JB HUNT TRANSPORT SERVICES 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 endedDecember 31, 2021 , 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. When we use words like "may," "plan," "contemplate," "anticipate," "believe," "intend," "continue," "expect," "project," "goals," "strategy," "future," "predict," "seek," "estimate," "likely," "could," "should," "would," and similar expressions, you should consider them as identifying forward-looking statements, although we may use other phrasing. 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 the following: general economic and business conditions; potential business or operational disruptions resulting from the ongoing effects of the novel coronavirus (COVID-19) pandemic, including any future spikes or outbreaks of the virus, as well as government actions taken in response to the pandemic; competition and competitive rate fluctuations; excess capacity in the intermodal or trucking industries; a loss of one or more major customers; cost and availability of diesel fuel; interference with or termination of our relationships with certain railroads; rail service delays; disruptions toU.S. port-of-call activity; ability to attract and retain qualified drivers, delivery personnel, independent contractors, and third-party carriers; retention of key employees; insurance costs and availability; litigation and claims expense; determination that independent contractors are employees; new or different environmental or other laws and regulations; volatile financial credit markets or interest rates; terrorist attacks or actions; acts of war; adverse weather conditions; disruption or failure of information systems; inability to keep pace with technological advances affecting our information technology platforms; operational disruption or adverse effects of business acquisitions; increased costs for new revenue equipment; increased tariffs assessed on or disruptions in the procurement of imported revenue equipment; 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. 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 Part I, Item 1A of our Annual Report (Form 10-K) for the year endedDecember 31, 2021 , 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 theSEC . 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. GENERAL We are one of the largest surface transportation, delivery, and logistics companies inNorth America . We operate five distinct, but complementary, business segments and provide a wide range of safe and reliable transportation, brokerage, and delivery services to a diverse group of customers and consumers throughout the continentalUnited States ,Canada , andMexico . 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, freight handling, specialized equipment, and freight network design. In addition, we provide or arrange for local and home delivery services, generally referred to as final-mile delivery services, to customers through a network of cross-dock and other delivery system locations throughout the continentalUnited States . Utilizing thousands of reliable third-party carriers, we also provide comprehensive freight transportation, brokerage, and logistics services. In addition to dry-van, full-load operations, we also arrange for these unrelated outside carriers to 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. Our customers, who include many Fortune 500 companies, have extremely diverse businesses. Many of them are served byJ.B. Hunt 360°®, an online platform that offers shippers and carriers greater access, visibility, and transparency of the supply chain. We account for our business on a calendar year basis, with our full year ending onDecember 31 and our quarterly reporting periods ending onMarch 31 ,June 30 , andSeptember 30 . The operation of each of our five business segments is described in Note 14, Segment Information, of our Annual Report (Form 10-K) for the year endedDecember 31, 2021 . 13
-------------------------------------------------------------------------------- Our operations have been impacted by the COVID-19 global pandemic. We began our COVID-19 response activities in the first quarter of 2020, which required remote working when possible, expanded health and safety policies, facility modifications, increased security coverage, and purchase and distribution of personal protective equipment and supplies. In addition, we provided incremental paid time off for employees to help offset any financial loss caused by their absence from work when receiving the COVID-19 vaccination. We also worked with local healthcare organizations to provide vaccination assistance under applicable area guidelines and procedures to employees and their family members. OnApril 4, 2022 , we eliminated the requirement of remote working when possible, resulting in previously remote employees returning to our home office campus and all other field locations throughoutNorth America . We continue to review and analyze both external and internal COVID-related data, including the effects of new variants. We have been pleased with the continued performance of our employees, particularly our drivers, who have provided consistent service to our customers throughout the pandemic.
Critical Accounting Policies and Estimates
The preparation of our financial statements in conformity withU.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 endedDecember 31, 2021 , 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 EndedJune 30, 2022 to Three Months EndedJune 30, 2021 Summary of Operating Segment Results For the Three Months Ended June 30, (in millions) Operating Revenues Operating Income/(Loss) 2022 2021 2022 2021 JBI$ 1,833 $ 1,289 $ 202.5 $ 134.6 DCS 863 621 89.2 79.0 ICS 623 608 23.6 3.1 JBT 269 184 25.0 14.2 FMS 257 212 12.8 10.7 Other (includes corporate) - - (0.0 ) (0.1 ) Subtotal 3,845 2,914 353.1 241.5 Inter-Segment eliminations (7 ) (6 ) - - Total$ 3,838 $ 2,908 $ 353.1 $ 241.5 14
-------------------------------------------------------------------------------- Total consolidated operating revenues increased to$3.84 billion for the second quarter 2022, a 32% increase from$2.91 billion in the second quarter 2021. Total consolidated operating revenue, excluding fuel surcharge revenue, increased 21%. This increase in operating revenues resulted from increased revenues in JBI driven by increased volumes and higher revenue per load, higher average truck counts and improved fleet productivity in DCS, higher revenues in JBT and ICS as both segments leveraged the capabilities of the J.B. Hunt 360 platform, and increased revenues in FMS, primarily driven by a recent business acquisition. JBI segment revenue increased 42% to$1.83 billion during the second quarter 2022, compared with$1.29 billion in 2021. Load volumes during the second quarter 2022 increased 8% over the same period 2021. Transcontinental loads increased 5% during the second quarter 2022, and eastern network load volume was up 13% compared to the second quarter 2021. Despite demand for intermodal capacity remaining high throughout the current period, JBI continued to encounter network fluidity issues attributable to rail velocity and customer behavior during the second quarter 2022, which hindered further load volume growth within the period. Revenue per load, which is determined by the combination of customer rates, fuel surcharges and freight mix, increased 32% during the second quarter 2022. Revenue per load excluding fuel surcharge revenue increased 20% compared to the second quarter 2021. JBI segment operating income increased 50%, to$202.5 million in the second quarter 2022, from$134.6 million in 2021. The increase is primarily due to increased revenue, partially offset by higher rail and third-party dray purchased transportation expense, higher costs to attract and retain drivers, increased non-driver salary and wages, and higher costs due to rail and port network inefficiencies and customer detention of equipment. In addition, JBI incurred a net expense of$7.7 million in the second quarter 2022, consisting of the segment's portion of an increase in casualty claim expenses, partially offset by a workers' compensation insurance benefit (Insurance-Related Charge). The current quarter ended with approximately 110,600 units of trailing capacity and 6,620 power units assigned to the dray fleet. DCS segment revenue increased 39% to$863 million in the second quarter 2022 from$621 million in 2021. Productivity, defined as revenue per truck per week, increased 14% when compared to the second quarter 2021. Productivity excluding fuel surcharges increased 5%, primarily due to contractual index-based rate increases, partially offset by lower productivity of equipment on start-up accounts during the current period. A net additional 2,122 revenue-producing trucks were in the fleet by the end of the second quarter 2022 compared to the prior year period. DCS segment operating income increased 13% to$89.2 million in the second quarter 2022, from$79.0 million in 2021. The increase is primarily due to increased revenue, partially offset by increased driver and non-driver wages, benefits and recruiting costs, higher costs related to the implementation of new long-term customer contracts, and increased bad debt expense when compared to the second quarter 2021. In addition, DCS incurred a net expense of$1.6 million for the segment's portion of the Insurance-Related Charge in second quarter 2022. ICS segment revenue increased 3% to$623 million in the second quarter 2022, from$608 million in 2021. Overall volumes decreased 3% compared to the second quarter 2021, while revenue per load increased 5%, primarily due to higher contractual rates within the truckload business as well as changes in customer freight mix, partially offset by lower revenue per load within the segment's spot rate business compared to second quarter 2021. Contractual business represented approximately 54% of total load volume and 48% of total revenue in the second quarter 2022, compared to 48% and 35%, respectively, in 2021. Approximately$392 million of second quarter 2022 ICS revenue was executed through the Marketplace forJ.B. Hunt 360 compared to$396 million in the second quarter 2021. ICS segment operating income increased to$23.6 million in the second quarter of 2022 compared to$3.1 million in 2021. Gross profit margin increased to 16.2% in the second quarter 2022, compared to 10.5% in 2021. Increases in revenue and gross profit margin were partially offset by higher personnel costs, increased insurance and claims expense, and increased technology spending, compared to second quarter 2021. In addition, ICS incurred a net expense of$6.7 million for the segment's portion of the Insurance-Related Charge in second quarter 2022. ICS's carrier base increased 33% compared to second quarter 2021. 15
-------------------------------------------------------------------------------- JBT segment revenue totaled$269 million for the second quarter 2022, an increase of 46% from$184 million in second quarter 2021. Revenue excluding fuel surcharge increased 37% primarily due to a 20% increase in revenue per load excluding fuel surcharge revenue and a 14% increase in load volume compared to second quarter 2021. Load volume growth was primarily related to the continued leveraging of the J.B. Hunt 360 platform to grow power capacity and the expansion ofJ.B. Hunt 360box® which leverages the J.B. Hunt 360 platform to access drop-trailer capacity for customers across our transportation network. At the end of the second quarter 2022, the JBT fleet consisted of 12,770 trailers and 2,623 tractors, compared to 8,958 trailers and 1,770 tractors in 2021. Trailer turns in the second quarter of 2022 decreased 18% compared to second quarter 2021 due to the onboarding of new trailers and freight mix. JBT segment operating income increased to$25.0 million in 2022, compared with$14.2 million during second quarter 2021. Benefits from the higher load volume and increased revenue per load were partially offset by higher purchased transportation expense, higher equipment maintenance costs, increased personnel costs, higher insurance and claims expense, and increased technology spending. In addition, JBT incurred a net expense of$2.0 million for the segment's portion of the Insurance-Related Charge in second quarter 2022. FMS segment revenue increased 21% to$257 million in the second quarter 2022 from$212 million in 2021, primarily due to the acquisition ofZenith Freight Lines, LLC (Zenith) completed in the first quarter 2022 and the addition of multiple new customer contracts implemented over the past year. The increase in revenue was partially offset by the effects of internal efforts to improve revenue quality across certain accounts. The Zenith acquisition contributed$28 million to FMS revenue during the second quarter 2022. FMS segment operating income increased to$12.8 million in the second quarter of 2022 compared to$10.7 million in 2021, which included a$3.2 million benefit from the net settlement of claims. Benefits from higher revenue were partially offset by higher personnel salary, wages and benefits expense, increased insurance and claims expense, higher technology costs, increased driver recruiting costs, and implementation costs related to new long-term contractual business. In addition, FMS incurred a net expense of$0.4 million for the segment's portion of the Insurance-Related Charge in second quarter 2022.
Consolidated Operating Expenses
The following table sets forth items in our Condensed Consolidated Statements of
Earnings as a percentage of operating revenues and the percentage increase or
decrease of those items as compared with the prior period.
Three Months Ended June 30,
Dollar Amounts as a Percentage Change
Percentage of Total of Dollar Amounts
Operating Revenues Between Quarters
2022 2021 2022 vs. 2021
Total operating revenues 100.0 % 100.0 % 31.9 %
Operating expenses:
Rents and purchased transportation 50.1 52.9 24.9
Salaries, wages and employee benefits 21.9 22.9 26.5
Fuel and fuel taxes 6.9 4.4 109.4
Depreciation and amortization 4.1 4.8 13.1
Operating supplies and expenses 3.3 3.1 38.9
Insurance and claims 2.3 1.2 145.7
General and administrative expenses, net of
asset dispositions 1.6 1.6 25.8
Operating taxes and licenses 0.4 0.5 14.9
Communication and utilities 0.2 0.3 2.3
Total operating expenses 90.8 91.7 30.7
Operating income 9.2 8.3 46.2
Net interest expense 0.3 0.4 6.5
Earnings before income taxes 8.9 7.9 48.3
Income taxes 2.2 2.0 48.1
Net earnings 6.7 % 5.9 % 48.3 %
Total operating expenses increased 30.7%, while operating revenues increased
31.9% during the second quarter 2022, from the comparable period 2021. Operating
income increased to $353.1 million during the second quarter 2022 from $241.5
million in 2021.
Rents and purchased transportation costs increased 24.9% in second quarter 2022.
This increase was primarily the result of an increase in rail carrier purchased
transportation rates within the JBI segment, increased JBI load volume, which
increased services provided by third-party rail carriers, and an increase in the
use of third-party truck carriers by JBT during second quarter of 2022 compared
to 2021.
16-------------------------------------------------------------------------------- Salaries, wages and employee benefits costs increased 26.5% during the second quarter 2022, compared with 2021. This increase was primarily related to increases in driver pay and office personnel compensation due to a tighter supply of qualified drivers, a trend we anticipate continuing, and an increase in the number of employees as well as an increase in incentive compensation and group medical expense, partially offset by an$11.6 million workers' compensation insurance return of premium benefit during the current quarter. Fuel costs increased 109.4% in 2022, compared with 2021, due primarily to an increase in the price of fuel and increased road miles. Depreciation and amortization expense increased 13.1% in second quarter 2022, primarily due to equipment purchases related to new DCS long-term customer contracts, the addition of trailing equipment and accessories within our JBI and JBT segments, and increased intangible asset amortization expense resulting from the Zenith acquisition within FMS, partially offset by lower JBT tractor depreciation expense due to reductions in its company-owned tractor fleet. Operating supplies and expenses increased 38.9%, driven primarily by higher equipment maintenance costs, increased tire expense, higher travel and entertainment expenses, and increased tolls expense. Insurance and claims expense increased 145.7% in 2022 compared with 2021, primarily due to increased cost per claim, higher insurance policy premium expense, and the inclusion of a$30 million expense in second quarter 2022 for additional reserves of claims subject to insurance coverage layer specific aggregated limits. General and administrative expenses increased 25.8% for the current quarter from the comparable period in 2021, primarily due to higher building rentals, bad debt expense, advertising expense and professional service expense, partially offset by higher net gains from sale or disposals of assets. Net gain from sale or disposal of assets was$3.4 million in 2022, compared to a net loss from sale or disposals of assets of$1.2 million in 2021. Net interest expense increased 6.5% in 2022 due to an increase in effective interest rates on our debt compared to second quarter 2021. Income tax expense increased 48.1% in 2022, compared with 2021, primarily due to higher taxable earnings. Our effective income tax rate was 25.0% for both the second quarter 2022 and 2021. Our annual tax rate for 2022 is expected to be between 23.5% and 24.5%. In determining our quarterly provision for income taxes, we use an estimated annual effective tax rate, adjusted for discrete items. This rate is based on our expected annual income, statutory tax rates, best estimate of nontaxable and nondeductible items of income and expense, and the ultimate outcome of tax audits. Comparison of Six Months EndedJune 30, 2022 to Six Months EndedJune 30, 2021 Summary of Operating Segment Results For the Six Months Ended June 30, (in millions) Operating Revenues Operating Income/(loss) 2022 2021 2022 2021 JBI$ 3,436 $ 2,467 $ 403.5 $ 242.1 DCS 1,604 1,201 166.3 153.3 ICS 1,299 1,133 48.6 10.4 JBT 533 333 56.5 24.4 FMS 476 414 12.7 19.2 Other (includes corporate) - - (0.2 ) (0.2 ) Subtotal 7,348 5,548 687.4 449.2 Inter-segment eliminations (22 ) (21 ) - - Total$ 7,326 $ 5,527 $ 687.4 $ 449.2 Total consolidated operating revenues increased to$7.33 billion for the first six months of 2022, a 33% increase from$5.53 billion for the comparable period 2021. Fuel surcharge revenue increased to$1.12 billion during the first six months of 2022, compared with$531.5 million in 2021. Total consolidated operating revenue, excluding fuel surcharge revenue, increased 24% for the first six months of 2022 compared to the prior year period. 17 -------------------------------------------------------------------------------- JBI segment revenue increased 39% to$3.44 billion during the first six months of 2022, compared with$2.47 billion in 2021. Load volume during the first six months of 2022 increased 7% and revenue per load increased 30%, which is determined by the combination of changes in freight mix, customer rate changes, and fuel surcharge revenue, compared to a year ago. Revenue per load, excluding fuel surcharge revenue, increased 21% compared to the first six months of 2021. JBI segment operating income increased 67% to$403.5 million in the first six months of 2022, from$242.1 million in 2021. The increase is primarily due to increased revenue and higher net gains from the sale of equipment during the first six months of 2022, partially offset by higher rail and third-party dray purchased transportation expense, higher costs to attract and retain drivers, increased non-driver salary and wages, and higher costs due to rail and port network inefficiencies and customer detention of equipment. In addition, JBI incurred a net expense of$7.7 million in 2022, consisting of the segment's portion of the Insurance-Related Charge in the second quarter. DCS segment revenue increased 34%, to$1.60 billion during the first six months of 2022, from$1.20 billion in 2021. Productivity, defined as revenue per truck per week, increased by approximately 10% from a year ago. Productivity excluding fuel surcharge revenue for the first six months of 2022 increased 3% from a year ago. The increase in productivity was primarily due to contractual index-based rate increases, partially offset by lower productivity of equipment on start-up accounts and COVID-related labor disruptions during the first half of the current period. Operating income of our DCS segment increased to$166.3 million in the first six months of 2022, from$153.3 million in 2021. Higher revenues during the current period were partially offset by increased driver and non-driver wages, benefits and recruiting costs, higher costs related to the implementation of new long-term customer contracts, and increased bad debt expense when compared to the first six months of 2021. In addition, DCS incurred a net expense of$1.6 million in 2022, consisting of the segment's portion of the Insurance-Related Charge in the second quarter. ICS revenue increased 15% to$1.30 billion during the first six months of 2022, from$1.13 billion in 2021. Overall volumes increased 4%, while revenue per load increased 10% primarily due to higher contractual and spot customer rates in our truckload business as well as changes in customer freight mix compared to 2021. Approximately$822 million of ICS revenue for the first six months of 2022 was executed through the Marketplace forJ.B. Hunt 360 compared to$755 million in 2021. Gross profit margin increased to 14.5% in the current period compared to 11.4% in 2021. ICS segment had operating income of$48.6 million in the first six months of 2022 compared to$10.4 million in 2021, primarily due to increased revenue and higher gross profit margins, partially offset by higher personnel costs, increased insurance and claims expense, and increased technology spending during the first six months of 2022. In addition, ICS incurred a net expense of$6.7 million in 2022, consisting of the segment's portion of the Insurance-Related Charge in the second quarter. JBT segment revenue increased 60% to$533 million for the first six months of 2022, from$333 million in 2021. Revenue excluding fuel surcharge revenue increased 53%, primarily due to a 32% increase in revenue per load excluding fuel surcharge revenue and a 15% increase in load volume compared to 2021. Operating income of our JBT segment increased to$56.5 million in the first six months of 2022, from$24.4 million in 2021. The increase in operating income was driven primarily by increased load counts and revenue per load during the current period which were partially offset by higher purchased transportation expense, higher equipment maintenance costs, increased personnel costs, higher insurance and claims expense, and increased technology spending. In addition, JBT incurred a net expense of$2.0 million in 2022, consisting of the segment's portion of the Insurance-Related Charge in the second quarter. FMS revenue increased 15% to$476 million during the first six months of 2022, from$414 million in 2021, primarily due to the addition of multiple new customer contracts implemented over the past year and the Zenith acquisition during the first half of the current period. The increase in revenue was partially offset by the effects of internal efforts to improve revenue quality across certain accounts as well as supply-chain related constraints for goods in the primary markets served by FMS. FMS segment had operating income of$12.7 million in the first six months of 2022 compared to$19.2 million in 2021, which included a$3.2 million benefit from the net settlement of claims. The decrease in operating income was primarily due to increased revenues being more than offset by higher personnel salary, wages and benefits expense, increased insurance and claims expense, increased driver recruiting costs, and implementation costs related to new long-term contractual business. In addition, FMS incurred a net expense of$0.4 million in 2022, consisting of the segment's portion of the Insurance-Related Charge in the second quarter. 18 --------------------------------------------------------------------------------
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.
Six Months Ended June 30,
Dollar Amounts as a Percentage Change
Percentage of Total of Dollar Amounts
Operating Revenues Between Periods
2022 2021 2022 vs. 2021
Total operating revenues 100.0 % 100.0 % 32.6 %
Operating expenses:
Rents and purchased transportation 51.3 52.3 30.0
Salaries, wages and employee benefits 21.9 23.3 24.9
Fuel and fuel taxes 6.2 4.3 89.7
Depreciation and amortization 4.2 5.0 10.6
Operating supplies and expenses 3.2 3.1 35.1
Insurance and claims 1.8 1.3 81.4
General and administrative expenses, net of
asset dispositions 1.4 1.8 5.2
Operating taxes and licenses 0.4 0.5 14.4
Communication and utilities 0.2 0.3 (0.4 )
Total operating expenses 90.6 91.9 30.8
Operating income 9.4 8.1 53.0
Net interest expense 0.4 0.4 5.6
Earnings before income taxes 9.0 7.7 55.7
Income taxes 2.2 1.9 53.5
Net earnings 6.8 % 5.8 % 56.4 %
Total operating expenses increased 30.8%, while operating revenues increased
32.6%, during the first six months of 2022, from the comparable period of 2021.
Operating income increased to $687.4 million during the first six months of
2022, from $449.2 million in 2021.
Rents and purchased transportation costs increased 30.0% in 2022. This increase
was primarily the result of increased load volumes, which increased services
provided by third-party rail and truck carriers within JBI and ICS segments,
increased rail and truck carrier purchased transportation rates, and an increase
in the use of third-party truck carriers by JBT during the current period.
Salaries, wages and employee benefits costs increased 24.9% in 2022 from 2021. 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 as well as an increase in incentive compensation and group medical expense.
Fuel costs increased 89.7% in 2022, compared with 2021, due primarily to an increase in the price of fuel and an increase in road miles. Depreciation and amortization expense increased 10.6% in 2022 primarily due to equipment purchases related to new DCS long-term customer contracts, the addition of trailing equipment and accessories within our JBI and JBT segments, and increased intangible asset amortization expense resulting from the Zenith acquisition within FMS, partially offset by lower JBT tractor depreciation expense due to reductions in its company-owned tractor fleet.
Operating supplies and expenses increased 35.1% driven primarily by higher equipment maintenance costs, increased tire expense, increased tolls expense, and higher travel and entertainment expenses. Insurance and claims expense increased 81.4% in 2022 compared with 2021, primarily due to increased cost per claim, higher insurance policy premium expense, and the inclusion of a$30 million expense in 2022 for additional reserves of claims subject to insurance coverage layer specific aggregated limits. General and administrative expenses increased 5.2% from the comparable period in 2021, primarily due to higher building rentals, advertising expense, professional services expense, and bad debt expense, partially offset by higher net gains from sale or disposals of assets. Net gain from sale or disposal of assets was$20.7 million in 2022, compared to a net loss from sale or disposals of assets of$2.4 million in 2021. 19
-------------------------------------------------------------------------------- Net interest expense increased 5.6% in 2022, due primarily to higher effective interest rates on our debt. Income tax expense increased 53.5% during the first six months of 2022, compared with 2021, primarily due to increased taxable earnings in the first six months of 2022. Our effective income tax rate was 24.7% for the first six months of 2022, compared to 25.0% in 2021. Our annual tax rate for 2022 is expected to be between 23.5% and 24.5%. 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$784.5 million during the first six months of 2022, compared with$668.7 million for the same period 2021. Operating cash flows increased due to increased earnings, partially offset by the timing of general working capital activities. Net cash used in investing activities totaled$685.0 million in 2022, compared with$260.8 million in 2021. The increase resulted from an increase in equipment purchases, net of proceeds from the sale of equipment and the purchase of Zenith during 2022. Net cash used in financing activities was$331.2 million in 2022, compared with$150.3 million in 2021. This increase resulted primarily from an increase in treasury stock purchased and higher dividends paid during the first six months of 2022. 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 as well as periodic business acquisitions. We are frequently able to accelerate or postpone a portion of equipment replacements or other capital expenditures depending on market and overall economic conditions. However, we do anticipate that the current challenges related to timely delivery of ordered equipment will continue due to supply chain challenges impacting production. In recent years, we have 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 our senior notes maturing in 2022, it is our intent to pay the entire outstanding balances in full, on or before the maturity dates, using our existing cash balance, 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. AtJune 30, 2022 , we had a cash balance of$123.8 million and no outstanding balance on our senior revolving line of credit, which authorizes us to borrow up to$750 million and is supported by a credit agreement with a group of banks that expires inSeptember 2023 . This senior credit facility allows us to request an increase in the total commitment by up to$250 million and to request a one-year extension of the maturity date. The applicable interest rate under this agreement is based on either the Prime Rate, the Federal Funds Rate or LIBOR, depending upon the specific type of borrowing, plus an applicable margin based on our credit rating and other fees. We continue to evaluate the possible effects of current economic conditions and reasonable and supportable economic forecasts on operational cash flows, including the risks of declines in the overall freight market and our customers' liquidity and ability to pay. We regularly monitor working capital and maintain frequent communication with our customers, suppliers and service providers. A large portion of our cost structure is variable. Purchased transportation expense represents more than half of our total costs but is heavily tied to load volumes. Our second largest cost item is salaries and wages, the largest portion of which is driver pay, which includes a large variable component. Our financing arrangements require us to maintain certain covenants and financial ratios. AtJune 30, 2022 , we were compliant with all covenants and financial ratios. In addition, we do not anticipate the future international transitioning from LIBOR to alternative rates to have a material impact on our financial statements. 20
-------------------------------------------------------------------------------- Our net capital expenditures were approximately$598.1 million during the first six months of 2022, compared with$260.7 million for the same period 2021. 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 2022 were primarily for tractors, intermodal containers and chassis, and other trailing equipment. We are currently committed to spend approximately$2.4 billion during the years 2022 to 2024, of which, approximately$1.0 billion is planned for the full year 2022. These expenditures will primarily be driven by purchasing additional intermodal containers, additional DCS tractors, and trailers used in ourJ.B. Hunt 360box program. AtJune 30, 2022 , our aggregate future minimum lease payments under operating lease obligations related primarily to the rental of maintenance and support facilities, cross-dock and delivery system facilities, office space, parking yards, and equipment was$252.2 million .
Off-Balance Sheet Arrangements
We had no off-balance sheet arrangements, other than our net purchase
commitments of
Risk Factors You should refer to Part I, Item 1A of our Annual Report (Form 10-K) for the year endedDecember 31, 2021 , 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. Risks Related to Our Industry ? Our business is significantly impacted by economic conditions, customer business cycles, and seasonal factors. ? Our business is significantly impacted by the effects of national or international health pandemics on general economic conditions and the
operations of our customers and third-party suppliers and service providers.
? Extreme or unusual weather conditions can disrupt our operations, impact
freight volumes, and increase our costs, all of which could have a material
adverse effect on our business results.
? Our operations are subject to various environmental laws and regulations,
including legislative and regulatory responses to climate change. Compliance
with environmental requirements could result in significant expenditures and
the violation of these regulations could result in substantial fines or
penalties.
? We depend on third parties in the operation of our business.
? Rapid changes in fuel costs could impact our periodic financial results.
? Insurance and claims expenses could significantly reduce our earnings.
? We operate in a regulated industry, and increased direct and indirect costs of
compliance with, or liability for violation of, existing or future regulations
could have a material adverse effect on our business.
? Difficulty in attracting and retaining drivers, delivery personnel andthird-party carriers could affect our profitability and ability to grow.
? We operate in a competitive and highly fragmented industry. Numerous factors
could impair our ability to maintain our current profitability and to compete
with other carriers and private fleets.
21--------------------------------------------------------------------------------
Risks Related to Our Business
? 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.
? A determination that independent contractors are employees could expose us to
various liabilities and additional costs.
? We may be subject to litigation claims that could result in significant
expenditures.
? We rely significantly on our information technology systems, a disruption,
failure, or security breach of which could have a material adverse effect on
our business.
? Acquisitions or business combinations may disrupt or have a material adverse
effect on our operations or earnings.
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