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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

J.B. HUNT TRANSPORT SERVICES, INC.

(Exact name of registrant as specified in its charter)

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

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 o

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.

Yes o  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 o

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 o   Non-accelerated filer o  Smaller reporting company o

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

Yes o  No x

The aggregate market value of 83,848,547 shares of the registrant’s $0.01 par value common stock held by non-affiliates as of June 30, 2008, was $2.8 billion (based upon $33.28 per share).

As of February 20, 2009, the number of outstanding shares of the registrant’s common stock was 126,091,815.

DOCUMENTS INCORPORATED BY REFERENCE

Certain portions of the Notice and Proxy Statement for the Annual Meeting of the Stockholders, to be held April 30, 2009, are incorporated by reference in Part III of this Form 10-K.

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J.B. HUNT TRANSPORT SERVICES, INC.

Form 10-K

For The Fiscal Year Ended December 31, 2008

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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, insurance costs and availability, claims expense, retention of key employees, terrorist attacks or actions, acts of war, adverse weather conditions, 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.  Current and future changes in fuel prices could result in significant fluctuations of quarterly earnings.

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 companies in North America.  J.B. Hunt Transport Services, Inc. is a publicly held holding company that, together with our wholly owned subsidiaries and affiliated companies, provides a wide range of transportation services to a diverse group of customers 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 wide scope of scalable service offerings is relatively uncommon in the industry and ranges from full-load containerized freight transportation over highways and railroads to individual deliveries to small businesses and personal residences.  We have arrangements with most of the major North American rail carriers to transport freight in containers and trailers.  We also provide customized freight movement, revenue equipment, labor and systems services that are tailored to meet individual customer’s requirements and typically involve longer-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 network design.  We also provide integrated capacity and comprehensive transportation and logistics services and solutions by utilizing a network of thousands of reliable third-party carriers.  While these unrelated outside carriers, at times, supplement our dry-van, full-load operations, they also provide flatbed, refrigerated, less-than-truckload (LTL) and other specialized equipment, drivers and services.

Our business operations are primarily organized through four distinct, but complementary, business segments.  These segments include intermodal (JBI), dedicated contract services (DCS), full-load dry-van (JBT) and integrated capacity solutions (ICS).  Our business is somewhat seasonal, with slightly higher

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freight volumes typically experienced during August through early November.  Our DCS segment is subject to less seasonal variation than our other segments.  For the calendar year ended December 31, 2008, our consolidated revenue totaled $3.7 billion, after the elimination of intersegment business.  Of the total, 52% was generated by our JBI business segment, 25% by DCS, 18% by JBT and 5% by ICS.

Additional general information about us is available from our Internet website 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.

OUR MISSION AND STRATEGY

We forge long-term partnerships with key customers that include supply-chain management as an integral part of their strategy.  Working in concert, we drive out cost, add value and function as an extension of our customers’ enterprise.  We believe that our operating strategy can add value to customers and increase our profits and returns to stockholders.

RECENT FOCUS

Our recent focus has been to maximize the return on our invested capital and to generate free cash flow to reduce outstanding debt.  We continuously analyze where capital expenditures yield the best return and allocate funds to those business units and specific activities inside the business unit.  Unacceptable returns in various areas have caused us to reduce certain of these business models or exit those activities within the business model.  Our goal is to become more asset-light in the services we provide, but to continue to grow with new and existing customers by providing the most efficient transportation solutions to their supply chains.  Examples of steps taken to reach those goals include the continued contraction of the JBT business unit coupled with the growth in our ICS business unit, the expansion of our eastern intermodal network, the repayment of approximately $280 million in outstanding debt in 2008, and the expansion of our new customer base.  We also continue to direct our dedicated business unit toward providing best-in-class service in applications that require unique and specialized services ranging from retail and small-business replenishment to deliveries at personal residences.

Increasingly, our customers are seeking energy-efficient transportation solutions to reduce both cost and greenhouse-gas emissions.  Our intermodal service addresses both demands.  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 13 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 with a unique partnership with the former Santa Fe Railway (now the BNSF Railway Company), a watershed event in the industry and the first agreement that linked major rail and truckload carriers in a joint marketing environment.  Essentially, JBI draws on the intermodal (also known as “container on flatcar”) services of rail carriers for the underlying linehaul movement of its equipment and performs the pickups and deliveries (“drayage”) for customers at the origin and destination rail terminal locations.  We provide the drayage service at either the origin or destination rail ramp utilizing our company-owned tractors for the majority of our intermodal loads, but utilize third parties where economical.  Performing our own dray

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services keeps costs lower and improves customer service.  JBI provides seamless coordination of the rail and dray movements for our customers and delivers a single billing for the complete door-to-door service.

Our intermodal program has grown to more than 837,000 loads in 2008.  JBI operates 39,161 company-controlled containers systemwide.  The entire fleet comprises 53-foot, high-cube containers and is designed to take advantage of intermodal double-stack economics and superior ride quality.  JBI also manages a fleet of 2,124 company-owned tractors and 2,633 company drivers that provide efficiency to our intermodal operations.  At December 31, 2008, the total JBI employee count was 2,913.  Revenue for the JBI segment in 2008 was $1.95 billion, compared with $1.65 billion in 2007.

DCS Segment

DCS offers transportation services that generally are not provided by common truckload carriers or intermodal due to strict service requirements, specialized equipment, and intense driver and delivery personnel demands.  Our operations are managed on site by transportation professionals who work in concert daily with the customer and our drivers to ensure we deliver their product or service on time in a safe and cost-effective manner.  All operations are governed by longer-term contracts that typically include fixed cost components related to dedicated specialized equipment and fuel surcharge programs on round-trip miles.  These contracts combined with our best-in-class execution allow DCS to retain its customer base with consistent margins.

DCS revenue for 2008 was $927 million, compared with $937 million in 2007.  At December 31, 2008 our segment operated 4,454 company-controlled trucks, 101 customer-owned trucks, and 67 independent contractor trucks.  The DCS segment employed 5,444 people at December 31, 2008.

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, 2008, we had 841 independent contractors operating in the JBT segment, some of whom were leasing company-owned tractors.  JBT revenue for 2008 was $676 million, compared with $842 million in 2007.  At December 31, 2008, the JBT segment operated 2,489 company-owned tractors and employed 3,030 people, 2,750 of whom were drivers.

In 2008, we entered into a plan to further reduce the size of our JBT fleet and sell approximately 1,100 trailers.  This plan is consistent with our strategy as an asset-light transportation company and our focus for growth and investment in segments that provide the desired margins.  We expect to sell or trade this equipment during calendar year 2009.

ICS Segment

ICS provides non-asset, asset-light, and transportation logistics solutions to customers through relationships with thousands of third-party carriers and integration with JBHT-owned equipment.  By leveraging the JBHT brand, systems and network, ICS brings 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 that desire to outsource their transportation functions and utilize JBHT’s proven supply-chain, technology, and design expertise to improve efficiency.  ICS operates outside offices as well as on-site logistics personnel working in direct contact with customers.  ICS revenue for 2008 was $209 million, compared with $92 million in 2007.  At December 31, 2008, the ICS segment employed 278 people.

Logistics Business and Affiliated Company

We own a 37% equity interest in a global transportation and logistics company, Transplace, Inc. (TPI). TPI is co-owned by five large transportation companies and provides a blend of logistics technology and

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transportation management services.  Our share of TPI’s financial results is included on a one-line nonoperating item included on our Consolidated Statements of Earnings titled “equity in loss of affiliated company.”

Marketing and Operations

We transport, or arrange for the transportation of, a wide range of freight, including general merchandise, food and beverages, forest and paper products, building materials, chemicals and automotive parts.  Our customer base is extremely diverse and includes a large number of Fortune 500 companies.  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.  We provide a broad range of transportation services to larger shippers that seek to use a limited number of “core” carriers.  We have no customers that represent 10% or more of our total revenue in 2008.

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 and ICS has its own proactive 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, 2008, we had 14,667 employees, including 10,022 company drivers, 1,197 mechanics and 3,448 office personnel.  We also had arrangements with more than 900 independent contractors to transport freight in our trailing equipment.  None of our employees is represented by unions or covered by collective bargaining agreements.

Revenue Equipment

Our JBI segment utilizes high-cube containers, which can be separated from the chassis and double-stacked on rail cars.  We continue the process of expanding our container fleet and reconditioning our chassis fleet.  The composition of our DCS trailing fleet also varies with specific customer requirements and may include dry-vans, flatbeds, temperature-controlled, curtain-side vans, straight trucks and dump trailers.  Our JBT segment operates primarily with 53-foot dry-van trailers.  We continue to execute our strategy of reducing the size of the JBT segment.  We primarily utilize third-party carriers’ tractor and trailing equipment for our ICS segment; however, certain loads will utilize third-party carriers’ tractors powering our trailing equipment.

As of December 31, 2008, our company-owned tractor and truck fleet consisted of 9,067 units.  In addition, we had 912 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.  Based on 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, 2008, the average age of our combined tractor fleet was 3.3 years, our containers averaged 5.3 years of age and our trailers averaged 7.2 years.  We perform routine servicing and preventive maintenance on our equipment at most of our regional terminal facilities.

Effective with model-year 2007 tractors, the EPA mandated lower emission standards for newly manufactured heavy-duty tractor engines.  The 2007 EPA-compliant engines show a slight reduction in miles per gallon and an increase in operating costs.  Further, the acquisition costs of these new engines have increased by approximately 10%.  A new set of more stringent emissions standards will become effective for newly manufactured tractor engines in January 2010.

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Competition and the Industry

The freight transportation market in which we operate is frequently referred to as highly fragmented and competitive.  Our JBI segment competes with other intermodal marketing companies as well as other full-load carriers that utilize railroads for a portion of the transportation service.  Considering the diversified nature of the services provided by our DCS segment, competition ranges from large diversified carriers to local transportation and delivery service 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 on-time pickup and delivery service, price, revenue equipment 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 all federal safety requirements, and we report certain accident and other information to the DOT.  Our operations into and out of Canada and Mexico are also subject to regulation by those countries.

In November 2008, the FMCSA adopted final provisions of the Agency’s December 17, 2007, interim final rule concerning hours of service for commercial vehicle drivers.  This final rule allows drivers to continue to drive up to 11 hours within a 14-hour nonextendable window from the start of the workday, following at least 10 consecutive hours off duty.  The rule also allows motor carriers and drivers to continue to restart calculations of weekly on-duty limits after the driver has at least 34 consecutive hours off duty.  The rule was effective January 19, 2009.  We continue to monitor the actions of the FMCSA.

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 subject to general economic and business factors, any of which could have a material adverse effect on our results of operations.  Recent economic trends and the current tightening of credit in financial markets could adversely affect our ability, and the ability of our suppliers, to obtain financing for operations and capital expenditures.

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.  These factors include interference with, or termination of, our relationships with certain railroads, significant increases or rapid fluctuations in fuel prices, fuel taxes, interest rates, insurance premiums, self-insurance levels, excess capacity in the trucking industry, license and registration fees, terrorist attacks or actions, acts of war, adverse weather conditions, increased costs for new revenue equipment or decreases in the value of used equipment, surpluses in the market for used equipment, and difficulty in attracting and retaining qualified drivers and independent contractors.

We are also affected by recessionary economic cycles and downturns in customers’ business cycles, particularly in market segments and industries such as retail and manufacturing, 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

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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 various Class I railroads, the majority of our business travels on the Burlington Northern Santa Fe and the Norfolk Southern railways.  The inability to utilize one or more of these railroads could have a material adverse effect on our business and operating results.  In addition, a portion of the freight we deliver is imported to the United States through ports of call that are subject to labor union contracts.  Work stoppages or other disruptions at any of these ports could have a material adverse effect on our business.

Our ICS business segment utilizes third-party carriers.  Aside from periodic use of our trailing equipment to fulfill certain loads, we do not own or control the revenue equipment or drivers delivering the loads.  The inability to obtain reliable third-party carriers could have a material adverse effect on our operating results and business growth.

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, 2008, our top 10 customers, based on revenue, accounted for approximately 35% of our revenue.  Our JBI, JBT and ICS segments typically do not have long-term contracts with their customers.  While our DCS segment business may involve a written contract, those contracts may contain cancellation clauses, and there is no assurance that our current customers will continue to utilize our services or that they will 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.

Ongoing insurance and claims expenses could significantly reduce our earnings.

Our future insurance and claims expenses might exceed historical levels, which could reduce our earnings.  During 2006 and 2007, the self-insured portion of our claims exposure for all claims was $500,000 per occurrence.  During 2008, the self-insured portion of our claims was $500,000 per occurrence for personal injury and property damage and $1 million per occurrence for workers’ compensation.  If the number or severity of claims for which we are self-insured increases, our operating results could be adversely affected.  We have renewed our policies for 2009 with substantially the same terms as our 2008 policies.  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 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.

We continue to monitor actions taken by the FMCSA.  Significant changes in hours-of-service regulations and other motor carrier safety regulations could negatively impact our operations due to lower driver productivity or increased capital expenditures for monitoring and recordkeeping equipment.

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Effective with model-year 2007 tractors, the EPA mandated lower emission standards for newly manufactured heavy-duty tractor engines.  The acquisition costs of these new engines have increased by approximately 10%.  A new set of more stringent emissions standards will become effective for newly manufactured tractor engines in January 2010.  While it is too early to assess the impact of the new standards, our fuel costs, operating costs and acquisition costs could be impacted.

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.

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

During the past several years, fuel cost per gallon has varied significantly.  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 prices rise that 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, 2008, we had no derivative financial instruments to reduce our exposure to fuel-price fluctuations.

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

Periodically, we have experienced difficulty in attracting and retaining qualified drivers, including independent contractors.  If we are unable to continue attracting an adequate number of employees or contract with enough independent contractors, we could be required to significantly increase our employee compensation package, let revenue equipment sit idle or dispose of the equipment altogether, which could adversely affect our growth and profitability.  In addition, our ICS segment growth could be limited by an inability to attract third-party carriers which we rely upon to provide transportation services.

We operate in a competitive and somewhat 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 services 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 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

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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 costs relating to towing and other maintenance frequently occur during the winter months of our business.  Natural disasters such as hurricanes and flooding can also impact freight volumes and increase our costs.

ITEM 1B.  UNRESOLVED STAFF COMMENTS

None.

ITEM 2.   PROPERTIES

Our corporate headquarters are in Lowell, Arkansas.  We occupy a number of buildings in Lowell that we utilize for administrative support, data center, primary customer service and freight dispatch.  We maintain a backup data center for disaster recovery, maintenance shop and driver operations facility in Lowell.  We also own or lease approximately 20 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 from seven to 35 acres in size.  Each of our business segments utilizes our larger facilities for services including bulk fueling, maintenance and driver support activities.  In addition to our principal properties listed below, we lease a number of small offices and parking yards throughout the country that support our customers’ business needs.

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

ITEM 3.   LEGAL PROCEEDINGS

We are involved in certain 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 claims and pending litigation will not have a material adverse effect on our financial condition, results of operations or liquidity.

ITEM 4.   SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

There were no matters submitted to a vote of our security holders during the quarter ended December 31, 2008.

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, 2008, we were authorized to issue up to 1 billion shares of our common stock and 167.1 million shares were issued.  The high and low sales prices of our common stock as reported by the National Association

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of Securities Dealers Automated Quotations National Market system (NASDAQ) and the quarterly dividends paid per share on our common shares were:

On February 20, 2009, the high and low sales prices for our common stock as reported by the NASDAQ were $21.94 and $21.21, respectively, and we had 1,345 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, earnings, capital requirements and any other factors the Board of Directors may deem relevant.  In February 2009, we announced an increase in our quarterly cash dividend from $0.10 to $0.11, which was paid February 26, 2009, to stockholders of record on February 12, 2009.  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

On April 21, 2005, our Board authorized the purchase of $500 million of our common stock over the next five years.  Purchases under that authorization were completed in March 2007.  On May 2, 2007, our Board authorized up to $500 million in additional purchases of our common stock over the next 12 months, which were completed by December 31, 2007.  There were no stock purchases during calendar year 2008.

Stock Performance Graph

The following graph compares the cumulative five-year total return to stockholders of our common stock relative to the cumulative total returns of the S&P 500 index and two customized peer groups of companies that include a former peer group and a new peer group.  The former peer group consists of eight companies: CH Robinson Worldwide Inc., Covenant Transportation Group Inc., Heartland Express Inc., Knight Transportation Inc., Landstar System Inc., Pacer International Inc., Ryder System Inc. and Werner Enterprises Inc.  The new peer group consists of 13 companies: Arkansas Best Corp., CH Robinson Worldwide Inc., CON-Way Inc., Expeditor International Of Washington, HUB Group Inc., Kansas City Southern, Landstar System Inc., Old Dominion Freight Line Inc., Pacer International Inc., Ryder System Inc., UTI Worldwide Inc., Werner Enterprises Inc. and YRC Worldwide Inc.  The new peer group was developed to reflect a better representation of our evolving business model.  The graph assumes that the value of the investment in our common stock, in each of the peer groups, and in the index (including reinvestment of dividends) was $100 on 12/31/2003 and tracks it through 12/31/2008.  The stock price performance included in this graph is not necessarily indicative of future stock price performance.

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COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN

Among J.B. Hunt Transport Services, Inc., The S&P 500 Index

And Peer Groups

Securities Authorized For Issuance Under Equity Compensation Plans

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ITEM 6.   SELECTED FINANCIAL DATA

(Dollars in millions, except per share amounts)

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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 (workers’ compensation), vehicular collisions, accidents and cargo claims.  Most of our insurance arrangements include a level of self-insurance (deductible) coverage applicable to each claim, but provide an umbrella policy to limit our exposure to catastrophic claim costs that are completely insured.  Our policies also include a contractual premium adjustment factor to be applied to incurred loss amounts at the end of 48 months from each policy period inception.  This contractual premium adjustment factor is used to convert

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the self-insured losses to fully insured losses and relieves us of any further liability on those claims.  Our estimated accrual of ultimate losses includes these premium adjustment factors as part of the liability we recognize when the accidents occur.

The amounts of self-insurance change from time to time based on certain measurement dates and policy expiration dates.  During 2006 and 2007, we were self-insured for $500,000 per occurrence for personal injury, property damage and workers’ compensation.  For 2008, we were self-insured for $500,000 per occurrence for personal injury and property damage and $1 million for workers’ compensation.  We have renewed our policies for 2009 with substantially the same terms as our 2008 policies.

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 the contractual premium adjustment factor mentioned above.  In doing so, the recorded liability considers future claims growth and 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, 2008, we had an accrual of approximately $18 million for estimated net claims.  In addition, we are required to pay certain advanced deposits and monthly premiums.  At December 31, 2008, we had a prepaid insurance asset of approximately $50 million, which represented prefunded claims and premiums.  We are also substantially self-insured for loss of and damage to our owned and leased revenue equipment.

Revenue Equipment

We operate a significant number of tractors, trucks, containers and trailers in connection with our business.  This equipment may be purchased or acquired under operating lease agreements.  In addition, we may rent revenue equipment from third parties and various railroads under short-term rental arrangements.  Revenue equipment that is purchased is depreciated on the straight-line method over the estimated useful life down 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.  See Note 2, Summary of Significant Accounting Policies, in our Consolidated Financial Statements, for a discussion of our plan to sell certain revenue equipment.  We have not identified any impairment to our remaining assets at December 31, 2008.

We have an agreement with our primary tractor supplier 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 tractor supplier were unable to perform under the terms of our agreement 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 carrier selection with respect to our ICS business.

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Our trade accounts receivable includes accounts receivable 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 collectibility.  The adequacy of our allowance is reviewed quarterly.

Income Taxes

We account for income taxes under the asset-and-liability method in accordance with current accounting standards.  Our deferred tax assets and liabilities represent items that will result in taxable income or a tax deduction 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 compared with when they are recognized in our tax returns.  We assess the likelihood that deferred tax assets will be recovered from future taxable income.  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.  We have not recorded a valuation allowance at December 31, 2008, as all deferred tax assets are more likely than not to be realized.

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 more likely than not of being sustained upon audit, we accrue the largest amount of the benefit that is 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 6, Income Taxes, in our Consolidated Financial Statements, for a discussion of our current tax contingencies.

YEAR IN REVIEW

Significant events for calendar year 2008 include:

·                  Reported seventh consecutive year of record revenues

·                  Reduced our total debt by approximately $280 million or 31%

·                  Continued strategy of transitioning our economic model from that of a primarily asset-based truckload carrier to an asset-light transportation company

·                  Designated approximately 1,100 trailers in our JBT segment to be sold or traded in 2009 in connection with our strategy to reduce the JBT segment fleet size to the appropriate level

·                  Increased our quarterly dividend to $0.10 per share in January 2008 from $0.09 in 2007, and announced an increase to $0.11 per share effective February 2009

Our 2008 net earnings of $200.6 million, or $1.56 per diluted share, were down 6% from the $213.1 million, or $1.55 per diluted share, earned in 2007.  A slowing freight environment and increased fuel costs were our major challenges for 2008.  Despite decreasing fuel prices in the second half of 2008, compared with the first half, fuel costs continued to represent a challenge for the transportation industry during 2008.  Our 2008 fuel cost per gallon averaged 30% above 2007 levels.  However, due to our fuel surcharge programs, we were able to recover the majority of our higher fuel costs.

Freight demand during 2008 was up for our JBI and ICS segments.  Demand for dry-van truck capacity was softer, particularly during the fourth quarter 2008.  Our JBI and ICS segments grew operating income by 6% and 146%, respectively.  DCS showed a small decline in operating income of 2%

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while JBT declined 96% from 2007.  In response to changing market conditions and a continued focus on growing segments that produce the greatest return on invested capital, we increased our JBI tractor and container counts by 18% and 15%, respectively, as well as increased our DCS trailer count by 11%.  We reduced our JBT company-owned tractor fleet by 27%, excluding tractors designated as held for sale.  We were able to effect some of these changes by transferring revenue equipment among our fleets.

Our 2008 consolidated operating ratio (operating expenses divided by total operating revenues) was 90.4%, compared with 89.4% in 2007.  Our 2008 operating income reflected $3.9 million of pretax charges to write down the value of certain assets held for sale.  Operating income in 2007 reflected $8.4 million of pretax charges related to assets held for sale.

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 as compared with the prior year.

2008 Compared With 2007

Consolidated Operating Revenues

Our total consolidated operating revenues rose to $3.7 billion in 2008, a 6.9% increase over 2007.  Significantly higher fuel prices resulted in fuel surcharge (FSC) revenues of $730 million in 2008, compared with $480 million in 2007.  This FSC revenue impacted our year-to-year comparison.  If FSC revenues were excluded from both years, our 2008 revenue decreased less than 1% from 2007.  A 13.5% and 117.3% increase in 2008 JBI and ICS load volume, respectively, contributed to our higher levels of revenue.  The increases in revenue of our JBI and ICS segments were partially offset by decreases in our DCS segment as a result of decreased activity for delivery service accounts due to the overall economic slowdown and weak housing market.  Our JBT segment revenue decreased as a result of rate declines and reduced tractor utilization, as a result of decreasing freight demand in the JBT segment.

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Consolidated Operating Expenses

Our total 2008 consolidated operating expenses increased 8.1% over 2007 and offset the impact of the 6.9% increase in 2008 revenue over 2007 that resulted in a slight increase in our operating ratio to 90.4% from 89.4% in 2007.  Rents and purchased transportation costs rose 19.7% in 2008, primarily due to additional funds paid to railroads, drayage companies and third-party carriers servicing ICS.  The total cost of salaries, wages and employee benefits decreased 3.3% in 2008 from 2007, primarily due to decreases in total driver pay.  This reduction in total driver pay was primarily the result of a 24% decrease in the number of drivers in the JBT segment.

Fuel and fuel taxes expense increased 12.3% in 2008, primarily due to 29.7% higher fuel cost per gallon and slightly lower fuel miles per gallon.  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 incorporate fuel cost increases as frequently as weekly, most also reflect a specified miles-per-gallon factor and require a certain minimum change in fuel costs (e.g., $0.05 per gallon) to trigger an increase in fuel surcharge revenue.  As a result, some of these programs have a timing lag between when the cost is incurred and when it is recovered.  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 costs is included in our payments to railroads, dray carriers and other third parties. These payments are classified as purchased transportation expense. While we are not always able to recover all fuel cost increases, partly due to empty miles run and engine-idling time, we are typically able to recover the majority of our increased fuel costs.

Two additional factors related to fuel costs and fuel surcharge revenue primarily impact JBT operating income when fuel costs change rapidly.  Some freight services incur empty miles and we may be unable to charge fuel surcharge revenue on those miles.  In addition, most systems and software applications utilized in the truckload industry for measuring miles and billing revenue result in computations that average 10% to 12% fewer miles than what is actually traveled (hub miles). The combination of these two factors frequently results in no fuel surcharge revenue billed for approximately 20% to 25% of the applicable miles actually traveled.  During times of rapidly changing fuel costs, operating income from these services can be significantly impacted.

The 1.4% decrease in depreciation and amortization expense was due to fewer tractors owned in our JBT and DCS segments.  Operating supplies and expenses rose 1.5% in 2008, primarily as a result of increased costs in airfare and travel expenses.  Insurance and claims expense decreased 12.8% due to fewer accidents and lower claims costs.  The 14.2% decrease in general and administrative expenses was primarily due to a decrease in other driving expenses due to a decrease in the number of drivers, and a decrease in the charge to write down to estimated fair value certain assets held for sale compared with the 2007 write-down.  In addition, gains on asset sales were $1.2 million in 2008 compared with losses on asset sales of $0.4 million in 2007.

Net interest expense for 2008 decreased by 18.9% compared with 2007.  This decrease was due to reduced outstanding debt balances as well as reduced interest rates on our variable rate debt.  Interest expense was further reduced by a refund of interest previously paid to the Internal Revenue Service (IRS) from the 1999 tax case settlement and lower accrued interest on uncertain tax positions.

Our effective income tax rate was 37.8% in 2008 and 34.4% in 2007.  The increase in 2008 was primarily due to the 2007 rate being reduced by our 1999 tax case settlement in 2007.  See the section comparing 2007 with 2006 operating results for further details of this settlement.  We expect our effective income tax rate to approximate 38% for calendar year 2009. The “equity in loss of affiliated company” item on our Consolidated Statement of Earnings reflects our share of the operating results of TPI.

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Segments

We operated four business segments during calendar year 2008.  The operation of each of these businesses is described in our notes to the Consolidated Financial Statements.  The following tables summarize financial and operating data by segment:

Operating Revenue by Segment

Operating Income by Segment

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Operating Data by Segment