4)3.         Capital Stock

The Company maintainsWe have a Managementstock option plan (Management Incentive PlanPlan) that provides various vehiclesfor the awarding of our common stock and stock options to compensate key employees with Company common stock.employees.  A summary of the restricted and non-statutory options to purchase Companyour common stock follows:

            We revised our Management Incentive Plan in January of 2002.  The Company announcedamendments included changes in Februaryvesting provisions and changes in the process of 2000, a decisiongranting options to discontinue paying dividends and an intent to use those funds to repurchase up to 500,000 shares of its common stock.  These shares were repurchased during the first six months of 2000.certain employees.

5)4.         Earnings Per Share

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

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

6)5.         Comprehensive Income

            Comprehensive income consists of net earnings and foreign currency translation adjustments.  During the three and six months ended September 30,March 31, 2002 and 2001, and 2000, comprehensive income was equal to:  (in thousands):

7)6.         Income Taxes

            The effective income tax rates were approximately 15% for the three months ended March 31, 2002 and nine months ended September 30, 2001, compared with 4% for the three months and 15% for the nine months ended September 30, 2000.  These rates were based on the estimated annual combined effective rates for each calendar year.of 23.5% and 27.5% respectively.

8)7.         Business Segments

            The Company hadWe operated three reportabledistinct business segments during the first nine monthsquarter of 2001.  Segments included2002.  These segments included:  Truck (JBT), Intermodal (JBI) and Dedicated Contract Services (DCS).  JBT business includes full truck-load, dry-van freight whichThe operation of each of these businesses is typically transported utilizing company-owned or controlled revenue equipment.  This freight is typically transported over roads and highways and does not move by rail.  The JBI segment includes freight which is transported by rail over at least some portiondescribed in footnote (10) of our annual report (Form 10-K) for 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 typically includes company-owned revenue equipment and employee drivers which are assigned to a specific customer, traffic lane or service.  DCS operations usually include formal, written long-term agreements or contracts which govern services performed and applicable rates.

                In addition, the Company operated a logistics business segment during the first six months of 2000.  Effective July 1, 2000, substantially all of the logistics business and related assets were contributed to a newly-formed, commonly-owned company, Transplace (TPC).  The Company presently has an approximate 27% interest in TPC and the financial results of TPC are included on a one-line, non-operating item on the Consolidated Statements of Earnings entitled “equity in earnings (loss) of associated companies.”year ended December 31, 2001.  A summary of certain segment information is presented below ((in millions):

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8.Reclassifications

We have reclassified certain amounts from our 2001 financial statements  so they will be consistent with the way we have classified amounts in millions):2002.

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9)      Derivative Instruments and Hedging Activities

            On January 1, 2001, the Company adopted the provisions of Statement of Financial Accounting Standards No. 133, “Accounting for Derivative Instruments and Hedging Activities” (Statement 133), amended by Statement 138.  Statement 138 amended the accounting and reporting standards of Statement 133 for certain derivative instruments and hedging activities.  Statement 138 also amends Statement 133 for decisions made by the FASB relating to the Derivatives Implementation Group (DIG) process.  The FASB DIG is addressing Statement 133 implementation issues the ultimate resolution of which may impact the application of Statement 133.

Under Statement 133, entities are required to record all derivative instruments on the balance sheet at fair value.  The accounting for changes in the fair value of a derivative instrument depends on whether it has been designated and qualifies as part of a hedging relationship and, if so, on the reason for holding it.  If certain conditions are met, entities may elect to designate a derivative instrument as a hedge of exposures to changes in fair values, cash flows, or foreign currencies.  If the hedged exposure is a fair value exposure, the gain or loss on the derivative instrument is recognized in earnings in the period of change together with the offsetting loss or gain on the hedged item attributable to the risk being hedged.  If the hedged exposure is a cash flow exposure, the effective portion of the gain or loss on the derivative instrument is reported initially as a component of other comprehensive income (outside earnings) and subsequently reclassified into earnings when the forecasted transaction affects earnings.  Any amounts excluded from the assessment of hedge effectiveness as well as the ineffective portion of the gain or loss is reported in earnings immediately.

Adoption of  Statement 133, as of January 1, 2001, did not have an effect on results of operations or financial position of the Company, because the Company does not have any free standing derivatives or embedded derivatives that would be required to be separated from the host contract and accounted for under SFAS 133.

10)      Reclassifications

            Certain amounts for 2000 have been reclassified to conform to the 2001 classifications.

INDEPENDENT ACCOUNTANTS’ REVIEW REPORT

The Board of Directors

J.B. Hunt Transport Services, Inc.:

We have reviewed the accompanying condensed consolidated balance sheet of J.B. Hunt Transport Services, Inc. and subsidiaries as of September 30, 2001,March 31, 2002, and the related condensed consolidated statements of earnings for the three and nine months ended September 30, 2001 and 2000, and the condensed consolidated statements of cash flows for the nine monthsthree-month periods ended September 30, 2001March 31, 2002 and 2000.2001.  These condensed consolidated financial statements are the responsibility of the Company’s management.

We conducted our review in accordance with standards established by the American Institute of Certified Public Accountants.  A review of interim financial information consists principally of applying analytical procedures to financial data and making inquiries of persons responsible for financial and accounting matters.  It is substantially less in scope than an audit in accordance with auditing standards generally accepted in the United States of America, the objective of which is the expression of an opinion regarding the financial statements taken as a whole.  Accordingly, we do not express such an opinion.

Based  on our review, we are not aware of any material modifications that should be made to the condensed consolidated financial statements referred to above for them to be in conformity with accounting principles generally accepted in the United States of America.

We have previously audited, in accordance with auditing standards generally accepted in the United States of America, the consolidated balance sheet of J.B. Hunt Transport Services, Inc. and subsidiaries as of December 31, 2000,2001, and the related consolidated statements of earnings, stockholders’ equity, and cash flows for the year then ended (not presented herein); and in our report dated February 2, 2001,1, 2002, we expressed an unqualified opinion on those consolidated financial statements.  In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of December 31, 2000,2001, is fairly presented, in all material respects, in relation to the consolidated balance sheet from which it has been derived.  Our report dated February 1, 2002, contains an explanatory paragraph that refers to a restatement of retained earnings to reflect an increase in insurance claims payable.

                                                                                                                                       & #160;        /s/ KPMG LLP

/s/ KPMG LLP

Tulsa, Oklahoma

OctoberApril 15, 20012002

ITEM 2.2.  MANAGEMENT’S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION

The following discussionYou should be read in conjunction withrefer to the attached interim condensed consolidated financial statements and related notes thereto, and with the Company’s audited consolidated financial statements and notes theretoalso to our annual report (Form 10-K) for the calendar year ended December 31, 20002001 as you read the following discussion.  We may make statements in this report and Management’s Discussionin documents we incorporate by reference that reflect our current expectation regarding future results of operations, performance and Analysis of Results of Operations and Financial Condition included in the 2000 Annual Report to Shareholders.

This report contains statements that may be considered as forward-looking or predictions concerning future operations.  Such statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995.achievements.  These “forward-looking” statements are based on management’sour belief or interpretation of information currently available.  ShareholdersYou should realize there are many risks and prospective investors are cautioneduncertainties that could cause actual results and experience mayto differ materially from the forward-looking statements as a result of many factors.those described.  Among all the factors and events that are not within the Company’sour control and could have a materialsignificant impact on future operating results are general economic conditions, cost and availability of diesel fuel, adverse weather conditions, and competitive rate fluctuations and availability of drivers.  Current and future changes in fuel prices could result in significant fluctuations of quarterly earnings.  FinancialOur future financial and operating results of the Company may fluctuate as a result of these and other risk factors as detaileddescribed from time to time in Companyour filings with the Securities and Exchange Commission.

                General

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

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

            Certain amounts included in or affecting our financial statements and related disclosures must be estimated, requiring certain assumptions with respect to values or conditions that cannot be known with certainty at the time the financial statements are prepared.

            The preparation of financial statements in conformity with generally accepted accounting principles requires us to make estimates and assumptions that affect:

•the amounts reported for assets and liabilities;

•the disclosure of contingent assets and liabilities at the date of the financial statements; and

•the amounts reported for revenues and expenses during the reporting period.

            Therefore, the reported amounts of assets and liabilities, revenues and expenses and associated disclosures with respect to contingent assets and obligations are necessarily affected by these estimates.  We evaluate these estimates on an ongoing basis, utilizing historical experience, consultation with experts and other methods considered reasonable in the particular circumstances.  Nevertheless, actual results may differ significantly from estimates.  Any effects on business, financial position or results of operations resulting from revisions to these estimates are recorded in the period in which the facts that give rise to the revision become known.

            In preparing financial statements and related disclosures, we must use estimates in determining the economic useful lives of assets, provisions for uncollectible accounts receivable, exposures under self-insurance plans and various other recorded or disclosed amounts.  However, we believe that certain accounting policies are of more significance in the financial statement preparation process than others and are discussed below.  To the extent that actual outcomes differ from our estimates, or additional facts and circumstances cause us to revise estimates, earnings will be affected.

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            Workers’ Compensation and Accident Costs

            We purchase insurance coverage for a portion of expenses related to employee injuries (workers’ compensation), vehicular collisions and accidents and cargo claims.  Most insurance arrangements include a level of self insurance (deductible) coverage applicable to each claim, but provide an umbrella policy to limit our exposure to catastrophic claim costs that are completely insured.  The amounts of self insurance change from time to time based on certain measurement dates and policy expiration dates.  Our current insurance coverage specifies that the first $5,000 of any claim is self insured and the self insured limit on certain claims is $1.5 million effective January 1, 2002, which is prefunded with our insurance carrier.  We are substantially self insured for loss of and damage to our owned and leased revenue equipment.  Our safety and claims personnel work directly with representatives from the insurance companies to continually update the estimated ultimate cost of each claim.  At March 31, 2002, we had approximately $17 million of estimated net claims payable.  In addition, we are required to pay certain advanced deposits and monthly premiums.  At March 31, 2002, we had a prepaid insurance asset of approximately $31 million.

            Revenue Equipment

            We operate a significant number of tractors, trailers and containers in connection with our business.  This equipment may be purchased or acquired under capital or operating leases.  In addition, we may rent revenue equipment from third parties and various railroads under short-term rental arrangements.  Revenue equipment which is purchased is depreciated on the straight-line method over the estimated useful life down to an estimated salvage or trade-in value.  Equipment acquired under capital leases is initially recorded at the net present value of the minimum lease payments and amortized on the straight-line method over the lease term or the estimated useful life, which ever is shorter.

            We have an arrangement with our primary tractor supplier for fixed residual or trade-in values for certain new equipment acquired since 1999.  We have utilized these values in accounting for purchased and leased tractors.  If the supplier is unable to perform under the terms of such agreements, it could have a material negative impact on our financial results.

            Revenue Recognition

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

SEGMENTS

            We operated three segments during the first quarter of 2002.  These segments included:  Truck (JBT, Intermodal (JBI) and Dedicated Contract Services (DCS).  The operation of each of these businesses is described in footnote 10 of our annual report (Form 10-K) for the year ended December 31, 2001.

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RESULTS OF OPERATIONS

Comparison of Third Quarter 2001 to Third Quarter 2000

SUMMARY

            Consolidated operating revenues for the third quarter of 2001 were $537 million, compared with $509 million during the third quarter of 2000.  The Company contributed all of its non-asset based logistics business to a jointly owned logistics company, Transplace (TPC), effective July 1, 2000.  While the Company’s results of operations include approximately 27% of TPC’s net results of operations, all logistics revenue has been excluded from the Company’s financial statements subsequent to June 30, 2000.

            JBT segment revenue grew 1% during the third quarter of 2001, to $210 million, compared with $208 million in 2000.  The JBT tractor fleet was 36 units larger at September 30, 2001, compared with September 30, 2000.  This increase included independent contractor tractors which the Company began utilizing in late 2000.  Revenue per loaded mile in the JBT segment, excluding fuel surcharges, rose 3.4% in the current quarter, compared with the third quarter of 2000.  The  JBT segment generated operating income of  $4.8 million during the third quarter of 2001, compared with a loss of $1.9 million in 2000.  The current quarter results represent the second quarter of positive operating income since the Company began reporting the Truck segment separately from Intermodal.  The improvement in JBT operating income during the current quarter was partly due to higher revenue per mile, strong September load volume and cost reduction initiatives, such as reduced empty miles per load.

            Revenue in the JBI segment rose 9% to $194 million in 2001, compared with $178 million in 2000.  Revenue per mile, excluding fuel surcharges, increased 1.1% in 2001, compared with the third quarter of 2000.  Operating income in the JBI segment was $11.4 million in 2001, compared with $10.3 million in 2000.

            DCS segment revenue increased 8% to $138 million in 2001 from $128 million in 2000.  Operating income declined to $1.7 million in 2001 from $8.0 million in 2000.  The decrease in operating income during the current quarter was primarily due to lower revenue per tractor, associated with the weak economy, and higher accident, equipment and personnel costs.

Summary of Operating Segments Results

For The Three Months Ended September 30March 31

(dollars in millions)

            Overview

            Our total consolidated operating revenue for the first quarter of 2002 was $510 million, up 3% over the $495 million in the first quarter of 2001.  The current quarter’s revenue was reduced by $18.4 million of fuel surcharge revenue due to lower fuel prices.  Excluding this reduction in fuel surcharges, total revenue increased 7%.

            JBT segment revenue declined 8%, to $188 million for the first quarter of 2002, compared with $204 million in 2001.  If the amount of fuel surcharge revenue was excluded from both the 2002 and 2001 periods, the decline in JBT revenue would have been 4%.  This 4% decrease in revenue was primarily a result of an approximate 7% decline in miles per tractor, partly offset by an approximate 3% increase in revenue per loaded mile, exclusive of fuel surcharges.  The lower miles per tractor (productivity) was primarily due to relatively soft freight levels during January and the first half of February.  While JBT generated an operating loss of $2.2 million for the first quarter of 2002, the comparable loss in 2001 was $3.2 million, which included a $4.1 million gain on the sale of a group of older trailers.  This improvement in results was in spite of relatively soft freight levels in 2002.  The improved financial results in 2002 were partly due to the higher revenue per loaded mile, reduced empty miles and slightly lower driver pay costs.  The higher revenue per mile and reduced empty miles were a result of our focus on yield management, an initiative which began last year.

            JBI segment revenue increased 10%, to $185 million during the first quarter of 2002, compared with $168 million in 2001.  If the amount of fuel surcharge revenue was excluded from both the 2002 and 2001 periods, the increase in JBI revenue would have been 14%.  The increase in revenue was primarily due to an approximate 6% increase in load volume and a separate 6% increase in revenue per load.  The higher revenue per load was a result of changes in freight mix which generated a longer average length of haul.  Revenue was also enhanced by an approximate 1.4% increase in revenue per loaded mile.  Operating income of the JBI segment was $10.5 million in the first quarter of 2002, compared with $7.3 million in 2001.  This increase was primarily due to higher revenue levels and reduced dray cost per load.  In addition, operating income benefited from the higher revenue per loaded mile and lower equipment ownership and maintenance expenses.

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            The DCS segment increased revenue 12% during the current quarter, to $143 million, from $128 million in the comparable period of 2001.  If the amount of fuel surcharge revenue was excluded from both the 2002 and 2001 periods, the increase in DCS revenue would have been 15%.  This increase in DCS segment revenue was driven by an approximate 13% increase in the average size of the tractor fleet.  DCS was also able to improve the utilization of segment assets which increased revenue per tractor in the first quarter of 2002.  Operating income rose to $5.3 million in the first quarter of 2002 from $4.3 million in 2001.  The 2001 results included a $1.3 million gain on the sale of some older trailers.  The improvement in 2002 operating income was partly due to the better utilization of tractors in service and efforts to reduce costs, including driver wages.  The improved operating income in 2002 was also in spite of approximately 200 tractors parked during the current quarter.

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