UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q10-Q/A

Amendment No. 1

(Mark One)

Forthe quarterly period ended June 30,March 31, 20178

OR

Commission File Number: 0-11757

J.B. HUNT TRANSPORT SERVICES, INC.

(Exact name of registrant as specified in its charter)

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

(Address of principal executive offices)

479-820-0000

(Registrant's telephone number, including area code)

www.jbhunt.com

(Registrant's web site)

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

Yes  X           No        

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

   Yes   X            No         

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

Large accelerated filer  X    Accelerated filer        Non-accelerated filer       

Smaller reporting company       Emerging growth company       

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

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

            Yes            No X             

The number of shares of the registrant’s $0.01 par value commoncommon stock outstanding on June 30March 31, 201, 20178 was109,435,453.109,755,618.

EXPLANATORY NOTE

This Amendment No. 1 on Form 10-Q/A to the J. B. Hunt Transport Services, Inc., Quarterly Report on Form 10-Q, as originally filed with the Securities and Exchange Commission on April 27, 2018 (the “Original Filing”), is being filed solely to correct a typographical error in “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”  The Original Filing disclosed Eastern network load volume decreased 12%, when it should have stated load volume increased 12%.  Specifically, page 13 of the Original Filing included the sentence: “Transcontinental loads grew 2% during the first quarter 2018, while the Eastern network load volume was down 12% compared to the first quarter 2017.”  The sentence has been amended to state the following: “Transcontinental loads grew 2% during the first quarter 2018, while the Eastern network load volume grew 12% compared to the first quarter 2017.”

Except as described above, no other changes have been made to the Original Filing.  We have restated the entire filing for convenience to the reader.  This Form 10-Q/A does not does reflect subsequent events that may have occurred since the date of the Original Filing or amend, update or change the financial statements or any other items or disclosures in the Original Filing.  In accordance with Rule 12b-15 under the Securities Exchange Act of 1934, as amended, we have included new certifications from our Chief Executive Officer and Chief Financial Officer dated the date of this Form 10-Q/A.

J.B. HUNT TRANSPORT SERVICES, INC.

Form 10-Q

For The QuarterlyQuarterly Period Ended June 30,March 31, 20178

Table of Contents

Part I.    Financial Information

ITEM 1.   FINANCIAL STATEMENTS

J.B. HUNT TRANSPORT SERVICES, INC.

Condensed Consolidated Statements of Earnings

(in thousands, except per share amounts)

(unaudited)

See Notes to Condensed Consolidated Financial Statements.

J.B. HUNT TRANSPORT SERVICES, INC.

Condensed Consolidated Balance Sheets

(in thousands)

See Notes to Condensed Consolidated Financial Statements.

J.B. HUNT TRANSPORT SERVICES, INC.

Condensed Consolidated Statements of Cash Flows

(in thousands)

(unaudited)

See Notes to Condensed Consolidated Financial Statements.

J.B. HUNT TRANSPORT SERVICES, INC.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

We compute basic earnings per share by dividing net earnings available to common stockholders by the actual weighted average number of common shares outstanding for the reporting period. Diluted earnings per share reflects the potential dilution that could occur if holders of unvested restricted and performance share units or vested and unvested stock options exercised or converted their holdings into common stock. The dilutive effect of restricted and performance share units and stock options was 1.21.1 million shares during the secondfirst quarter 2017, compared to 1.1 million shares during second2018 and the first quarter 2016. During the six months ended June 30, 2017 and 2016, the dilutive effect of restricted and performance share units and stock options was 1.2 million shares and 1.0 million shares, respectively.2017.

On October 22, 2015, our Board of Directors authorized the purchase of $500$500 million of our common stock. On April 20, 2017, our Board of Directors authorized an additional purchase of up to $500$500 million of our common stock. At June 30, 2017, $521March 31, 2018, $521 million of the combined authorization was remaining. We purchased approximately 1,892,000did not purchase any shares or $180 million, of our common stock under our repurchase authorizationsauthorization during the sixthree months ended June 30, 2017. March 31, 2018. On January 24, 2018, we announced an increase in our quarterly cash dividend from $0.23 to $0.24, which was paid February 23, 2018, to stockholders of record on February 9, 2018. On April 20, 2017, 19, 2018, our Board of Directors declared a regular quarterly dividend of $0.23 per common share, which was paid on May 19, 2017, to stockholders of record on May 5, 2017. On July 20, 2017, our Board of Directors declared a regular quarterly dividend of $0.23$0.24 per common share, which will be paid on AugustMay 18, 2017, 2018, to stockholders of record on August 7, 2017.May 4, 2018.

ITEM 2.     MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION ANDRESULTS OFOPERATIONS

You should refer to the attached interim Condensed Consolidated Financial Statements and related notes and also to our Annual Report (Form 10-K) for the year ended December 31, 2016,2017, as you read the following discussion. We may make statements in this report that reflect our current expectation regarding future results of operations, performance, and achievements. These are “forward-looking” statements as defined in the Private Securities Litigation Reform Act of 1995, and are based on our belief or interpretation of information currently available. You should realize there are many risks and uncertainties that could cause actual results to differ materially from those described. Some of the factors and events that are not within our control and could have a significant impact on future operating results are general economic 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, costrail service delays, insurance costs and availability, claims expense, retention of fuel, accidents,key employees, terrorist attacks or actions, acts of war, adverse weather conditions, disruption or failure of information technology systems, competitive rate fluctuations, availabilitynew or different environmental or other laws and regulations, operational disruption or adverse effects of drivers, adverse legal decisionsbusiness acquisitions, increased costs for new revenue equipment or decreases in the value of used equipment, and audits or tax assessmentsthe ability of various federal, state, or local taxing authorities.revenue equipment manufacturers to perform in accordance with agreements for guaranteed equipment trade-in values. Additionally, our business is somewhat seasonal with slightly higher freight volumes typically experienced during August through early November in our full-load transportation business. You should also refer to Item 1A of our Annual Report (Form 10-K) for the year ended December 31, 2016,2017, for additional information on risk factors and other events that are not within our control. Our future financial and operating results may fluctuate as a result of these and other risk factors as described from time to time in our filings with the SEC.

GENERAL

We are one of the largest surface transportation, delivery, and logistics companies in North America. We operate four distinct, but complementary, business segments and provide a wide range of transportation and delivery services to a diverse group of customers throughout the continental United States, Canada, and Mexico. Our service offerings include transportation of full-truckload containerized freight, which we directly transport utilizing our company-controlled revenue equipment and company drivers or independent contractors. We have arrangements with most of the major North American rail carriers to transport freight in containers or trailers, while we perform the majority of the pickup and delivery services. We also provide customized freight movement, revenue equipment, labor, systems, and delivery services that are tailored to meet individual customers’ requirements and typically involve long-term contracts. These arrangements are generally referred to as dedicated services and may include multiple pickups and drops, local and home deliveries, freight handling, specialized equipment, and freight network design. Our local and home delivery services typically are provided through a network of cross-dock service centers throughout the continental United States. Utilizing a network of thousands of reliable third-party carriers, we also provide comprehensive transportation and logistics services. In addition to dry-van, full-load operations, these unrelated outside carriers also provide flatbed, refrigerated, less-than-truckload (LTL), and other specialized equipment, drivers, and services. Also, we utilize a combination of company-owned and contracted power units to provide traditional over-the-road full truckload delivery services. We account for our business on a calendar year basis, with our full year ending on December 31 and our quarterly reporting periods ending on March 31, June 30, and September 30. The operation of each of our four business segments is described in Note 11,13, Segment Information, of our Annual Report (Form 10-K) for the year ended December 31, 2016.2017.

Critical Accounting Policies and Estimates

The preparation of our financial statements in conformity with U.S. GAAP requires us to make estimates and assumptions that impact the amounts reported in our Condensed Consolidated Financial Statements and accompanying notes. Therefore, the reported amounts of assets, liabilities, revenues, expenses and associated disclosures of contingent liabilities are affected by these estimates. We evaluate these estimates on an ongoing basis, utilizing historical experience, consultation with experts and other methods considered reasonable in the particular circumstances. Nevertheless, actual results may differ significantly from our estimates. Any effects on our business, financial position or results of operations resulting from revisions to these estimates are recognized in the accounting period in which the facts that give rise to the revision become known.

Information regarding our Critical Accounting Policies and Estimates can be found in our Annual Report (Form 10-K).  The critical accounting policies that we believe require us to make more significant judgments and estimates when we prepare our financial statements include those relating to self-insurance accruals, revenue equipment, revenue recognition and income taxes.  We have discussed the development and selection of these critical accounting policies and estimates with the Audit Committee of our Board of Directors.  In addition, Note 2,Summary of Significant Accounting Policies, to the financial statements in our Annual Report (Form 10-K) for the year ended December 31, 2016,2017, contains a summary of our critical accounting policies.  There have been no material changes to the methodology we apply for critical accounting estimates as previously disclosed in our Annual Report on Form 10-K.

RESULTS OF OPERATIONS

Comparison of Three Months Ended June 30,March 31, 20178 to ThreeThree Months Ended June 30, 201March 31, 62017

Total consolidated operating revenues were $1.73 billion for second quarter 2017, compared with $1.62increased to $1.95 billion for the secondfirst quarter 2016. Current2018, a 20% increase from $1.63 billion in the first quarter total operating revenue,2017, and a 17% increase excluding fuel surcharge revenue, increased 5% versus the comparable quarterrevenues. This increase in 2016. This increaseoperating revenues was primarily due to a 6% increase in load growth of 5%volumes and an 8% increase in revenue per load in JBI, a 5%26% increase in revenues in DCS related to new customer contracts and rate increases from more mature customer contracts, and a 6% increase in load volume and a 34% increase in revenue producingper load in ICS over the same period in 2017. JBT revenue decreased 1% primarily from fewer seated trucks in DCS, and load growth of 20% in ICS.compared to a year ago.

JBI segment revenue increased 7%,14% to $1.0$1.07 billion during the secondfirst quarter 2017,2018, compared with $933$937 million in 2016. This2017. Load volumes during the first quarter 2018 grew 6% over the same period 2017. Transcontinental loads grew 2% during the first quarter 2018, while the Eastern network load volume grew 12% compared to the first quarter 2017. The 14% increase in segment revenue was primarily a result of a 5% increase in loaddue to the 6% volume and a 2%growth, combined with an 8% increase in revenue per load, which is determined by the combination of changes incustomer rates, fuel surcharges and freight mix, customer rate changes, and fuel surcharge revenue, compared to a year ago.mix. Revenue per load excluding fuel surcharges, decreased 1% from the second quarter 2016. Transcontinental load volumesurcharge revenue increased 10% while Eastern network volumes decreased 2%4% year over the second quarter 2016. Operating income of theyear. JBI segment operating income increased 4%20%, to $109.7$114.2 million in the secondfirst quarter 2017,2018, from $105.6$95.3 million in 2016.2017. Benefits from volume growth, customer rate increases, and dray fleet productivityfreight mix were partially offset by increasedan increase in rail purchased transportation costs, higher driver wagecosts; reduced network utilization and retention costs, higher driver recruiting expenses, increased technology developmentlower dray efficiency created from rail congestion, customer equipment pool utilization and modernization costs anda tight third party dray market; higher equipment ownership costs.costs; increased driver wages and recruiting costs; increased costs for onboarding and integration of container tracking technologies and insurance and claims costs compared to the first quarter 2017. The current period ended with approximately 85,60089,500 units of trailing capacity and 5,3005,450 power units availableassigned to the dray fleet.

DCS segment revenue increased 8%,26% to $412$494 million in the secondfirst quarter 2017,2018 from $383$392 million in 2016.2017. Productivity, defined as revenue per truck per week, increased by approximately 2% versus 2016, while productivity5% when compared to 2017. Productivity excluding fuel surcharges was flat from a year ago. The increase in revenue wasincreased 2%, primarily a result of better integration of assets between customer accounts anddue to customer rate increases partially offset by lower productivity under new customer contracts implementeda more impactful winter weather season during the current quarter.first quarter of 2018 compared to 2017. In addition, the growth in DCS revenue includes an increase of $35 million in Final Mile Services (FMS) revenue, approximately $25 million of which was derived from the 2017 acquisition of Special Logistics Dedicated, resulting in a 75% increase in total FMS revenue when compared to first quarter 2017. A net additional 4861,329 revenue producing trucks were in the fleet by the end of the currentfirst quarter 2018 compared to priora year ago, primarily from private fleet conversions and growth in FMS in the current and prior periods. Customer retention rates remain above 98%. Operating income of our DCS segment operating income decreased 4%9% to $48.6$40.6 million in 2017,the first quarter 2018, from $50.5$44.8 million in 2016. The decrease is primarily due to increased2017. Increased revenue was more than offset by winter weather inefficiencies, higher insurance and claims costs, driven byincreased driver wages and recruiting costs, higher incident volume,non-driver salaries wages and benefits, higher start-up expenses for new customer contractsfacilities rent and costs from the expanded FMS network, increased maintenance costs on equipment scheduled to be traded in 2018 and approximately $1.9 million in additional non-cash amortization expense compared to the prior year.first quarter 2017.

ICS segment revenue increased 9%41% to $222$296 million in the secondfirst quarter of 2017,2018, from $204$209 million in 2016.2017. Overall volumes increased 20%. Contractual business represented approximately 73% of total load volume and 58% of total6% while revenue in the current period compared to 72% and 65%, respectively, in second quarter 2016. Revenue per load decreased 9%increased 34% primarily due to freight mix changes driven by customer demand. ICS segment operating income decreased 102% to an operating loss of $0.2 million, from operating income of $10.9 million in 2016, primarily due to lower gross profit margins, increased claims cost, higher technology development costs, and increased number of branches less than two years old. These younger start-up branches typically produce less revenue and lower gross margins thana more mature branches, resulting in a higher proportion of personnel costs to net revenue. ICS had 16 of these start-up branches during the second quarter 2017,vibrant spot pricing market when compared to ten in the secondfirst quarter 2016. Gross profit margin decreased to 11.6% in the current quarter versus 15.0% last year primarily due to higher purchased transportation costs that outpaced customer rate increases implemented on2017. Spot volumes increased 43% and contractual business compared to second quarter 2016. ICS’s carrier base increased 9% and employee count increased 21% compared to second quarter 2016.

JBT segment revenueload counts decreased 4% to $95 million in the second quarter of 2017, from $98 million in 2016. Revenue excluding fuel surcharges decreased 6%, compared to a year ago, while load volume remained flat. Revenue per loaded mile excluding fuel surcharges increased approximately 1% primarily from changes in customer driven freight mix and decreased length of haul. Core customer rates increased 0.4%7% compared to the same period in 2016.2017. Contractual business represented approximately 67% of total load volume and 44% of total revenue in the first quarter 2018, compared to 76% and 63%, respectively, in 2017. ICS segment operating income increased 99% to $8.9 million in the first quarter 2018, from $4.4 million in 2017, primarily from a higher revenue per load, a higher gross profit margin, and an increased number of branches more than two years old, partially offset by continued personnel growth costs and increased technology spending as marketplace for JBHunt360 continues its rollout. Approximately $96 million of first quarter 2018 ICS revenue was executed through the marketplace for JBHunt360. Gross profit margin increased to 14.4% in the first quarter 2018, compared to 14.3% in 2017, primarily due to increased spot market activity. Total branch count grew to 44 locations compared to 42 at the end of the comparable quarter last year. ICS’s carrier base increased 15% and employee count increased 14% compared to first the quarter 2017.

JBT segment revenue totaled $93 million for the first quarter 2018, a decrease of 1% from $94 million in first quarter 2017. Revenue excluding fuel surcharge decreased 3% primarily from a 15% decrease in load count, partially offset by an increase in revenue per load. Revenue per load excluding fuel surcharge increased 14%, primarily from a 10% increase in rates per loaded mile and a 3% increase in length of haul when compared to first quarter 2017. At the end of the currentfirst quarter 2018, JBT operated 2,0721,926 tractors compared to 2,1862,144 in 2016.2017. JBT segment operating income decreased 37%increased 4% to $5.5$5.1 million in 2017,2018, compared with $8.8$4.9 million in 2016. Theduring first quarter 2017. Benefits from the higher revenue per load were partially offset by a 10% decrease in operating income was driven primarily by increased driver wage and retention costs,tractor count, an average of 162 unseated trucks during first quarter 2018, higher driver recruiting expenses, higherand independent contractor costcosts per mile and increased tractor maintenancehigher recruiting costs per driver and independent contractor compared to secondfirst quarter 2016.2017.

Consolidated Operating Expenses

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

Total operating expenses increased 8.6%20.3%, while operating revenues increased 6.9%19.6%, during the secondfirst quarter 2017,2018, from the comparable period 2016.2017. Operating income decreasedincreased to $163.6$168.8 million during the secondfirst quarter 2017,2018, from $175.8$149.4 million in 2016.2017.

Rents and purchased transportation costs increased 9.6%19.6% in 2017.2018. This increase was primarily the result of increased rail and truck purchased transportation rates and the increase in load volumevolumes, which increased services provided by third-party rail and truck carriers within JBI and ICS segments.segments and increased truck and rail purchased transportation rates.

Salaries, wages and employee benefitsbenefit costs increased 4.8% during the second quarter 2017,18.4% in 2018 compared with 2016.2017. This increase was primarily related to increases in driver pay and office personnel compensation due to a tighter supply of qualified drivers and an increase in the number of employees.

Fuel costs increased 33.8% in 2018, compared with 2017, due to increases in the price of fuel and increased road miles. Depreciation and amortization expense increased 3.0%14.5% in 2017,2018, primarily due to additions to our JBI segment tractor, container and chassis fleets to support additional business demand and equipment purchased related to new DCS long-term customer contracts. Fuel costs increased 10.6% in 2017, compared with 2016, due to increases in the price of fuel and increased road miles.

Operating supplies and expenses increased 14.1%, driven21.8% in 2018, compared with 2017, primarily bydue to higher equipment maintenance costs, increased tire expense, higher nondriver travel costs, increased toll costs, and higher equipmentbuilding maintenance expenses. Insurance and claims expense increased 43.8% in 2017 compared with 2016, primarily due to higher incident volume and accident severity. General and administrative expenses increased 16.1%37.7% for the current quarter from the comparable period in 2016,2017, primarily due to increased net losses from asset sales and disposals, increased building and computer rentals, and higher professional fees.fees, partially offset by a reduction in charitable contributions. Net loss from sale or disposal of assets was $1.7$2.8 million in 2017,2018, compared to a net loss of $1.0$1.7 million in 2016.2017, primarily due to higher volume. Insurance and claims expense increased 23.9% in 2018, compared with 2017, due to higher incident volume.

Net interest expense increased 15.2%34.3% in 20172018, due primarily due to higher effective interest rates on our debt.

Income tax expense increased 4.1% in first quarter 2018, compared with 2017, primarily due to increased taxable earnings, partially offset by a lower effective income tax rate in first quarter 2018 due to the impact of the Tax Cuts and Jobs Act of 2017. Our effective income tax rate was 37.4%26.0% for the three months ended June 30,first quarter 2018, compared to 28.0% in 2017. First quarter 2017 compared with 38.0%included a one-time after-tax benefit of $13.6 million for the three months ended June 30, 2016.claiming of federal research and development tax credits and domestic production tax deductions for the 2012 through 2016 tax years. Our annual tax rate for 20172018 is expected to be 35.0% and the normalized annual tax rate, excluding one-time benefits or costs, is expected to be 37.0%26.0%. In determining our quarterly provision for income taxes, we use an estimated annual effective tax rate, adjusted for discrete items. This rate is based on our expected annual income, statutory tax rates, best estimate of nontaxable and nondeductible items of income and expense, and the ultimate outcome of tax audits.

Comparison of Six Months Ended June 30, 2017 to Six Months Ended June 30, 2016

Total consolidated operating revenues increased to $3.36 billion for the first six months of 2017, a 7% increase from the $3.14 billion for the comparable period 2016. Fuel surcharge revenues were $343.3 million during the first six months in 2017, compared with $233.7 million in 2016. If fuel surcharges were excluded from both periods, the increase in revenue from 2016 to 2017 was 4%.

JBI segment revenue increased 6%, to $1.94 billion during the first six months of 2017, compared with $1.83 billion in 2016. This increase in revenue was primarily a result of a 3% increase in load volume and a 3% increase in revenue per load, which is the combination of changes in freight mix, customer rate changes, and fuel surcharge revenue, compared to a year ago. Competitive truckload pricing originating from the 2016 bid season within the shorter length of haul Eastern network continued to carry over into 2017, pressuring intermodal rates and conversion. Revenue per load, excluding fuel surcharge revenue, decreased 1% from the first six months of 2016. JBI operating income segment decreased to $205.0 million in the first six months of 2017, from $208.8 million in 2016. Benefits from volume growth were more than offset by lower revenue per load excluding fuel surcharges, increases in rail purchased transportation costs, higher driver wages and recruiting costs, higher equipment ownership costs, increased insurance and claims costs and, increased technology development and modernization costs.

DCS segment revenue increased 9%, to $804 million during the first six months of 2017, from $741 million in 2016. Productivity, defined as revenue per truck per week, increased by approximately 4% from a year ago. Productivity excluding fuel surcharges for the first six months of 2017 increased 2% from a year ago. The increase in revenue was primarily a result of better integration of assets between customer accounts and customer rate increases, partially offset by lower productivity under new customer contracts and a more impactful winter weather season during the first quarter of 2017 compared to 2016. Operating income of our DCS segment decreased to $93.3 million in 2017, from $95.2 million in 2016. Increased revenue and improved asset integration was offset by higher driver wages, increased insurance and claims cost, and increased start up expenditures for new customer contracts compared to the first six months of 2016.

ICS revenue increased 12% to $432 million during the first six months of 2017, from $387 million in 2016. Overall volumes increased 28%. Revenue per load decreased 13% primarily due to freight mix changes driven by customer demand. ICS segment operating income decreased 80% to $4.2 million, from $21.7 million in 2016, primarily due to lower gross profit margins, increased claims cost, increased number of branches less than two years old, and higher technology development costs. Gross profit margin decreased to 12.9% in the current period versus 16.1% last year primarily due to higher purchased transportation costs that outpaced customer rate increases implemented on contractual business and lower customer spot rates, compared to a year ago.

JBT segment revenue decreased 3% to $188 million for the first six months of 2017, from $194 million in 2016. Revenue excluding fuel surcharges decreased 6%, primarily from a 7% decrease in revenue per load partially offset by a 1% increase in load count. The decrease in revenue per load when compared to 2016 was primarily due to a 6% decrease in length of haul. Our JBT segment operating income decreased 42% to $10.5 million during the first six months 2017, from $18.0 million in 2016. The decrease in operating income was driven primarily by lower revenue, increased driver wages and recruiting costs, higher independent contractor cost per mile, higher insurance and claims cost, and increased tractor maintenance costs compared to second quarter 2016.

Consolidated Operating Expenses

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

Total operating expenses increased 8.7%, while operating revenues increased 6.8%, during the first six months 2017, from the comparable period of 2016. Operating income decreased to $313.0 million during the first six months 2017, from $343.7 million in 2016.

Rents and purchased transportation costs increased 9.3% in 2017. This increase was primarily the result of increased rail and truck purchased transportation rates and the increase in load volume which increased services provided by third-party rail and truck carriers within JBI and ICS segments.

Salaries, wages and employee benefits costs increased 4.9% in 2017 from 2016. This increase was primarily related to increases in driver pay and office personnel compensation due to a tighter supply of qualified drivers and an increase in the number of employees.

Depreciation and amortization expense increased 3.6% in 2017 primarily due to additions to our JBI segment tractor, container and chassis fleets to support additional business demand and equipment purchased related to new DCS long-term customer contracts. Fuel costs increased 22.0% in 2017, compared with 2016, due to increases in the price of fuel and increased road miles.

Operating supplies and expenses increased 10.3% driven primarily by increased tire expense, higher nondriver travel costs and higher equipment maintenance expenses. Insurance and claims expense increased 38.2% in 2017 compared with 2016, primarily due to higher incident volume and accident severity. General and administrative expenses increased 11.5% from the comparable period in 2016, primarily due to increased net losses from asset sales and disposals, increased building and computer rentals, and higher professional fees, partially offset by a reduction in charitable contributions. Net loss from sale or disposal of assets was $3.4 million in 2017, compared to a net loss of $1.0 million in 2016.

Net interest expense increased 10.5% in 2017, primarily due to higher effective interest rates on our debt. Income tax expense decreased 21.9% in 2017, compared with 2016, primarily due to a one-time after-tax benefit of $13.6 million for the claiming of federal research and development tax credits and domestic production tax deductions for the 2012 through 2016 tax years, recorded in the first quarter of 2017. Our effective income tax rate was 32.9% for the first six months of 2017, compared to 38.0% in 2016. Our annual tax rate for 2017 is expected to be 35.0% and the normalized annual tax rate, excluding one-time benefits or costs, is expected to be 37.0%. In determining our quarterly provision for income taxes, we use an estimated annual effective tax rate, adjusted for discrete items. This rate is based on our expected annual income, statutory tax rates, best estimate of nontaxable and nondeductible items of income and expense, and the ultimate outcome of tax audits.

Liquidity and Capital Resources

Cash Flow

Net cash provided by operating activities totaled $443.4$262 million during the first sixthree months of 2017,2018, compared with $474.1$286 million for the same period 2016.2017. Operating cash flows decreased due to the timing of general working capital activities.activities, partially offset by increased earnings. Net cash used in investing activities totaled $168.6$179 million in 2017,2018, compared with $258.0$94 million in 2016.2017. The decreaseincrease resulted from a decreasean increase in equipment purchases in 2017,2018 partially offset by a decreasean increase in proceeds from the sale of equipment during the same period. Net cash used in financing activities was $274.0$90 million in 2017,2018, compared with $210.5$185 million in 2016.2017. This change resulted primarily from an increasea decrease in treasury stock purchased.purchased in 2018.

Debt and Liquidity Data

Liquidity

Our need for capital has typically resulted from the acquisition of containers and chassis, trucks, tractors and trailers required to support our growth and the replacement of older equipment. We are frequently able to accelerate or postpone a portion of equipment replacements depending on market conditions. We have, during the past few years, obtained capital through cash generated from operations, revolving lines of credit and long-term debt issuances. We have also periodically utilized operating leases to acquire revenue equipment. For all debt facilities maturing in 2019, it is our intent to pay the entire outstanding balances in full, on or before the maturity dates, using our existing senior revolving line of credit or other sources of long-term financing.

We believe our liquid assets, cash generated from operations, and revolving line of credit will provide sufficient funds for our operating and capital requirements for the foreseeable future. The following table summarizes our expected obligations and commitments as of June 30, 2017March 31, 2018 (in millions):

Our net capital expenditures were approximately $165$179 million during the first sixthree months of 2017,2018, compared with $258$91 million for the same period 2016.2017.  Our net capital expenditures include net additions to revenue equipment and non-revenue producing assets that are necessary to contribute to and support the future growth of our various business segments.  Capital expenditures in 20172018 were primarily for tractors, additional intermodal containers and chassis, and other trailing equipment.  We are currently committed to spend approximately $882$743 million during the remainder of 20172018 and 2018.2019.  We expect to spend in the range of $450$440 million to $475$460 million for net capital expenditures during calendar year 2017.the remainder of 2018.  The table above excludes $40.4$50.2 million of potential liabilities for uncertain tax positions, including interest and penalties, which are recorded on our Condensed Consolidated Balance Sheets.  However, we are unable to reasonably estimate the ultimate timing of any settlements.

On July 20, 2017, we entered into an agreement to acquire Special Logistics Dedicated, LLC, and its affiliated entities, see Note 10, Subsequent Event, in our Condensed Consolidated Financial Statements.  We anticipate using our existing revolving credit facility to finance this transaction and to provide liquidity for future operations.  The transaction is not expected to have a material impact on interest expense.

Off-Balance Sheet Arrangements

Our only off-balance sheet arrangements as of June 30, 2017March 31, 2018, were operating leases related to facility lease obligations.

Risk Factors

You should refer to Item 1A of our Annual Report (Form 10-K) for the year ended December 31, 2016,2017, under the caption “Risk Factors” for specific details on the following factors and events that are not within our control and could affect our financial results.