 $ 4,098 6,641 1,835,872 190 $ 4,109 5,865 6,762 10 436 7,208 21,672 22,391 6,425 7 448 6,880 20,516 20,927 5,805 10 592 6,407 19,062 19,229 542,947 $ 1,288 453,410 $ 1,584 388,987 $ 1,380 15.3% 670 45,700 13.0% 582 39,100 11.8% 503 34,600 366,297 448 163,115 193,856 78.9 $ 3,698 2,051 370,555 411 151,725 179,036 71.8 $ 4,068 1,868 386,875 431 165,543 194,046 73.3 $ 3,828 2,007 1,462 687 2,149 7,604 6,460 1,296 590 1,886 7,215 5,891 1,200 657 1,857 6,828 6,877 2 0 1 5 A n n u a l R e p o r t 57 JBI Segment JBI segment revenue decreased 0.6% to $3.66 billion in 2015, from $3.69 billion in 2014, resulting from a decrease in revenue per load, which is attributable to customer rate increases offset by lower fuel surcharges and freight mix. This decrease was partially offset by increases in load volume in both our eastern and transcontinental networks. Excluding fuel surcharge, revenues increased 8.7% and revenue per load increased 4.4% in 2015 over the prior year. Average length of haul remained relatively ﬂat in 2015 when compared to 2014. Operating income in our JBI segment increased to $477 million in 2015, from $461 million in 2014. This increase was primarily due to customer rate increases, increased load volume, reduced reliance on outsourced dray carriers, lower insurance and cargo claim costs, and lower maintenance costs, partially offset by increases in rail purchased transportation rates, higher equipment depreciation expense, higher driver procurement and retention expenses, and $6.4 million in corporate-wide streamlining and technology redevelopment costs. DCS Segment DCS segment revenue increased 4.1% to $1.45 billion in 2015, from $1.39 billion in 2014. Productivity, deﬁned as revenue per truck per week, decreased 1.7% when compared to 2014, primarily from lower fuel surcharge revenue. Revenue, excluding fuel surcharges, increased 10.0% in 2015 compared to 2014, and productivity excluding fuel surcharge revenue increased 3.9% from 2014, primarily from customer rate increases and additional activity at customer accounts. DCS ended 2015 with a net additional 328 revenue-producing trucks when compared to 2014. Operating income increased to $163 million in 2015, compared with $117 million in 2014. The increase in operating income was primarily due to increased revenue, improved asset utilization, less reliance on third-party carriers and lower maintenance costs, partially offset by increased equipment depreciation expense, higher driver wage and recruiting costs, and $2.6 million in corporate-wide streamlining and technology redevelopment costs. ICS Segment ICS segment revenue decreased 2.6% to $699 million in 2015, from $718 million in 2014. This decrease in revenue was primarily due to decreased revenue per load resulting from lower fuel prices, changes in freight mix, and less transactional customer demand, partially offset by an increase in overall load volume. Contractual business was approximately 71% of the total load volume and 63% of the total revenue in the 2015, compared to 63% of the total load volume and 55% of the total revenue in 2014. Operating income increased to $36 million in 2015, compared to $30 million in 2014, primarily due to improved gross proﬁt margin. ICS gross proﬁt margin increased to 15.3% for 2015 from 13.0% for 2014. Improvements in gross proﬁt margin were offset by approximately $4.4 million in corporate-wide streamlining and technology redevelopment costs and higher personnel costs as the total branch count increased to 34 from 29 at the end of 2014. ICS’s carrier base increased 17%, and the employee count increased 15% when compared to 2014. JBT Segment JBT segment revenue remained ﬂat at $386 million in 2015 when compared to 2014. Excluding fuel surcharges, revenue for 2015 increased 7.5% compared to 2014, primarily due to increased truck count and core rate increases. JBT segment had operating income of $40 million in 2015 compared with $24 million in 2014. Beneﬁts from an increased truck count, core rate increases, and improvements in equipment maintenance costs, insurance and claims costs, and fuel economy were partially offset by lower asset utilization, higher driver wage and hiring costs, lower gains on equipment sales, increased equipment depreciation expense, increased driver and independent contractor costs per mile, and corporate-wide streamlining and technology redevelopment costs. 2014 COMPARED WITH 2013 Consolidated Operating Revenues Our total consolidated operating revenues were $6.2 billion in 2014, a 10.4% increase over 2013, primarily due to increased load volume and rate increases. Fuel surcharge revenues remained ﬂat at $1.1 billion in 2014 when compared to 2013, due to decreases in the price of fuel during the second half of 2014. If fuel surcharge revenues were excluded from both years, our 2014 revenue increased 12.3% over 2013. Consolidated Operating Expenses Our 2014 consolidated operating expenses increased 10.5% from 2013, compared to the 10.4% increase in revenue year over year, resulting in a 2014 operating ratio of 89.8% compared to 89.7% in 2013. Rents and purchased transportation costs increased 10.0% in 2014, primarily due to the increase in load volume that increased services from third-party rail and truck carriers within our JBI, DCS, and ICS segments. Salaries, wages and employee beneﬁt costs increased 13.4% in 2014 from 2013. This increase was primarily related to increases in driver pay and ofﬁce personnel compensation due to an increase in the number of employees and a tighter supply of qualiﬁed drivers. In addition, workers’ compensation claims expense increased due to increases in both incident volume and severity, as well as increased insurance premium costs. Fuel and fuel taxes expense decreased 0.4% in 2014 compared with 2013, due to decreases in the price of fuel and improved fuel efﬁciency during 2014, partially offset by increased road miles. We have fuel surcharge programs in place with the majority of our customers. These programs typically involve a speciﬁed computation based on the change in national, regional or local fuel prices. While these programs may address fuel cost changes as frequently as weekly, most also reﬂect a speciﬁed miles-per-gallon factor and require a certain minimum change in fuel costs to trigger a change in fuel surcharge revenue. As a result, some of these programs have a time lag between when fuel costs change and when this change is reﬂected 58 t r o p e R l a u n n A 5 1 0 2 in revenues. Due to these programs, this lag negatively impacts operating income in times of rapidly increasing fuel costs and positively impacts operating income when fuel costs decrease rapidly. It is not meaningful to compare the amount of fuel surcharge revenue or the change in fuel surcharge revenue between reporting periods to fuel and fuel taxes expense, or the change of fuel expense between periods, as a signiﬁcant portion of fuel cost is included in our payments to railroads, dray carriers and other third parties. These payments are classiﬁed as purchased transportation expense. Depreciation and amortization expense increased 16.2% in 2014, primarily due to additions to our JBI segment tractor, container and chassis ﬂeets to support additional business demand, equipment purchased related to new DCS long-term customer contracts, and new replacement tractors and trailers in JBT. Operating supplies and expenses increased 7.8%, driven primarily by increased general maintenance costs resulting from growth in equipment ﬂeets and increased toll activity. Insurance and claims expense increased 47.0% for 2014, primarily due to higher incidents and increased accident severity. General and administrative expenses increased 11.3%, due primarily to an increase in driver advertising, higher building and facility rental expenses, and increased professional fees, partially offset by an increase in net gains from asset sales and disposals. Net gains from the disposal of assets were $6 million in 2014, compared with $5 million in 2013. Net interest expense for 2014 increased by 16.4% compared with 2013, primarily due to increased average debt levels. Our effective income tax rate was 38.01% in 2014 and 38.15% in 2013. The decrease in 2014 was primarily related to a decrease in the provision for uncertain tax positions taken in prior years. JBI Segment JBI segment experienced an environment of challenging rail service and limited dray ﬂeet capacity throughout 2014. JBI segment revenue increased 6.7% to $3.69 billion in 2014, from $3.46 billion in 2013, primarily due to a 6.7% increase in overall load volume, with both our eastern and transcontinental networks reporting increased volumes. Excluding fuel surcharge, revenues increased 8.0% in 2014 over the prior year. The combination of trafﬁc mix, customer rate increases, and fuel surcharge revenue resulted in revenue per load remaining unchanged compared to a year ago. Average length of haul decreased 2.3% in 2014 when compared to 2013. Operating income in our JBI segment increased to $461 million in 2014, from $447 million in 2013. This increase was primarily due to increased revenue, partially offset by slow train speeds and reductions in dray ﬂeet capacity throughout 2014, which negatively impacted the network ﬂuidity, resulting in a reduction in box turns and dray power utilization. In addition, JBI experienced higher driver procurement and retention expenses, increased rail and dray purchased transportation costs, higher insurance and claims costs, and increased equipment costs during 2014 when compared to 2013. DCS Segment DCS segment revenue increased 13.2% to $1.39 billion in 2014, from $1.23 billion in 2013. Revenue, excluding fuel surcharges, increased 14.1% in 2014 compared to 2013, primarily attributable to large existing accounts becoming fully implemented in the current year, new customer contracts, and rate increases established in the latter half of 2014. DCS ended 2014 with a net additional 473 revenue-producing trucks when compared to 2013. Productivity for 2014, deﬁned as revenue per truck per week, was virtually ﬂat when compared to 2013, due to the large number of customer accounts affected by severe winter weather conditions during the ﬁrst quarter of 2014 and continued driver shortages throughout the current year. Operating income increased to $117 million in 2014, compared with $110 million in 2013. The increase in operating income was primarily due to increased revenue, partially offset by higher driver recruiting and retention costs, increased insurance and workers’ compensation costs, higher purchased transportation costs, increased equipment and maintenance expenses, and fewer gains on the sale of equipment compared to 2013. ICS Segment ICS segment revenue grew 33.8% to $718 million in 2014, from $537 million in 2013. This increase in revenue was primarily due to a 16.6% increase in load volume and a 14.8% increase in revenue per load in 2014 when compared to 2013. Both transactional and contractual business experienced increased load volumes. Contractual business was approximately 63% of the total load volume but only 55% of the total revenue in the 2014, compared to 64% of the total load volume and 61% of the total revenue in 2013. Operating income increased to $30 million in 2014, compared to $16 million in 2013. ICS gross proﬁt margin increased to 13.0% for 2014 from 11.8% for 2013, primarily due to customer rate increases in contractual business and maintaining margin discipline in transactional business. ICS incurred increased personnel and branch network expansion costs during 2014 resulting from the continued expansion of the segment’s branch location network. 2 0 1 5 A n n u a l R e p o r t 59 JBT Segment JBT segment revenue decreased 1.4% to $386 million in 2014, from $391 million in 2013, primarily due to operating a reduced ﬂeet size for the majority of 2014, partially offset by increased pricing. Excluding fuel surcharges, revenue for 2014 increased 0.9% compared to 2013. JBT segment had operating income of $24 million in 2014 compared with $4 million in 2013. This increase in operating income was primarily due to increased rate per loaded mile, lower personnel costs, a smaller trailer ﬂeet and gains on equipment sales, offset by increased driver hiring costs, increases in driver and independent contractor costs per mile, higher maintenance and equipment costs per unit, and increased insurance and safety costs. LIQUIDITY AND CAPITAL RESOURCES Net cash provided by operating activities was $873 million in 2015 and $647 million in 2014. This increase in 2015 was primarily due to increased earnings and the collection of trade and income taxes receivable, partially offset by the timing of the payments of trade payables and accrued expenses. Net cash used in investing activities totaled $577 million in 2015, compared with $660 million in 2014. The decrease resulted primarily from a reduction in equipment purchases, combined with an increase in proceeds from the sale of equipment in 2015, compared to 2014. Net cash used in ﬁnancing activities was $297 million in 2015, compared to net cash provided by ﬁnancing activities of $13 million in 2014. This change resulted primarily from an increase in treasury stock purchases and lower long-term debt issuances, net of long-term debt repayments, in 2015. Our dividend policy is subject to review and revision by the Board of Directors, and payments are dependent upon our ﬁnancial condition, liquidity, earnings, capital requirements, and other factors the Board of Directors may deem relevant. We paid a $0.15 per share quarterly dividend in 2013, with the ﬁrst quarter dividend being pulled forward and paid in fourth quarter 2012, a $0.20 per share quarterly dividend in 2014, and a $0.21 per share quarterly dividend in 2015. On January 28, 2016, we announced an increase in our quarterly cash dividend from $0.21 to $0.22 per share, which will be paid February 26, 2016, to stockholders of record on February 12, 2016. We currently intend to continue paying cash dividends on a quarterly basis. However, no assurance can be given that future dividends will be paid. Liquidity Our need for capital has typically resulted from the acquisition of containers, chassis, trucks, tractors, and trailers required to support our growth and the replacement of older equipment. We are frequently able to accelerate or postpone a portion of equipment replacements depending on market conditions. We obtain capital through cash generated from operations, revolving lines of credit, and long-term debt issuances. We have also periodically utilized capital and operating leases for revenue equipment. t r o p e R l a u n n A 5 1 0 2 At December 31, 2015, 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 the Prime Rate, the Federal Funds Rate, or LIBOR, depending upon the speciﬁc type of borrowing, plus an applicable margin based on our credit rating and other fees. At December 31, 2015, we had $150 million outstanding at an average interest rate of 1.39% under this agreement. Our senior notes consist of three separate issuances. The ﬁrst and second issuances are $250 million of 2.40% senior notes due March 2019 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. The third issuance 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. We may redeem for cash some or all of these notes based on a redemption price set forth in the note indenture. We currently have interest rate swap agreements which effectively convert our $250 million of 2.40% ﬁxed-rate senior notes due March 2019 and our $350 million of 3.30% ﬁxed-rate senior notes due August 2022 to variable rates, resulting in interest rates of 1.36% and 1.72%, respectively, at December 31, 2015. The applicable interest rates under these swap agreements are based on LIBOR plus an established margin. Our ﬁnancing arrangements require us to maintain certain covenants and ﬁnancial ratios. We were in compliance with all covenants and ﬁnancial ratios at December 31, 2015. We believe our liquid assets, cash generated from operations, and various ﬁnancing arrangements will provide sufﬁcient funds for our operating and capital requirements for the foreseeable future. We are currently committed to spend approximately $463 million, net of proceeds from sales or trade-ins, during 2016 and 2017, which is primarily related to the acquisition of containers, chassis, and tractors. Off-Balance Sheet Arrangements Our only off-balance sheet arrangements are related to operating leases. As of December 31, 2015, we had approximately $28.1 million of obligations, primarily related to facility leases. 60 Contractual Obligations and Commitments The following table summarizes our expected obligations and commitments (in millions) as of December 31, 2015: Operating leases Long-term debt obligations Interest payments on debt (1) Commitments to acquire revenue equipment and facilities Total Total $ 28.1 1,000.0 141.2 463.3 $ 1,632.6 2016 $ 13.5 – 21.1 455.4 $ 490.0 2017-2018 $ 12.6 – 42.3 7.9 $ 62.8 2019-2020 $ 1.8 400.0 36.0 – $ 437.8 2021 and thereafter $ 0.2 600.0 41.8 – $ 642.0 (1) Interest payments on debt are based on the debt balance and applicable rate at December 31, 2015. We had standby letters of credit outstanding of approximately $4.4 million at December 31, 2015, that expire at various dates in 2016, which are related to certain operating agreements and our self-insured retention levels for casualty and workers’ compensation claims. We plan to renew these letters of credit in accordance with our third-party agreements. The table above excludes $36.0 million of liabilities related to uncertain tax positions, including interest and penalties, as we are unable to reasonably estimate the ultimate timing of settlement. See Note 7, Income Taxes, in the Notes to Consolidated Financial Statements for further discussion. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Interest rate risk can be quantiﬁed by measuring the ﬁnancial impact of a near-term adverse increase in short-term interest rates on variable-rate debt outstanding. Our total long-term debt consists of both ﬁxed and variable interest rate facilities. Our senior notes have ﬁxed interest rates ranging from 2.40% to 3.85%. These ﬁxed-rate facilities reduce the impact of changes to market interest rates on future interest expense. Our senior revolving line of credit has variable interest rates, which are based on the Prime Rate, the Federal Funds Rate, or LIBOR, depending upon the speciﬁc type of borrowing, plus any applicable margins. We currently have interest rate swap agreements which effectively convert our $250 million of 2.40% ﬁxed-rate senior notes due March 2019 and our $350 million of 3.30% ﬁxed-rate senior notes due August 2022 to variable rates. The applicable interest rates under these swap agreements are based on LIBOR plus an established margin. Our earnings would be affected by changes in these short-term variable interest rates. At our current level of borrowing, a one-percentage-point increase in our applicable rate would reduce annual pretax earnings by $7.5 million. Although we conduct business in foreign countries, international operations are not material to our consolidated ﬁnancial position, results of operations, or cash ﬂows. Additionally, foreign currency transaction gains and losses were not material to our results of operations for the year ended December 31, 2015. Accordingly, we are not currently subject to material foreign currency exchange rate risks from the effects that exchange rate movements of foreign currencies would have on our future costs or on future cash ﬂows we would receive from our foreign investment. To date, we have not entered into any foreign currency forward exchange contracts or other derivative ﬁnancial instruments to hedge the effects of adverse ﬂuctuations in foreign currency exchange rates. The price and availability of diesel fuel are subject to ﬂuctuations due to changes in the level of global oil production, seasonality, weather, and other market factors. Historically, we have been able to recover a majority of fuel-price increases from our customers in the form of fuel surcharges. We cannot predict the extent to which volatile ﬂuctuations in fuel prices will continue in the future or the extent to which fuel surcharges could be collected to offset fuel-price increases. As of December 31, 2015, we had no derivative ﬁnancial instruments to reduce our exposure to fuel-price ﬂuctuations. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Our Consolidated Financial Statements, Notes to Consolidated Financial Statements, and reports thereon of our independent registered public accounting ﬁrm as speciﬁed by this Item are presented following Item 15 of this report and include: 2 0 1 5 A n n u a l R e p o r t Reports of Independent Registered Public Accounting Firm Consolidated Balance Sheets as of December 31, 2015 and 2014 Consolidated Statements of Earnings for years ended December 31, 2015, 2014, and 2013 Consolidated Statements of Stockholders’ Equity for years ended December 31, 2015, 2014, and 2013 Consolidated Statements of Cash Flows for years ended December 31, 2015, 2014, and 2013 Notes to Consolidated Financial Statements 61 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. ITEM 9A. CONTROLS AND PROCEDURES Disclosure Controls and Procedures We maintain controls and procedures designed to ensure that we are able to collect the information we are required to disclose in the reports we ﬁle with the SEC, and to process, summarize, and disclose this information within the time periods speciﬁed in the SEC rules. Based on an evaluation of our disclosure controls and procedures as of the end of the period covered by this report, conducted by our management and with the participation of our Chief Executive Ofﬁcer and Chief Financial Ofﬁcer, the Chief Executive Ofﬁcer and Chief Financial Ofﬁcer believe these controls and procedures are effective to ensure that we are able to collect, process, and disclose the information we are required to disclose in our reports ﬁled with the SEC within the required time periods. The certiﬁcations of our Chief Executive Ofﬁcer and Chief Financial Ofﬁcer required under Section 302 of the Sarbanes-Oxley Act have been ﬁled as Exhibits 31.1 and 31.2 to this report. Management’s Report on Internal Control Over Financial Reporting Our management is responsible for establishing and maintaining effective internal control over ﬁnancial reporting as deﬁned in Rules 13a-15(f) under the Securities Exchange Act of 1934. Our internal control over ﬁnancial reporting is designed to provide reasonable assurance to our management and Board of Directors regarding the preparation and fair presentation of published ﬁnancial statements. Because of its inherent limitation, internal control over ﬁnancial reporting may not prevent or detect misstatements. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to ﬁnancial statement preparation and presentation. Management assessed the effectiveness of our internal control over ﬁnancial reporting as of December 31, 2015. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control – Integrated Framework (2013 Framework). Based on our assessment, we believe that as of December 31, 2015, our internal control over ﬁnancial reporting is effective based on those criteria. The effectiveness of internal control over ﬁnancial reporting as of December 31, 2015, has been audited by Ernst & Young LLP, an independent registered public accounting ﬁrm that also audited our Consolidated Financial Statements. Ernst & Young LLP’s report on internal control over ﬁnancial reporting is included herein. Changes in Internal Control Over Financial Reporting There has been no change in our internal control over ﬁnancial reporting during the fourth quarter ended December 31, 2015, that has materially affected, or is reasonably likely to materially affect, our internal control over ﬁnancial reporting. ITEM 9B. OTHER INFORMATION None. PART III ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE Directors The schedule of directors is hereby incorporated by reference from the Notice and Proxy Statement for Annual Meeting of Stockholders to be held April 21, 2016. Executive Ofﬁcers The schedule of executive ofﬁcers is hereby incorporated by reference from the Notice and Proxy Statement for Annual Meeting of Stockholders to be held April 21, 2016. Code of Ethics We have adopted a code of ethics that applies to our principal executive ofﬁcer, principal ﬁnancial and accounting ofﬁcer, and all other ofﬁcers, employees, and directors. Our code of ethics is available on our Internet website at www.jbhunt.com. If we make substantive amendments to this code of ethics or grant any waiver, including any implicit waiver, we will disclose the nature of such amendment or waiver on our website or in a report on Form 8-K within four days of such amendment or waiver. t r o p e R l a u n n A 5 1 0 2 62 Corporate Governance In complying with the rules and regulations required by the Sarbanes-Oxley Act of 2002, NASDAQ, Public Company Accounting Oversight Board (PCAOB), and others, we have attempted to do so in a manner that clearly meets legal requirements but does not create a bureaucracy of forms, checklists, and other inefﬁcient or expensive procedures. We have adopted a code of conduct, code of ethics, whistleblower policy, and charters for all of our Board of Director Committees and other formal policies and procedures. Most of these items are available on our website, www.jbhunt.com. If we make signiﬁcant amendments to our code of ethics or whistleblower policy, or grant any waivers to these items, we will disclose such amendments or waivers on our website or in a report on Form 8-K within four days of such action. Audit Committee The information required by Regulation S-K, Item 407(d) is hereby incorporated by reference from the Notice and Proxy Statement for Annual Meeting of Stockholders to be held April 21, 2016. ITEM 11. EXECUTIVE COMPENSATION The information required for Item 11 is hereby incorporated by reference from the Notice and Proxy Statement for Annual Meeting of Stockholders to be held April 21, 2016. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS The information required for Item 12 is hereby incorporated by reference from the Notice and Proxy Statement for Annual Meeting of Stockholders to be held April 21, 2016. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE The information required for Item 13 is hereby incorporated by reference from the Notice and Proxy Statement for Annual Meeting of Stockholders to be held April 21, 2016. ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES The information required for Item 14 is hereby incorporated by reference from the Notice and Proxy Statement for Annual Meeting of Stockholders to be held April 21, 2016. PART IV ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES (A) Financial Statements, Financial Statement Schedules and Exhibits: (1) Financial Statements The ﬁnancial statements included in Item 8 above are ﬁled as part of this annual report. (2) Financial Statement Schedules Schedule II – Valuation and Qualifying Accounts (in millions) Allowance for Doubtful Accounts and Revenue Adjustments for the years Ended: December 31, 2013 December 31, 2014 December 31, 2015 Balance at Beginning of Year $ 6.6 8.1 9.5 Charged to Expense / Against Revenue $ 14.0 19.0 9.5 Write-Offs, Net of Recoveries $ (12.5) (17.6) (9.1) Balance at End of Year $ 8.1 9.5 9.9 All other schedules have been omitted either because they are not applicable or because the required information is included in our Consolidated Financial Statements or the notes thereto. (3) Exhibits The response to this portion of Item 15 is submitted as a separate section of this report on Form 10-K (“Exhibit Index”). 2 0 1 5 A n n u a l R e p o r t 63 SIGNATURES Pursuant to the requirements of Sections 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized, in the City of Lowell, Arkansas, on the 23rd day of February, 2016. J.B. Hunt TRANSPORT SERVICES, INC. (Registrant) By: /s/ John N. Roberts, III John N. Roberts, III President and Chief Executive Ofﬁcer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on the 23rd day of February, 2016, on behalf of the registrant and in the capacities indicated. t r o p e R l a u n n A 5 1 0 2 President and Chief Executive Ofﬁcer, Member of the Board of Directors (Principal Executive Ofﬁcer) Executive Vice President, Finance and Administration, Chief Financial Ofﬁcer and Corporate Secretary (Principal Financial Ofﬁcer) Senior Vice President Finance, Controller, Chief Accounting Ofﬁcer Chairman of the Board of Directors Member of the Board of Directors (Lead Director) Member of the Board of Directors Member of the Board of Directors Member of the Board of Directors Member of the Board of Directors Member of the Board of Directors Member of the Board of Directors Member of the Board of Directors Member of the Board of Directors /s/ John N. Roberts, III John N. Roberts, III /s/ David G. Mee David G. Mee /s/ John Kuhlow John Kuhlow /s/ Kirk Thompson Kirk Thompson /s/ James L. Robo James L. Robo /s/ Douglas G. Duncan Douglas G. Duncan /s/ Francesca M. Edwardson Francesca M. Edwardson /s/ Wayne Garrison Wayne Garrison /s/ Sharilyn S. Gasaway Sharilyn S. Gasaway /s/ Gary C. George Gary C. George /s/ J. Bryan Hunt, Jr. J. Bryan Hunt, Jr. /s/ Coleman H. Peterson Coleman H. Peterson /s/ John A. White John A. White 64 EXHIBIT INDEX Exhibit Number Description 3.1 Amended and Restated Articles of Incorporation of J.B. Hunt Transport Services, Inc. dated May 19, 1988 (incorporated by reference from Exhibit 3.1 of the Company’s quarterly report on Form 10-Q for the period ended March 31, 2005, ﬁled April 29, 2005) 3.2 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) 10.1 Amended and Restated Employee Retirement Plan (incorporated by reference from Exhibit 99 of the Company’s registration statement on Form S-8, ﬁled December 30, 1994) 10.2 Second Amended and Restated Management Incentive Plan (incorporated by reference from Exhibit 10.1 of the Company’s quarterly report on Form 10-Q for the period ended June 30, 2012, ﬁled July 31, 2012) 10.3 Summary of Compensation Arrangements with Named Executive Ofﬁcers 10.4 Indenture (incorporated by reference from Exhibit 4.1 of the Company’s registration statement on Form S-3ASR, ﬁled September 14, 2010) 10.5 Second Supplemental Indenture (incorporated by reference from Exhibit 4.2 of the Company’s current report on Form 8-K, ﬁled March 6, 2014) 10.6 Third Supplemental Indenture (incorporated by reference from Exhibit 4.4 of the Company’s current report on Form 8-K, ﬁled March 6, 2014) 10.7 Fourth Supplemental Indenture (incorporated by reference from Exhibit 4.3 of the Company’s current report on Form 8-K, ﬁled August 6, 2015) 10.8 Credit Agreement and related documents (incorporated by reference from Exhibit 10.1 of the Company’s current report on Form 8-K, ﬁled October 2, 2015) 21.1 Subsidiaries of J.B. Hunt Transport Services, Inc. 23.1 Consent of Ernst & Young LLP 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 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 65 2 0 1 5 A n n u a l R e p o r t INDEX TO CONSOLIDATED FINANCIAL INFORMATION Management’s Report on Internal Control Over Financial Reporting Report of Independent Registered Public Accounting Firm on Consolidated Financial Statements Report of Independent Registered Public Accounting Firm on Internal Control Over Financial Reporting Consolidated Balance Sheets as of December 31, 2015 and 2014 Consolidated Statements of Earnings for years ended December 31, 2015, 2014, and 2013 Consolidated Statements of Stockholders’ Equity for years ended December 31, 2015, 2014, and 2013 Consolidated Statements of Cash Flows for years ended December 31, 2015, 2014, and 2013 Notes to Consolidated Financial Statements PAGE 67 68 69 70 71 72 73 74 t r o p e R l a u n n A 5 1 0 2 66 MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING We are responsible for the preparation, integrity, and fair presentation of our Consolidated Financial Statements and related information appearing in this report. We take these responsibilities very seriously and are committed to maintaining controls and procedures that are designed to ensure that we collect the information we are required to disclose in our reports to the SEC and to process, summarize, and disclose this information within the time periods speciﬁed by the SEC. Based on an evaluation of our disclosure controls and procedures as of the end of the period covered by this report, conducted by our management and with the participation of our Chief Executive Ofﬁcer and Chief Financial Ofﬁcer, we believe our controls and procedures are effective to ensure that we are able to collect, process, and disclose the information we are required to disclose in our reports ﬁled with the SEC within the required time periods. We are responsible for establishing and maintaining effective internal control over ﬁnancial reporting as deﬁned in Rules 13a-15(f) under the Securities Exchange Act of 1934. Our internal control over ﬁnancial reporting is designed to provide reasonable assurance to our management and Board of Directors regarding the preparation and fair presentation of published ﬁnancial statements. Because of its inherent limitation, internal control over ﬁnancial reporting may not prevent or detect misstatements. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to ﬁnancial statement preparation and presentation. We assessed the effectiveness of our internal control over ﬁnancial reporting as of December 31, 2015. In making this assessment, we used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control – Integrated Framework (2013 Framework). Based on our assessment, we believe that as of December 31, 2015, our internal control over ﬁnancial reporting is effective based on those criteria. The effectiveness of internal control over ﬁnancial reporting as of December 31, 2015, has been audited by Ernst & Young LLP, an independent registered public accounting ﬁrm that also audited our Consolidated Financial Statements. Ernst & Young LLP’s report on internal control over ﬁnancial reporting is included herein. /s/ John N. Roberts, III John N. Roberts, III President and Chief Executive Ofﬁcer (Principal Executive Ofﬁcer) /s/ David G. Mee David G. Mee Executive Vice President, Finance and Administration, Chief Financial Ofﬁcer (Principal Financial Ofﬁcer) 2 0 1 5 A n n u a l R e p o r t 67 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM The Board of Directors and Stockholders of J.B. Hunt Transport Services, Inc. We have audited the accompanying consolidated balance sheets of J.B. Hunt Transport Services, Inc. and subsidiaries as of December 31, 2015 and 2014, and the related consolidated statements of earnings, stockholders’ equity, and cash ﬂows for each of the three years in the period ended December 31, 2015. Our audits also included the ﬁnancial statement schedule listed in the Index at Item 15(a). These ﬁnancial statements and schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on these ﬁnancial statements and schedule based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the ﬁnancial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the ﬁnancial statements. An audit also includes assessing the accounting principles used and signiﬁcant estimates made by management, as well as evaluating the overall ﬁnancial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the ﬁnancial statements referred to above present fairly, in all material respects, the consolidated ﬁnancial position of J.B. Hunt Transport Services, Inc. and subsidiaries at December 31, 2015 and 2014, and the consolidated results of their operations and their cash ﬂows for each of the three years in the period ended December 31, 2015, in conformity with U.S. generally accepted accounting principles. Also, in our opinion, the related ﬁnancial statement schedule, when considered in relation to the basic ﬁnancial statements taken as a whole, presents fairly in all material respects the information set forth therein. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), J.B. Hunt Transport Services, Inc. and subsidiaries’ internal control over ﬁnancial reporting as of December 31, 2015, based on criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), and our report dated February 23, 2016 expressed an unqualiﬁed opinion thereon. /s/ Ernst & Young LLP Rogers, Arkansas February 23, 2016 t r o p e R l a u n n A 5 1 0 2 68 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM The Board of Directors and Stockholders of J.B. Hunt Transport Services, Inc. We have audited J.B. Hunt Transport Services, Inc. and subsidiaries’ internal control over ﬁnancial reporting as of December 31, 2015, based on criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). J.B. Hunt Transport Services, Inc. and subsidiaries’ management is responsible for maintaining effective internal control over ﬁnancial reporting, and for its assessment of the effectiveness of internal control over ﬁnancial reporting included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the company’s internal control over ﬁnancial reporting based on our audit. We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over ﬁnancial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over ﬁnancial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. A company’s internal control over ﬁnancial reporting is a process designed to provide reasonable assurance regarding the reliability of ﬁnancial reporting and the preparation of ﬁnancial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over ﬁnancial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reﬂect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of ﬁnancial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the ﬁnancial statements. Because of its inherent limitations, internal control over ﬁnancial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. In our opinion, J.B. Hunt Transport Services, Inc. and subsidiaries maintained, in all material respects, effective internal control over ﬁnancial reporting as of December 31, 2015, based on the COSO criteria. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of J.B. Hunt Transport Services, Inc. and subsidiaries as of December 31, 2015 and 2014, and the related consolidated statements of earnings, stockholders’ equity, and cash ﬂows for each of the three years in the period ended December 31, 2015 of J.B. Hunt Transport Services, Inc. and subsidiaries, and our report dated February 23, 2016 expressed an unqualiﬁed opinion thereon. Rogers, Arkansas February 23, 2016 /s/ Ernst & Young LLP 2 0 1 5 A n n u a l R e p o r t 69 J.B. HUNT TRANSPORT SERVICES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS December 31, 2015 and 2014 (in thousands, except share data) Assets Current assets: Cash and cash equivalents Trade accounts receivable, net Inventories Prepaid licenses and permits Prepaid insurance Other current assets Total current assets Property and equipment, at cost: Revenue and service equipment Land Structures and improvements Furniture and office equipment Total property and equipment Less accumulated depreciation Net property and equipment Other assets Total assets t r o p e R l a u n n A 5 1 0 2 Liabilities and Stockholders’ Equity Current liabilities: Current portion of long-term debt Trade accounts payable Claims accruals Accrued payroll Other accrued expenses Total current liabilities Long-term debt Other long-term liabilities Deferred income taxes Total liabilities Commitments and contingencies (Note 10) Stockholders’ equity: Preferred stock, $100 par value. 10 million shares authorized; none outstanding Common stock, $.01 par value. 1 billion shares authorized; (167,099,432 shares issued at December 31, 2015 and 2014, of which 113,947,780 shares and 116,575,163 shares were outstanding at December 31, 2015 and 2014, respectively) Additional paid-in capital Retained earnings Treasury stock, at cost (53,151,652 shares at December 31, 2015, and 50,524,269 shares at December 31, 2014) Total stockholders’ equity 2015 2014 $ 5,566 654,542 23,191 25,057 60,599 90,412 859,367 3,636,767 39,026 154,142 189,516 4,019,451 1,318,122 2,701,329 75,871 $ 3,636,567 $ – 340,332 104,220 59,420 28,445 532,417 1,005,026 58,552 740,220 2,336,215 $ 5,961 653,795 27,740 22,886 55,660 95,457 861,499 3,336,529 38,978 153,704 190,546 3,719,757 1,237,225 2,482,532 34,455 $ 3,378,486 $ 250,000 325,838 96,719 80,547 17,966 771,070 683,539 59,561 659,793 2,173,963 – – 1,671 268,728 2,885,843 1,671 247,641 2,555,972 (1,855,890) 1,300,352 (1,600,761) 1,204,523 Total liabilities and stockholders’ equity $ 3,636,567 $ 3,378,486 See Notes to Consolidated Financial Statements. 70 J.B. HUNT TRANSPORT SERVICES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF EARNINGS Years Ended December 31, 2015, 2014 and 2013 (in thousands, except per share amounts) Operating revenues, excluding fuel surcharge revenues $ 5,516,282 $ 5,082,827 $ 4,527,238 2015 2014 2013 Fuel surcharge revenues Total operating revenues Operating expenses: Rents and purchased transportation Salaries, wages and employee beneﬁts Fuel and fuel taxes Depreciation and amortization Operating supplies and expenses Insurance and claims General and administrative expenses, net of asset dispositions Operating taxes and licenses Communication and utilities Total operating expenses Operating income Interest income Interest expense Earnings before income taxes Income taxes Net earnings Weighted average basic shares outstanding Basic earnings per share Weighted average diluted shares outstanding Diluted earnings per share Dividends declared per common share See Notes to Consolidated Financial Statements. 671,364 6,187,646 2,994,586 1,394,239 313,034 339,613 220,597 73,689 72,522 43,084 20,588 5,471,952 715,694 86 25,577 690,203 262,968 1,082,614 6,165,441 3,085,276 1,290,404 453,919 294,496 218,539 81,062 50,596 38,796 20,811 5,533,899 631,542 87 27,028 604,601 229,809 1,057,333 5,584,571 2,805,568 1,138,213 455,926 253,380 202,700 55,158 45,469 32,307 19,142 5,007,863 576,708 69 23,209 553,568 211,186 $ 427,235 $ 374,792 $ 342,382 115,677 117,000 117,449 $ 3.69 $ 3.20 $ 2.92 116,728 $ 3.66 $ 0.84 118,445 $ 3.16 $ 0.80 119,404 $ 2.87 $ 0.45 2 0 1 5 A n n u a l R e p o r t 71 J.B. HUNT TRANSPORT SERVICES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY Years Ended December 31, 2015, 2014 and 2013 (in thousands, except per share amounts) Balances at December 31, 2012 Comprehensive income: Net earnings Cash dividend declared and paid ($0.45 per share) Tax beneﬁt of stock options exercised Purchase of treasury shares Stock compensation Stock option exercises and restricted share issuances, net of stock repurchased for payroll taxes Balances at December 31, 2013 Comprehensive income: Net earnings Cash dividend declared and paid ($0.80 per share) Tax beneﬁt of stock options exercised Purchase of treasury shares Stock compensation Stock option exercises and restricted share issuances, net of stock repurchased for payroll taxes Balances at December 31, 2014 Comprehensive income: Net earnings Cash dividend declared and paid ($0.84 per share) Tax beneﬁt of stock options exercised Purchase of treasury shares Stock compensation Stock option exercises and restricted share issuances, net of stock repurchased for payroll taxes Common Stock $ 1,671 – – – – – – Additional Paid-in Capital $ 207,073 – – 21,950 – 32,354 Retained Earnings $ 1,985,213 Treasury Stock $ (1,402,097) Stockholders’ Equity $ 791,860 342,382 (52,811) – – – – – – (114,723) – 342,382 (52,811) 21,950 (114,723) 32,354 (34,782) – 26,222 (8,560) $ 1,671 $ 226,595 $ 2,274,784 $ (1,490,598) $ 1,012,452 – – – – – – – – 16,645 – 35,333 374,792 (93,604) – – – – – – (125,000) – 374,792 (93,604) 16,645 (125,000) 35,333 (30,932) – 14,837 (16,095) $ 1,671 $ 247,641 $ 2,555,972 $ (1,600,761) $ 1,204,523 – – – – – – – – 12,877 – 37,228 427,235 (97,364) – – – – – – (262,275) – 427,235 (97,364) 12,877 (262,275) 37,228 (29,018) – 7,146 (21,872) Balances at December 31, 2015 $ 1,671 $ 268,728 $ 2,885,843 $ (1,855,890) $ 1,300,352 See Notes to Consolidated Financial Statements. t r o p e R l a u n n A 5 1 0 2 72 J.B. HUNT TRANSPORT SERVICES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS Years Ended December 31, 2015, 2014 and 2013 (in thousands) Cash flows from operating activities: Net earnings Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation and amortization Share-based compensation Gain on sale of revenue equipment and other Provision for deferred income taxes Changes in operating assets and liabilities: Trade accounts receivable Income taxes receivable or payable Other current assets Trade accounts payable Claims accruals Accrued payroll and other accrued expenses Net cash provided by operating activities Cash flows from investing activities: Additions to property and equipment Proceeds from sale of equipment Change in other assets Net cash used in investing activities Cash flows from financing activities: Proceeds from issuances of long-term debt Payments on long-term debt Proceeds from revolving lines of credit and other Payments on revolving lines of credit and other Purchase of treasury stock Stock option exercises and other Stock repurchased for payroll taxes Tax benefit of stock options exercised Dividends paid Net cash provided by/(used in) financing activities Net increase/(decrease) in cash and cash equivalents Cash and cash equivalents at beginning of year Cash and cash equivalents at end of year Supplemental disclosure of cash flow information: Cash paid during the year for: Interest Income taxes See Notes to Consolidated Financial Statements. 2015 2014 2013 $ 427,235 $ 374,792 $ 342,382 339,613 37,228 (1,281) 80,427 (747) 3,055 (17,735) 8,600 7,502 (10,589) 873,308 (725,122) 168,686 (20,096) (576,532) 349,129 (250,000) 2,110,800 (2,138,466) (262,275) 2,978 (24,850) 12,877 (97,364) (297,171) (395) 5,961 $ 5,566 294,496 35,333 (6,342) 79,343 (85,276) (72,291) (29,793) 15,284 28,498 12,735 646,779 (808,569) 148,859 29 (659,681) 499,642 (250,000) 2,092,193 (2,110,749) (125,000) 7,324 (23,419) 16,645 (93,604) 13,032 130 5,831 $ 5,961 253,380 32,354 (5,334) 48,076 (102,508) (5,381) (23,254) 11,530 20,779 2,327 574,351 (493,431) 50,927 (37) (442,541) – (100,000) 1,933,753 (1,811,177) (114,723) 9,403 (17,963) 21,950 (52,811) (131,568) 242 5,589 $ 5,831 $ 27,245 $ 163,304 $ 26,685 $ 192,955 $ 24,722 $ 141,968 2 0 1 5 A n n u a l R e p o r t 73 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. Business J.B. Hunt Transport Services, Inc. is one of the largest surface transportation and delivery service companies in North America. We operate four distinct, but complementary, business segments and provide a wide range of general and speciﬁcally tailored freight and logistics services to our customers. We generate revenues from the actual movement of freight from shippers to consignees, customized labor and delivery services, and serving as a logistics provider by offering or arranging for others to provide the transportation service. Unless otherwise indicated by the context, “we,” “us,” “our” and “JBHT” refer to J.B. Hunt Transport Services, Inc. and its consolidated subsidiaries. 2. Summary of Signiﬁcant Accounting Policies Basis of Consolidation Our Consolidated Financial Statements include all of our wholly owned subsidiaries. Intercompany balances and transactions have been eliminated in consolidation. J.B. Hunt Transport Services, Inc. is a parent-level holding company with no signiﬁcant assets or operations. J.B. Hunt Transport, Inc. is a wholly owned subsidiary of J.B. Hunt Transport Services, Inc. and is the primary operating subsidiary. All other subsidiaries of J.B. Hunt Transport Services, Inc. are minor. Use of Estimates The Consolidated Financial Statements contained in this report have been prepared in conformity with accounting principles generally accepted in the United States of America. The preparation of these statements requires us to make estimates and assumptions that directly affect the amounts reported in such statements and accompanying notes. We evaluate these estimates on an ongoing basis utilizing historical experience, consulting with experts and using other methods we consider reasonable in the particular circumstances. Nevertheless, our actual results may differ signiﬁcantly from our estimates. We believe certain accounting policies and estimates are of more signiﬁcance in our ﬁnancial statement preparation process than others. We believe the most critical accounting policies and estimates include the economic useful lives and salvage values of our assets, provisions for uncollectible accounts receivable, estimates of exposures under our insurance and claims policies, and estimates for taxes. To the extent that actual, ﬁnal outcomes are different from our estimates, or that additional facts and circumstances cause us to revise our estimates, our earnings during that accounting period will be affected. Cash and Cash Equivalents Cash in excess of current operating requirements is invested in short-term, highly liquid investments. We consider all highly liquid investments purchased with original maturities of three months or less to be cash equivalents. Accounts Receivable and Allowance Our trade accounts receivable includes accounts receivable reduced by an allowance for uncollectible accounts and revenue adjustments. Receivables are recorded at amounts billed to customers when loads are delivered or services are performed. The allowance for uncollectible accounts and revenue adjustments is based on historical experience, as well as any known trends or uncertainties related to customer billing and account collectability. The adequacy of our allowance is reviewed quarterly. Balances are charged against the allowance when it is determined the receivable will not be recovered. The allowance for uncollectible accounts and revenue adjustments was $9.9 million and $9.5 million at December 31, 2015 and 2014, respectively. Inventory Our inventories consist primarily of revenue equipment parts, tires, supplies, and fuel and are valued using the lower of average cost or market. Investments in Marketable Equity Securities Our investments consist of marketable equity securities stated at fair value and are designated as either trading securities or available-for-sale securities at the time of purchase based upon the intended holding period. Changes in the fair value of our trading securities are recognized currently in “general and administrative expenses, net of asset dispositions” in our Consolidated Statements of Earnings. Changes in the fair value of our available-for-sale securities are recognized in “accumulated other comprehensive income” on our Consolidated Balance Sheets, unless we determine that an unrealized loss is other-than-temporary. If we determine that an unrealized loss is other-than-temporary, we recognize the loss in earnings. Cost basis is determined using average cost. At December 31, 2015 and 2014, we had no available-for-sale securities. See Note 8, Employee Beneﬁt Plans, for a discussion of our trading securities. Property and Equipment Depreciation of property and equipment is calculated on the straight-line method over the estimated useful lives of 4 to 10 years for tractors, 7 to 20 years for trailing equipment, 10 to 40 years for structures and improvements, and 3 to 10 years for furniture and ofﬁce equipment. Salvage values are typically 10% to 30% of original cost for tractors and trailing equipment and reﬂect any agreements with tractor suppliers for residual or trade-in 74 t r o p e R l a u n n A 5 1 0 2 values for certain new equipment. We capitalize tires placed in service on new revenue equipment as a part of the equipment cost. Replacement tires and costs for recapping tires are expensed at the time the tires are placed in service. Gains and losses on the sale or other disposition of equipment are recognized at the time of the disposition and are classiﬁed in general and administrative expenses, net of asset dispositions. Revenue Recognition We recognize revenue based on relative transit time in each reporting period and as other services are provided, with expenses recognized as incurred. Accordingly, a portion of the total revenue that will be billed to the customer once a load is delivered is recognized in each reporting period based on the percentage of the freight pickup and delivery service that has been completed at the end of the reporting period. We record revenues on the gross basis at amounts charged to our customers because we are the primary obligor, we are a principal in the transaction, we invoice our customers and retain all credit risks, and we maintain discretion over pricing. Additionally, we are responsible for selection of third-party transportation providers to the extent used to satisfy customer freight requirements. Derivative Instruments We periodically utilize derivative instruments to manage exposure to changes in interest rates. At inception of a derivative contract, we document relationships between derivative instruments and hedged items, as well as our risk-management objective and strategy for undertaking various derivative transactions, and assess hedge effectiveness. If it is determined that a derivative is not highly effective as a hedge, or if a derivative ceases to be a highly effective hedge, we discontinue hedge accounting prospectively. Income Taxes Income taxes are accounted for under the liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the ﬁnancial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carry forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized as income or expense in the period that includes the enactment date. We record valuation allowances for deferred tax assets to the extent we believe these assets are not more likely than not to be realized through the reversal of existing taxable temporary differences, projected future taxable income, or tax-planning strategies. We record a liability for unrecognized tax beneﬁts when the beneﬁts of tax positions taken on a tax return are not more likely than not to be sustained upon audit. Interest and penalties related to uncertain tax positions are classiﬁed as interest expense in the Consolidated Financial Statements. Earnings Per Share We compute basic earnings per share by dividing net earnings available to common stockholders by the actual weighted average number of common shares outstanding for the reporting period. Diluted earnings per share reﬂect the potential dilution that could occur if holders of unvested restricted and performance share units or options exercised or converted their holdings into common stock. Outstanding unvested restricted share units and stock options represent the dilutive effects on weighted average shares. A reconciliation of the number of shares used in computing basic and diluted earnings per share is shown below (in thousands): Weighted average shares outstanding – basic Effect of common stock equivalents Weighted average shares outstanding – diluted Concentrations of Credit Risk 2015 115,677 1,051 116,728 Years ended December 31, 2014 117,000 1,445 118,445 2013 117,449 1,955 119,404 Financial instruments, which potentially subject us to concentrations of credit risk, include trade receivables. For the years ended December 31, 2015, 2014, and 2013, our top 10 customers, based on revenue, accounted for approximately 29%, 28%, and 29%, respectively, of our total revenue. Our top 10 customers, based on revenue, accounted for approximately 27% and 29% of our total trade accounts receivable at December 31, 2015 and 2014, respectively. We had no individual customers with revenues greater than 10% of total revenues. Share-based Compensation We have share-based compensation plans covering certain employees, including ofﬁcers and directors. We account for share-based compensation utilizing the fair value recognition provisions of current accounting standards for share-based payments. We currently utilize restricted share units, performance share units, and nonstatutory stock options. Issuances of our stock upon restricted share unit and performance share unit vesting or share option exercise are made from treasury stock. Our restricted share unit and performance share unit awards may include both graded-vesting and cliff-vesting awards and therefore vest in increments during the requisite service period or at the end of the requisite service period, as appropriate for each type of vesting. We recognize compensation expense on a straight-line basis over the requisite service periods within each award. Claims Accruals We purchase insurance coverage for a portion of expenses related to employee injuries, vehicular collisions, accidents, and cargo damage. We are substantially self-insured for loss of and damage to our owned and leased revenue equipment. Certain insurance arrangements include a level of self-insurance (deductible) coverage applicable to each claim. We have umbrella policies to limit our exposure to catastrophic claim costs. 75 2 0 1 5 A n n u a l R e p o r t The amounts of self-insurance change from time to time based on measurement dates, policy expiration dates, and claim type. For 2013 through 2015, we were self-insured for $500,000 per occurrence for personal injury and property damage and self-insured for $100,000 per workers’ compensation claim. We have policies in place for 2016 with substantially the same terms as our 2015 policies for personal injury, workers’ compensation, and cargo and property damage. Our claims accrual policy for all self-insured claims is to recognize a liability at the time of the incident based on our analysis of the nature and severity of the claims and analyses provided by third-party claims administrators, as well as legal, economic, and regulatory factors. Our safety and claims personnel work directly with representatives from the insurance companies to continually update the estimated cost of each claim. The ultimate cost of a claim develops over time as additional information regarding the nature, timing, and extent of damages claimed becomes available. Accordingly, we use an actuarial method to develop current claim information to derive an estimate of our ultimate claim liability. This process involves the use of loss-development factors based on our historical claims experience and includes a contractual premium adjustment factor, if applicable. In doing so, the recorded liability considers future claims growth and, if applicable, conversion to fully insured status and provides an allowance for incurred-but-not-reported claims. We do not discount our estimated losses. At December 31, 2015 and 2014, we had an accrual of approximately $95 million and $88 million, respectively, for estimated claims. In addition, we are required to pay certain advanced deposits and monthly premiums. At December 31, 2015 and 2014, we had an aggregate prepaid insurance asset of approximately $87 million and $68 million, respectively, which represented prefunded premiums. 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. We have the option of using either a full retrospective or a modiﬁed retrospective approach when adopting this new standard. 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. We are currently evaluating the alternative transition methods and the potential effects of the adoption of this update on our ﬁnancial statements. In April 2015, the FASB issued ASU 2015-03, Interest – Imputation of Interest: Simplifying the Presentation of Debt Issuance Costs, which amends the current presentation of debt issuance costs in the ﬁnancial statements. ASU 2015-03 requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts, instead of as an asset. The amendments are to be applied retrospectively and are effective for interim and annual periods beginning after December 15, 2015, but early adoption is permitted. The adoption of the new guidance is not expected to have a material impact on our ﬁnancial statements. In January 2016, the FASB issued ASU 2016-01, Financial Instruments – Overall: Recognition and Measurement of Financial Assets and Financial Liabilities, which amends certain aspects of recognition, measurement, presentation, and disclosure of ﬁnancial instruments. ASU 2016-01 requires equity investments, with certain exceptions, to be measured at fair value with changes in fair value recognized in net income; simpliﬁes the impairment assessment of equity investments without readily determinable fair values by requiring a qualitative assessment to identify impairment; eliminates the requirement for public business entities to disclose the methods and signiﬁcant assumptions used to estimate the fair value that is required to be disclosed for ﬁnancial instruments measured at amortized cost on the balance sheet; requires public business entities to use the exit price notion when measuring the fair value of ﬁnancial instruments for disclosure purposes; requires an entity to present separately in other comprehensive income the portion of the total change in the fair value of a liability resulting from a change in the instrument-speciﬁc credit risk when the entity has elected to measure the liability at fair value in accordance with the fair value option for ﬁnancial instruments; requires separate presentation of ﬁnancial assets and ﬁnancial liabilities by measurement category and form of ﬁnancial asset on the balance sheet or the accompanying notes to the ﬁnancial statements; and clariﬁes that an entity should evaluate the need for a valuation allowance on a deferred tax asset related to available-for-sale securities. The amendments are to be applied by means of a cumulative-effect adjustment to the balance sheet and are effective for interim and annual periods beginning after December 15, 2017. With certain exceptions, early adoption is not permitted. The adoption of the new guidance is not expected to have a material impact on our ﬁnancial statements. Accounting Pronouncements Adopted in 2015 In November 2015, the FASB issued ASU 2015-17, Income Taxes: Balance Sheet Classiﬁcation of Deferred Taxes, which amends the current presentation of deferred taxes in the ﬁnancial statements. ASU 2015-17 requires that deferred tax assets and deferred tax liabilities be presented in the balance sheet as noncurrent, which simpliﬁes the current guidance that requires entities to separately present these items as current and noncurrent in the balance sheet. The amendments can be applied retrospectively or prospectively and are effective for interim and annual periods beginning after December 15, 2016, but early adoption is permitted. We retroactively adopted ASU 2015-17 at December 31, 2015, and have reclassiﬁed all prior periods to be consistent with the amendments outlined in the ASU. The impact of the prior period reclassiﬁcation was an $18.6 million reduction of current assets and working capital at December 31, 2014. t r o p e R l a u n n A 5 1 0 2 76 3. Financing Arrangements Outstanding borrowings under our current ﬁnancing arrangements consist of the following (in millions): Senior revolving line of credit Senior notes, net of unamortized discount Less current portion of long-term debt Total long-term debt December 31, 2015 $ 150.0 855.0 – $ 1,005.0 2014 $ 183.0 750.5 (250.0) $ 683.5 Aggregate maturities of long-term debt subsequent to December 31, 2015, are as follows: $252.3 million in 2019, $150.0 million in 2020, and $602.7 million thereafter. Senior Revolving Line of Credit In September 2015, we replaced our $500 million senior revolving credit facility established in August 2011 with a new credit facility authorizing us 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. This new senior credit facility has a ﬁve-year term expiring in September 2020, and allows us to request an increase in the total commitment by up to $250 million and to request a one-year extension of the maturity date. The applicable interest rate under this agreement is based on either the Prime Rate, the Federal Funds Rate, or LIBOR, depending upon the speciﬁc type of borrowing, plus an applicable margin based on our credit rating and other fees. At December 31, 2015, we had $150 million outstanding at an average interest rate of 1.39% 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. The third issuance 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 guarantied 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 4, 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 $250 million of 3.375% senior notes matured in September 2015. The entire outstanding balance was paid in full at maturity. Our ﬁnancing arrangements require us to maintain certain covenants and ﬁnancial ratios. We were in compliance with all covenants and ﬁnancial ratios at December 31, 2015. 4. Derivative Financial Instruments We periodically utilize derivative instruments for hedging and non-trading purposes to manage exposure to changes in interest rates and to maintain an appropriate mix of ﬁxed and variable-rate debt. At inception of a derivative contract, we document relationships between derivative instruments and hedged items, as well as our risk-management objective and strategy for undertaking various derivative transactions, and assess hedge effectiveness. If it is determined that a derivative is not highly effective as a hedge, or if a derivative ceases to be a highly effective hedge, we discontinue hedge accounting prospectively. 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 is based on LIBOR plus an established margin, resulting in an interest rate of 1.36% for our $250 million of 2.40% senior notes and 1.72% for our $350 million of 3.30% senior notes at December 31, 2015. The swaps expire when the corresponding senior notes are due. The fair values of these swaps are recorded in other assets in our Consolidated Balance Sheet at December 31, 2015. See Note 9, 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. 2 0 1 5 A n n u a l R e p o r t 77 5. Capital Stock We have one class of preferred stock and one class of common stock. We had no outstanding shares of preferred stock at December 31, 2015 or 2014. Holders of shares of common stock are entitled to receive dividends when and if declared by the Board of Directors and are entitled to one vote per share on all matters submitted to a vote of the stockholders. At December 31, 2015, we had 2.0 million shares of common stock to be issued upon the exercise or vesting of equity awards and 7.5 million shares reserved for future issuance pursuant to share-based payment plans. During calendar year 2015, we purchased approximately 3.3 million shares, or $262.3 million, of our common stock in accordance with plans authorized by our Board. At December 31, 2015, we had $451.0 million available under an authorized plan to purchase our common stock. 6. Share-based Compensation We maintain a Management Incentive Plan (the “Plan”) that provides various share-based ﬁnancial methods to compensate our key employees with shares of our common stock or common stock equivalents. Under the Plan, as amended, we have, from time to time, utilized restricted share units, performance share units, restricted options, and nonstatutory stock options to compensate our employees and directors. We currently are utilizing restricted and performance share units and nonstatutory stock options. Our restricted share units have various vesting schedules generally ranging from 3 to 10 years when awarded. These restricted share units do not contain rights to vote or receive dividends until the vesting date. Unvested restricted share units are forfeited if the employee terminates for any reason other than death, disability, or special circumstances as determined by the Compensation Committee. Restricted share units are valued based on the fair value of the award on the grant date, adjusted for dividend estimates based on grant date dividend rates. Our performance share units vest based on the passage of time (generally 3 to 10 years) and achievement of performance criteria. Performance share units do not contain rights to vote or receive dividends until the vesting date. Unvested performance share units are forfeited if the employee terminates for any reason other than death or disability. Performance shares are valued based on the fair value of the award on the grant date, adjusted for dividend estimates based on grant date dividend rates. Our nonstatutory stock options may be granted to key employees for the purchase of our common stock for 100% of the fair market value of the common stock at the grant date as awarded by the Compensation Committee. These options generally vest over a 10-year period and are forfeited immediately if the employee terminates for any reason other than death, disability or retirement after age 55. We did not grant any stock options during the years ended December 31, 2015, 2014, and 2013. An employee is allowed to surrender shares of common stock that the employee has owned for at least six months in full or partial payment of the option price of an option being exercised and/or to satisfy tax withholding obligations incident to the vesting of restricted share units, performance share units, or the exercise of an option. We account for our restricted share units, performance share units, and stock options in accordance with current accounting standards for share-based payments. These standards require that the cost of all share-based payments to employees, including grants of employee stock options, be recognized in our Consolidated Financial Statements based on the grant date fair value of those awards. This cost is recognized over the period for which an employee is required to provide service in exchange for the award, subject to the attainment of performance metrics established for performance share units. Share-based compensation expense is recorded in salaries, wages, and employee beneﬁts in our Consolidated Statements of Earnings, along with other compensation expenses to employees. The following table summarizes the components of our share-based compensation program expense (in thousands): Restricted share units Pretax compensation expense Tax benefit Restricted share units, net of tax Performance share units Pretax compensation expense Tax benefit Performance share awards, net of tax Stock options Pretax compensation expense Tax benefit Stock option expense, net of tax 2015 Years ended December 31, 2014 2013 $ 27,898 10,629 $ 17,269 $ 9,330 3,555 $ 5,775 $ – – $ – $ 27,256 10,360 $ 16,896 $ 7,882 2,996 $ 4,886 $ 195 74 $ 121 $ 25,606 9,769 $ 15,837 $ 5,941 2,266 $ 3,675 $ 807 308 $ 499 t r o p e R l a u n n A 5 1 0 2 78 A summary of our restricted share units, performance share units, and nonstatutory stock options is as follows: Restricted Share Units Unvested at December 31, 2012 Granted Vested Forfeited Unvested at December 31, 2013 Granted Vested Forfeited Unvested at December 31, 2014 Granted Vested Forfeited Unvested at December 31, 2015 Performance Share Units Unvested at December 31, 2012 Granted Vested Forfeited Unvested at December 31, 2013 Granted Vested Forfeited Unvested at December 31, 2014 Granted Vested Forfeited Unvested at December 31, 2015 Stock Options Outstanding at December 31, 2012 Exercised Forfeited Outstanding at December 31, 2013 Exercised Forfeited Outstanding at December 31, 2014 Exercised Forfeited Outstanding at December 31, 2015 Exercisable Number of Shares 2,835,466 522,062 (865,147) (70,951) 2,421,430 447,780 (808,914) (119,298) 1,940,998 390,143 (783,483) (30,908) 1,516,750 Number of Shares 309,500 160,500 (61,975) – 408,025 106,945 (81,075) – 433,895 160,574 (103,796) – 490,673 Weighted Average Remaining Weighted Number of Shares Average Exercise Contractual Term Price $ 16.63 14.77 19.89 $ 19.08 18.70 19.08 $ 20.40 20.35 24.27 $ 20.76 $ 20.76 (in thousands) 1,031 (585) (6) 440 (341) (1) 98 (95) (1) 2 2 (in years) 2.35 – – 1.67 – – 0.86 – – 0.05 0.05 Weighted Average Grant Date Fair Value $ 32.75 71.50 31.92 36.67 $ 41.49 75.61 37.33 47.81 $ 51.74 74.86 39.45 54.89 $ 63.96 Weighted Average Grant Date Fair Value $ 47.07 71.90 47.48 – $ 56.78 76.22 53.26 – $ 62.23 74.37 58.28 – $ 67.04 Aggregate Intrinsic Value (in millions) $ 44.4 34.0 – $ 25.6 19.9 – $ 6.3 5.8 – $ 0.1 $ 0.1 2 0 1 5 A n n u a l R e p o r t At December 31, 2015, we had $58.5 million and $19.4 million of total unrecognized compensation expense related to restricted share units and performance share units, respectively, that is expected to be recognized on a straight-line basis over the remaining weighted average vesting period of approximately 3.6 years for restricted share units and 2.6 years for performance share units. The aggregate intrinsic value of restricted and performance share units vested and options exercised during the years ended December 31, 2015, 2014, and 2013, was $80.8 million, $88.5 million, and $104.5 million, respectively. The aggregate intrinsic value of unvested restricted and performance share units was $147.3 million at December 31, 2015. The total fair value of shares vested for restricted share, performance share, and stock option plans during the years ended December 31, 2015, 2014, and 2013, was $37.3 million, $37.5 million, and $35.4 million, respectively. 79 7. Income Taxes Income tax expense attributable to earnings before income taxes consists of (in thousands): Current: Federal State and local Deferred: Federal State and local Total tax expense 2015 Years ended December 31, 2014 2013 $ 160,235 22,306 182,541 71,292 9,135 80,427 $ 262,968 $ 130,761 19,705 150,466 72,547 6,796 79,343 $ 229,809 $ 144,299 18,811 163,110 41,811 6,265 48,076 $ 211,186 Income tax expense attributable to earnings before income taxes differed from the amounts computed using the statutory federal income tax rate of 35% as follows (in thousands): Income tax at federal statutory rate State tax, net of federal effect Nondeductible meals and entertainment Change in effective state tax rate, net of federal benefit Change in valuation allowance Other, net Total tax expense 2015 $ 241,571 18,671 1,420 1,761 – (455) $ 262,968 Years ended December 31, 2014 $ 211,610 17,357 1,395 256 – (809) $ 229,809 2013 $ 193,749 13,551 1,543 3,708 (755) (610) $ 211,186 Income taxes receivable was $76.7 million and $79.8 million at December 31, 2015 and 2014, respectively. These amounts have been included in other current assets in our Consolidated Balance Sheets. The tax effects of temporary differences that give rise to signiﬁcant portions of the deferred tax assets and deferred tax liabilities at December 31, 2015 and 2014, are presented below (in thousands): t r o p e R l a u n n A 5 1 0 2 Deferred tax assets: Insurance accruals Allowance for doubtful accounts Compensation accrual Deferred compensation accrual Federal benefit of state uncertain tax positions Capital loss carry-forward Other Total gross deferred tax assets Valuation allowance Total deferred tax assets, net of valuation allowance Deferred tax liabilities: Plant and equipment, principally due to differences in depreciation Prepaid permits and insurance, principally due to expensing for income tax purposes Other Total gross deferred tax liabilities Net deferred tax liability December 31, 2015 2014 $ 33,522 2,335 13,991 24,687 12,751 – 4,036 91,322 (552) 90,770 786,840 33,064 11,086 830,990 $ 740,220 $ 30,565 2,291 15,260 25,042 12,268 1,443 3,954 90,823 (1,994) 88,829 707,071 30,012 11,539 748,622 $ 659,793 80 Guidance on accounting for uncertainty in income taxes prescribes recognition and measurement criteria and requires that we assess whether the beneﬁts of our tax positions taken are more likely than not of being sustained under tax audits. We have made adjustments to the balance of unrecognized tax beneﬁts, a component of other long-term liabilities on our Consolidated Balance Sheet, as follows (in millions): Beginning balance Additions based on tax positions related to the current year Additions/(reductions) based on tax positions taken in prior years Reductions due to settlements Reductions due to lapse of applicable statute of limitations Ending balance 2015 $ 31.6 9.4 (2.5) (3.0) (3.5) $ 32.0 December 31, 2014 $ 29.7 8.2 0.4 (3.7) (3.0) $ 31.6 2013 $ 25.8 7.0 (1.2) (0.1) (1.8) $ 29.7 At December 31, 2015 and 2014, we had a total of $32.0 million and $31.6 million, respectively, in gross unrecognized tax beneﬁts. Of these amounts, $20.8 million and $20.5 million represent the amount of unrecognized tax beneﬁts that, if recognized, would impact our effective tax rate in 2015 and 2014, respectively. Interest and penalties related to income taxes are classiﬁed as interest expense in our Consolidated Financial Statements. The amount of accrued interest and penalties recognized during the years ended December 31, 2015, 2014, and 2013, was $1.9 million, $1.8 million, and $1.9 million, respectively. Future changes to unrecognized tax beneﬁts will be recognized as income tax expense and interest expense, as appropriate. The total amount of accrued interest and penalties for such unrecognized tax beneﬁts at December 31, 2015 and 2014, was $4.0 million and $3.5 million, respectively. Tax years 2012 and forward remain subject to examination by federal tax jurisdictions, while tax years 2005 and forward remain open for state jurisdictions. 8. Employee Beneﬁt Plans We maintain a deﬁned contribution employee retirement plan, which includes a 401(k) option, under which all employees are eligible to participate. We match a speciﬁed percentage of employee contributions, subject to certain limitations. For the years ended December 31, 2015, 2014, and 2013, our matching contributions to the plan were $14.7 million, $11.6 million, and $11.4 million, respectively. We have a nonqualiﬁed deferred compensation plan that allows eligible employees to defer a portion of their compensation. The compensation deferred under this plan is credited with earnings or losses on investments elected by plan participants. Each participant is fully vested in all deferred compensation and earnings; however, these amounts are subject to general creditor claims until actually distributed to the employee. A participant may elect to receive deferred amounts in one payment or in quarterly installments payable over a period of 2 to 25 years upon reaching age 55, having 15 years of service, or becoming disabled. Our total liability under this plan was $13.6 million as of December 31, 2015, and $13.5 million as of December 31, 2014. These amounts are included in other long-term liabilities in our Consolidated Balance Sheets. Participant withholdings are held by a trustee and invested in equity securities as directed by participants. These investments are classiﬁed as trading securities and recorded at fair value. Realized and unrealized gains and losses are recognized currently in earnings. The investments are included in other assets in our Consolidated Balance Sheets and totaled $13.6 million as of December 31, 2015, and $13.5 million as of December 31, 2014. 9. 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 December 31, 2015 (in millions): Trading investments Interest rate swap Senior notes Asset/(Liability) Balance $ 13.6 $ 6.1 $ (605.2) Input Level 1 2 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 and interest rate swaps are classiﬁed in other assets in our Consolidated Balance Sheets, and the senior notes are classiﬁed in long-term debt in our Consolidated Balance Sheets. Financial Instruments The carrying amount and estimated fair value at December 31, 2015, 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 $399.8 million and $407.7 million, respectively. The carrying amounts of all other instruments at December 31, 2015, approximate their fair value due to the short maturity of these instruments. 81 2 0 1 5 A n n u a l R e p o r t 10. Commitments and Contingencies As of December 31, 2015, we had approximately $28.1 million of obligations remaining under operating lease arrangements related primarily to terminal and support facilities. Future minimum lease payments under noncancelable operating leases (with initial or remaining lease terms in excess of one year) as of December 31, 2015, are approximately $28.1 million, with payment streams as follows (in millions): 2016 – $13.5; 2017 – $8.7; 2018 – $3.9, 2019 – $1.3, 2020 – $0.5, and thereafter – $0.2. Total rent expense was $39.5 million in 2015, $39.1 million in 2014, and $33.2 million in 2013. At December 31, 2015, we had outstanding commitments of approximately $463 million, net of proceeds from sales or trade-ins during 2016 and 2017, which is primarily related to the acquisition of containers, chassis, and tractors. During 2015, we issued ﬁnancial standby letters of credit as a guaranty of our performance under certain operating agreements and self-insurance arrangements. If we default on our commitments under the agreements or other arrangements, we are required to perform under these guaranties. The undiscounted maximum amount of our obligation to make future payments in the event of defaults is approximately $4.4 million as of December 31, 2015. We are a defendant in certain class-action lawsuits in which the plaintiffs are current and former California-based drivers who allege claims for unpaid wages, failure to provide meal and rest periods, and other items. During the ﬁrst half of 2014, the Court in the lead class-action granted judgment in our favor with regard to all claims. The plaintiffs have appealed the case to the Ninth Circuit Court of Appeals where it is currently pending. The overlapping claims in the remaining action have been stayed pending a decision in the lead class-action case. We cannot reasonably estimate at this time the possible loss or range of loss, if any, that may arise from these lawsuits. 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. 11. Segment Information We have four reportable business segments – Intermodal (JBI), Dedicated Contract Services® (DCS), Integrated Capacity Solutions (ICS), and Truck (JBT) – which are based primarily on the services each segment provides. The JBI segment includes freight that is transported by rail over at least some portion of the movement and also includes certain repositioning truck freight moved by JBI equipment or third-party carriers, when such highway movement is intended to direct JBI equipment back toward intermodal operations. DCS segment business includes company-owned and customer-owned, DCS-operated revenue equipment and employee drivers assigned to a speciﬁc customer, trafﬁc lane, or service. DCS operations usually include formal, written longer-term agreements or contracts that govern services performed and applicable rates. ICS provides non-asset and asset-light transportation solutions to customers through relationships with third-party carriers and integration with JBHT-owned equipment. ICS services include ﬂatbed, refrigerated, and LTL, as well as a variety of dry-van and intermodal solutions. JBT business includes full-load, dry-van freight that is typically transported utilizing company-owned or company-controlled revenue equipment. This freight is typically transported over roads and highways and does not move by rail. All transactions between reporting segments are eliminated in consolidation. Our customers are geographically dispersed across the United States. A summary of certain segment information as of December 31 is presented below (in millions): JBI DCS ICS JBT Other (includes corporate) Total JBI DCS ICS JBT Total segment revenues Intersegment eliminations Total Assets (Excludes intercompany accounts) December 31, 2014 $ 1,733 832 106 289 418 $ 3,378 2013 $ 1,611 721 78 164 245 $ 2,819 2015 $ 1,848 949 99 286 455 $ 3,637 Revenues Years ended December 31, 2014 $ 3,687 1,394 718 386 6,185 (20) $ 6,165 2013 $ 3,456 1,231 537 391 5,615 (30) $ 5,585 2015 $ 3,665 1,451 699 386 6,201 (13) $ 6,188 82 t r o p e R l a u n n A 5 1 0 2 JBI DCS ICS JBT Total JBI DCS JBT Other Total Operating Income Years ended December 31, 2014 $ 461 117 30 24 $ 632 2013 $ 447 110 16 4 $ 577 2015 $ 477 163 36 40 $ 716 Depreciation and Amortization Expense Years ended December 31, 2014 $ 130 117 32 15 $ 294 2013 $ 116 97 29 11 $ 253 2015 $ 148 133 42 17 $ 340 12. Quarterly Financial Information (Unaudited) Operating results by quarter for the years ended December 31, 2015 and 2014 are as follows(in thousands, except per share data): 2015: Operating revenues Operating income Net earnings First Second Third Fourth Quarter $ 1,440,180 $ 1,539,957 $ 1,586,494 $ 1,621,015 $ 155,220 $ 173,735 $ 193,846 $ 192,893 $ 91,932 $ 103,419 $ 115,139 $ 116,746 Basic earnings per share $ 0.79 $ 0.89 $ 1.00 $ 1.02 Diluted earnings per share $ 0.78 $ 0.88 $ 0.99 $ 1.01 2014: Operating revenues Operating income Net earnings $ 1,406,908 $ 1,547,867 $ 1,601,156 $ 1,609,511 $ 117,307 $ 159,230 $ 172,100 $ 182,905 $ 68,664 $ 93,408 $ 102,414 $ 110,306 Basic earnings per share $ 0.59 $ 0.80 $ 0.87 $ 0.94 Diluted earnings per share $ 0.58 $ 0.79 $ 0.87 $ 0.93 2 0 1 5 A n n u a l R e p o r t 83 STOCKHOLDER INFORMATION Corporate Address J.B. Hunt Transport Services, Inc. 615 J.B. Hunt Corporate Drive Lowell, AR 72745 479-820-0000 Internet Address www.jbhunt.com Auditors Ernst & Young LLP Rogers, Arkansas Counsel Mitchell, Williams, Selig, Gates & Woodyard PLLC Little Rock, Arkansas Stock Exchange Listing J.B. Hunt Transport Services, Inc. Class A Common Stock is listed on NASDAQ National Market System Stock Symbol JBHT Stock Transfer Agent and Registrar Computershare Trust Company, N.A. 211 Quality Circle, Suite 210 College Station, TX 77845 877-498-8861 for Stockholder Inquiries www.computershare.com/investor Annual Meeting The Annual Meeting of Stockholders will be held at 10:00 a.m. CDT, on Thursday, April 21, 2016, at the corporate headquarters of J.B. Hunt Transport Services, Inc., Lowell, Arkansas, located on Interstate 49 at the Lowell Exit 78. BOARD OF DIRECTORS Kirk Thompson Chairman of the Board Douglas G. Duncan FedEx Freight Corporation (retired) Francesca M. Edwardson American Red Cross of Greater Chicago (retired) Wayne Garrison J.B. Hunt Transport Services, Inc. (retired) Sharilyn S. Gasaway Alltel Corp. (retired) Gary C. George George’s, Inc. J. Bryan Hunt, Jr. Hunt Auto Group Coleman H. Peterson Hollis Enterprises, LLC John N. Roberts, III President and Chief Executive Ofﬁcer James L. Robo NextEra Energy, Inc. Dr. John A. White Chancellor Emeritus and Distinguished Professor University of Arkansas OFFICERS Kirk Thompson Chairman of the Board, Director John N. Roberts, III President and Chief Executive Ofﬁcer, Director David G. Mee Executive Vice President, Finance and Administration, Chief Financial Ofﬁcer, and Corporate Secretary Craig Harper Executive Vice President Terrence D. Matthews Executive Vice President and President, Intermodal Nicholas Hobbs Executive Vice President and President, Dedicated Contract Services Stuart Scott Executive Vice President and Chief Information Ofﬁcer Shelley Simpson Executive Vice President, Chief Marketing Ofﬁcer, and President, Integrated Capacity Solutions and Truckload t r o p e R l a u n n A 5 1 0 2 84 2015 Percent of Revenue by Industry 17% 15% 10% 23% Specialty Retailers Food General Merchandise Forest & Paper Products Transportation Electronics Beverages Other Motor Vehicles & Parts Building Materials Soaps, Cosmetics Chemicals Metals Pharmaceuticals 1% 7% 6% 5% 4% 4% 2% 2% 2% 2% 85 P.O. Box 130 • Lowell, Arkansas 72745 www.jbhunt.com

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