What changed in this filing

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Item 1. Financial Statements

2020-11-06 compared with 2020-08-07 · 155 added, 157 removed, 798 unchanged (28% of the section changed)

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CONSOLIDATED CONDENSED BALANCE SHEETS

September 30,

(In thousands, except share information)

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11,055  

Prepaid expenses and other

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192,000,000 shares authorized;

55,107,805 shares at June 30, 2020, and 54,703,466 shares at December 31, 2019, issued and outstanding

82,680,849 shares at September 30, 2020, and 82,055,199 shares at December 31, 2019, issued and outstanding

Additional paid-in capital

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$ 796,586  

The accompanying notes are an integral part of these consolidated condensed financial statements.

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CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS

Ended June 30,

Ended September 30,

(In thousands, except per share information)

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Gain on disposition of revenue equipment

Gain on disposition of facility

16,223  

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$ 49,896  

Basic earnings per common share

$ 45,323  

$ 0.28  

$ 0.58  

$ 0.53  

Diluted earnings per common share

$ 0.33  

$ 0.28  

$ 0.58  

$ 0.52  

Dividends declared per common share

$ 0.04  

$ 0.03  

$ 0.08  

$ 0.06  

Pro forma post-stock split basis (see Note 16):

Basic earnings per common share

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629,398  

18,044  

Issuance of common stock from share-based payment arrangement exercises and vesting of performance unit awards

Share-based payment arrangement compensation expense

Dividends on common stock

Balance at September 30, 2020

82,681  

$ 84,389  

$ 559,492  

$ 644,708  

The accompanying notes are an integral part of these consolidated condensed financial statements.  

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602,390  

16,587  

Issuance of common stock from share-based payment arrangement exercises and vesting of performance unit awards

Share-based payment arrangement compensation expense

Dividends on common stock

Balance at September 30, 2019

82,031  

$ 78,840  

$ 503,197  

$ 582,857  

The accompanying notes are an integral part of these consolidated condensed financial statements.  

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CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS

Ended June 30,

Ended September 30,

(In thousands)

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Gain on disposition of revenue equipment

Gain on disposition of facility

Deferred income taxes

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Buildings and land, office equipment and other additions

Proceeds from buildings and land, office equipment and other dispositions

Net cash used for investing activities

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56,818  

26,029  

Cash and cash equivalents:

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$ 2,355  

$ 10,527  

Operating lease assets and liabilities acquired

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$ 5,543  

$ 4,447  

The accompanying notes are an integral part of these consolidated condensed financial statements.

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NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

SIX MONTHS ENDED JUNE 30 , 2020

NINE MONTHS ENDED SEPTEMBER 30 , 2020

( 1 ) Consolidated Condensed Financial Statements

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Basic and diluted earnings per common share were computed as follows:  

Ended June 30,

Ended September 30,

(In thousands, except per share amounts)

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$ 0.55  

Pro forma basic and diluted earnings per common share to show the effect of the three -for- two stock split payable on August 13, 2020 ( see Note 16 ) is computed as follows:

Ended June 30,

(In thousands, except per share amounts)

$ 18,134  

$ 15,190  

$ 31,852  

$ 28,736  

Pro forma basic earnings per common share - weighted-average shares

82,527  

81,924  

82,371  

81,877  

Pro forma effect of dilutive stock options

Pro forma diluted earnings per common share - weighted-average shares and assumed conversions

83,133  

82,621  

83,018  

82,582  

Pro forma basic earnings per common share

$ 0.22  

$ 0.19  

$ 0.39  

$ 0.35  

Pro forma diluted earnings per common share

$ 0.22  

$ 0.18  

$ 0.38  

$ 0.35  

Options totaling 187,300 and 200,900 equivalent shares for the three -month and six -month periods ended June 30, 2020, respectively, and 317,800 equivalent shares for each of the three -month and six -month periods ended June 30, 2019, were outstanding but were not included in the calculation of diluted earnings per share because including the options in the denominator would be antidilutive, or decrease the number of weighted-average shares, due to their exercise prices exceeding the average market price of the common shares, or because inclusion of average unrecognized compensation expense in the calculation would cause the options to be antidilutive.

Unvested performance unit awards totaling 66,658 equivalent shares for each of the three -month and six -month periods ended June 30, 2020, and 72,796 equivalent shares for each of the three -month and six -month periods ended June 30, 2019, were considered outstanding but were not included in the calculation of diluted earnings per share because inclusion of average unrecognized compensation expense in the calculation would cause the performance units to be antidilutive.

Options totaling 181,650 and 288,150 equivalent shares for the three -month and nine -month periods ended September 30, 2020, respectively, and 313,950 and 477,900 equivalent shares for the three -month and nine -month periods ended September 30, 2019, respectively, were outstanding but were not included in the calculation of diluted earnings per share because including the options in the denominator would be antidilutive, or decrease the number of weighted-average shares, due to their exercise prices exceeding the average market price of the common shares, or because inclusion of average unrecognized compensation expense in the calculation would cause the options to be antidilutive.

Unvested performance unit awards totaling 43,923 and 96,423 equivalent shares for the three -month and nine -month periods ended September 30, 2020, respectively, and 101,274 and 102,774 equivalent shares for the three -month and nine -month periods ended September 30, 2019, respectively, were considered outstanding but were not included in the calculation of diluted earnings per share because inclusion of average unrecognized compensation expense in the calculation would cause the performance units to be antidilutive.

( 3 ) Stock Split

On August 13, 2020, we effected a three -for- two stock split of our common stock, $.01 par value, in the form of a 50 % stock dividend.

Our consolidated condensed financial statements, related notes, and other financial data contained in this report have been adjusted to give retroactive effect to the stock split for all periods presented.

( 4 ) Long-Term Debt

In August 2018, we entered into an amendment to our unsecured committed credit facility which reduces the aggregate principal amount of the facility from $ 40.0 million to $ 30.0 million and extends the term of the facility to August 2023.

At June 30, 2020, there was no outstanding principal balance on the facility.

At September 30, 2020, there was no outstanding principal balance on the facility.

As of that date, we had outstanding standby letters of credit to guarantee settlement of self-insurance claims of $ 17.0 million and remaining borrowing availability of $ 13.0 million.

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This facility bears interest at a variable rate based on the London Interbank Offered Rate or the lender’s Prime Rate, in each case plus/minus applicable margins.

The interest rate for the facility that would apply to outstanding principal balances was 0.8 % at June 30, 2020.

The interest rate for the facility that would apply to outstanding principal balances was 0.84 % at September 30, 2020.

Our credit facility prohibits us from paying, in any fiscal year, stock redemptions and dividends in excess of 25 % of our net income from the prior fiscal year.

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This facility also contains restrictive covenants which, among other matters, require us to maintain compliance with cash flow leverage and fixed charge coverage ratios.

We were in compliance with all covenants at June 30, 2020 and December 31, 2019.

We were in compliance with all covenants at September 30, 2020 and December 31, 2019.

( 5 ) Related Party Transactions

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Bauer, the chairman of the board, chief executive officer and the principal stockholder of BBI, is one of our directors.

We paid BBI $ 124,000 in the first six months of 2020 and $ 201,000 in the first six months of 2019 for fuel, tires and related services.

In addition, we paid $ 1.2 million in the first six months of 2020 and $ 571,000 in the first six months of 2019 to tire manufacturers for tires that were provided by BBI.

We paid BBI $ 166,000 in the first nine months of 2020 and $ 311,000 in the first nine months of 2019 for fuel, tires and related services.

In addition, we paid $ 1.7 million in the first nine months of 2020 and $ 1.2 million in the first nine months of 2019 to tire manufacturers for tires that were provided by BBI.

BBI received commissions from the tire manufacturers related to these purchases.

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In 2015, our Board of Directors approved and we announced an increase in the share repurchase program, providing for the repurchase of up to $ 40 million, or approximately two million shares, of our common stock, which was increased by our Board of Directors to 3.3 million shares in August 2017 to reflect the five -for- three stock split effected in the form of a stock dividend on July 7, 2017.

In August 2019, our Board of Directors approved and we announced an increase from current availability in our existing share repurchase program providing for the repurchase of up to $ 34 million, or approximately 1.8 million shares, of our common stock, which was increased by our Board of Directors to 2.7 million shares in August 2020 to reflect the three -for- two stock split effected in the form of a stock dividend on August 13, 2020.

The timing and extent to which we repurchase shares depends on market conditions and other corporate considerations.

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We repurchased and retired 53,064 shares of common stock for $ 597,000 in the first quarter of 2020.

We did not repurchase any shares in the second quarter of 2020 or in 2019.

As of June 30, 2020, future repurchases of up to $ 33.4 million, or approximately 1.8 million shares, were available in the share repurchase program.

We did not repurchase any shares in the second or third quarters of 2020 or in 2019.

As of September 30, 2020, future repurchases of up to $ 33.4 million, or approximately 2.6 million shares, were available in the share repurchase program.

( 7 ) Dividends

In 2010, we announced that our Board of Directors approved a regular cash dividend program to our stockholders, subject to approval each quarter.

A quarterly cash dividend of $ 0.04 per share of common stock was declared in each of the first two quarters of 2020 which totaled $ 4.4 million.

A quarterly cash dividend of $ 0.03 per share of common stock was declared in each of the first two quarters of 2019 which totaled $ 3.3 million.

A quarterly cash dividend of $ 0.027 per share of common stock was declared in each of the first two quarters of 2020 and of $ 0.04 per share of common stock was declared in the third quarter of 2020 which totaled $ 7.7 million.

We paid cash dividends totaling $ 40.4 million in the first three quarters of 2019 which consisted of a special dividend of $ 0.433 per share of common stock in September, along with quarterly cash dividends of $ 0.02 per share of common stock in each of the first three quarters of 2019.

Our ability to pay cash dividends is currently limited by restrictions contained in our revolving credit facility, which prohibits us from paying, in any fiscal year, stock redemptions and dividends in excess of 25 % of our net income from the prior fiscal year.

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Stock Compensation .

During the first six months of 2020, there were no significant changes to the structure of our stock-based award plans.

Pre-tax compensation expense related to stock options and performance unit awards recorded in the first six months of 2020 and 2019 was $ 972,000 and $ 1.0 million, respectively.

During the first nine months of 2020, there were no significant changes to the structure of our stock-based award plans.

Pre-tax compensation expense related to stock options and performance unit awards of $ 1.4 million was recorded in each of the first nine months of 2020 and 2019.

( 9 ) Termination of Deferred Compensation Plan

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We accounted for our ownership interest in MWL under the equity method of accounting.

We received $ 1.2 million of our revenue for loads transported by our tractors and arranged by MWL in the first six months of 2019.

We received $ 2.0 million of our revenue for loads transported by our tractors and arranged by MWL in the first nine months of 2019.

( 11 ) Fair Value of Financial Instruments

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( 12 ) Commitments and Contingencies

We are committed to new revenue equipment purchases of $ 69.0 million through the remainder of 2020.

We are committed to new revenue equipment purchases of $ 33.0 million through the remainder of 2020 and $ 50.4 million in 2021.

Operating lease obligation expenditures through 2025 total $ 1.1 million.

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We base our calculation of the amount of revenue to record in each period for individual loads picking up in one period and delivering in the following period using the number of hours estimated to be incurred within each period applied to each estimated transaction price.

Contract assets for this estimated revenue which are classified within prepaid expenses and other within our consolidated condensed balance sheet were $ 2.1 million and $ 1.7 million as of June 30, 2020 and December 31, 2019, respectively.

We had no impairment losses on contract assets in the first six months of 2020 or in 2019.

Contract assets for this estimated revenue which are classified within prepaid expenses and other within our consolidated condensed balance sheet were $ 2.2 million and $ 1.7 million as of September 30, 2020 and December 31, 2019, respectively.

We had no impairment losses on contract assets in the first nine months of 2020 or in 2019.

We bill our customers for loads after delivery is complete with standard payment terms of 30 days.

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We do not prepare separate balance sheets by segment and, as a result, assets are not separately identifiable by segment.

Ended June 30,

Ended September 30,

(In thousands)

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$ 57,711  

Truckload segment depreciation expense was $ 14.0 million and $ 13.4 million, Dedicated segment depreciation expense was $ 10.3 million and $ 8.6 million, Intermodal segment depreciation expense was $ 1.3 million and $ 1.2 million, and Brokerage segment depreciation expense was $ 306,000 and $ 376,000 in the three -month periods ended June 30, 2020 and 2019, respectively.

Truckload segment depreciation expense was $ 27.8 million and $ 26.5 million, Dedicated segment depreciation expense was $ 20.2 million and $ 16.3 million, Intermodal segment depreciation expense was $ 2.7 million and $ 2.4 million, and Brokerage segment depreciation expense was $ 667,000 and $ 740,000 in the six -month periods ended June 30, 2020 and 2019, respectively.

Truckload segment depreciation expense was $ 13.4 million and $ 13.7 million, Dedicated segment depreciation expense was $ 10.5 million and $ 9.0 million, Intermodal segment depreciation expense was $ 1.4 million and $ 1.2 million, and Brokerage segment depreciation expense was $ 271,000 and $ 382,000 in the three -month periods ended September 30, 2020 and 2019, respectively.

Truckload segment depreciation expense was $ 41.3 million and $ 40.1 million, Dedicated segment depreciation expense was $ 30.7 million and $ 25.4 million, Intermodal segment depreciation expense was $ 4.1 million and $ 3.7 million, and Brokerage segment depreciation expense was $ 939,000 and $ 1.1 million in the nine -month periods ended September 30, 2020 and 2019, respectively.

( 14 ) Measurement of Credit Losses on Financial Instruments

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( 15 ) Consolidated Condensed Statements of Cash Flows Reclassifications

Tires in service amortization and operating leases in our consolidated condensed statements of cash flows have been reclassified to be consistent with the current presentation, resulting in a $ 1.6 million reclassification from investing to operating activities for the six months ended June 30, 2019.

Tires in service amortization and operating leases in our consolidated condensed statements of cash flows have been reclassified to be consistent with the current presentation, resulting in a $ 2.4 million reclassification from investing to operating activities for the nine months ended September 30, 2019.

( 16 ) Use of Estimates

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Ultimate results could differ from these estimates.

( 16 ) Stock Split Subsequent Event

On July 16, 2020, our Board of Directors declared a three -for- two stock split of our common stock, $.01 par value.

The stock split will be effected in the form of a 50 % stock dividend payable on August 13, 2020 to stockholders of record as of July 30, 2020.

Holders of our common stock will receive an additional one -half share for each outstanding share of common stock held as of July 30, 2020.

The stock split will increase the number of outstanding shares of common stock from approximately 55.1 million to approximately 82.7 million shares.

To show the effect of the stock split, pro forma basic and diluted earnings per common share and dividends declared per common share amounts are disclosed in the consolidated condensed statements of operations, and basic and diluted weighted average shares outstanding are disclosed in Note 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations.

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In addition to the factors discussed above, our operating revenue is also affected by, among other things, the United States economy, inventory levels, the level of truck and rail capacity in the transportation market, a contracting driver market, severe weather conditions and specific customer demand.

Our operating revenue increased $19.9 million, or 4.8%, in the first six months of 2020 from the first six months of 2019.

Our operating revenue, net of fuel surcharges, increased $26.6 million, or 7.4%, compared with the first six months of 2019.

Truckload segment revenue, net of fuel surcharges, increased 3.9% from the first six months of 2019 primarily due to an increase in our average number of tractors.

Dedicated segment revenue, net of fuel surcharges, increased 24.9% from the first six months of 2019 primarily due to fleet growth driven by an increase in the number of Dedicated contracts we have with our customers.

Our operating revenue increased $21.0 million, or 3.3%, in the first nine months of 2020 from the first nine months of 2019.

Our operating revenue, net of fuel surcharges, increased $33.9 million, or 6.2%, compared with the first nine months of 2019.

Truckload segment revenue, net of fuel surcharges, increased 3.5% from the first nine months of 2019 primarily due to fleet growth and an increase in our average revenue per tractor.

Dedicated segment revenue, net of fuel surcharges, increased 21.8% from the first nine months of 2019 primarily due to fleet growth driven by an increase in the number of Dedicated contracts we have with our customers.

Intermodal segment revenue, net of fuel surcharges, increased 4.4% primarily due to increased load volume.

Brokerage segment revenue decreased 14.2% primarily due to a decrease in revenue per load in the first six months of 2020.

Fuel surcharge revenue decreased to $43.6 million in the first six months of 2020 from $50.3 million in the first six months of 2019 due to significantly lower fuel prices.

Brokerage segment revenue decreased 15.9% primarily due to a decrease in both revenue per load and load volume in the first nine months of 2020.

Fuel surcharge revenue decreased to $63.5 million in the first nine months of 2020 from $76.4 million in the first nine months of 2019 due to significantly lower fuel prices.

Our profitability is impacted by the variable costs of transporting freight for our customers, fixed costs, and expenses containing both fixed and variable components.

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This expense is included within purchased transportation in our consolidated condensed statements of operations.

Our operating income improved 14.9% to $43.3 million in the first six months of 2020 from $37.7 million in the first six months of 2019.

Our operating income improved 17.3% to $67.7 million in the first nine months of 2020 from $57.7 million in the first nine months of 2019.

Our operating expenses as a percentage of operating revenue, or “operating ratio,”

improved to 90.0% in the first six months of 2020 from 90.8% in the first six months of 2019.

Operating expenses as a percentage of operating revenue, with both amounts net of fuel surcharges, improved to 88.8% in the first six months of 2020 from 89.6% in the first six months of 2019.

Our net income improved 10.8% to $31.9 million, or $0.58 per diluted share, in the first six months of 2020 from $28.7 million, or $0.52 per diluted share, in the first six months of 2019.

improved to 89.5% in the first nine months of 2020 from 90.8% in the first nine months of 2019.

Operating expenses as a percentage of operating revenue, with both amounts net of fuel surcharges, improved to 88.4% in the first nine months of 2020 from 89.5% in the first nine months of 2019.

Our net income improved 10.1% to $49.9 million, or $0.60 per diluted share, in the first nine months of 2020 from $45.3 million, or $0.55 per diluted share, in the first nine months of 2019.

Our business requires substantial, ongoing capital investments, particularly for new tractors and trailers.

At June 30, 2020, we had $75.3 million of cash and cash equivalents, $629.4 million in stockholders’

At September 30, 2020, we had $88.3 million of cash and cash equivalents, $644.7 million in stockholders’

equity and no long-term debt outstanding.

In the first six months of 2020, net cash flows provided by operating activities of $104.1 million were primarily used to purchase new revenue equipment, net of proceeds from dispositions, in the amount of $55.7 million, to pay cash dividends of $4.4 million, and to upgrade regional operating facilities in the amount of $2.2 million, resulting in a $43.9 million increase in cash and cash equivalents.

In the first nine months of 2020, net cash flows provided by operating activities of $154.7 million were primarily used to purchase new revenue equipment, net of proceeds from dispositions, in the amount of $91.6 million, to pay cash dividends of $7.7 million, and to upgrade regional operating facilities in the amount of $3.3 million, resulting in a $56.8 million increase in cash and cash equivalents.

We estimate that capital expenditures, net of proceeds from dispositions, will be approximately $26 million for the remainder of 2020.

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Additionally, we are an active participant in the United States EPA SmartWay Transport Partnership, in which freight shippers, carriers, logistics companies and other voluntary stakeholders partner with the EPA to measure, benchmark and improve logistics operations to reduce their environmental footprint.

This Management’s Discussion and Analysis of Financial Condition and Results of Operations includes discussions of operating revenue, net of fuel surcharge revenue;

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Pursuant to Item 10(e) of Regulation S-K, we have included the amounts necessary to reconcile these non-GAAP financial measures to the most directly comparable GAAP financial measures of operating revenue, operating expenses divided by operating revenue, and fuel and fuel taxes.

On August 13, 2020, we effected a three-for-two stock split of our common stock, $.01 par value, in the form of a 50% stock dividend.

C OVID -19 Update

The North American trucking industry, which provides an essential service, is facing a challenging period as the decrease in manufacturing and retail activity within the managed economic slowdown in response to the COVID-19 pandemic has lowered overall freight volumes.

The demand that our customers have from their customers for the food, beverages and other consumer goods that we transport and distribute varies significantly for each customer across their individual products, by region and in total –

The demand that our customers have from their customers within the COVID-19 pandemic for the food, beverages and other consumer goods that we transport and distribute varies significantly for each customer across their individual products, by region and in total –

with the level of demand by freight lane also subject to significant fluctuations.

Our continual redeployment of our drivers to match the changing freight demand by lane while minimizing empty miles has been and will continue to be essential to the utilization of our revenue equipment and our operating revenue through this environment.

While our overall level of customer demand is negatively impacted by the economic slowdown, and may be increasingly impacted in the near-term depending on the extent of the slowdown, our execution of our unique multifaceted business model across our diverse customer base, including our ability to quickly make data-driven decisions and adjustments utilizing our in-house operating technology, has and will continue to be one of our key strengths as we proactively navigate through this fast-changing landscape.

Our continual redeployment of our drivers to match the changing freight demand by lane while minimizing empty miles has been and will continue to be imperative to the utilization of our revenue equipment and our operating revenue through this environment.

Our execution of our unique multifaceted business model across our diverse customer base, including our ability to quickly make data-driven decisions and adjustments utilizing our in-house operating technology, has and will continue to be one of our key strengths as we proactively navigate through this fast-changing landscape in providing our essential service.

Based upon anticipated cash flows, existing cash and cash equivalents balances, current borrowing availability and other sources of financing we expect to be available to us, we believe we are well-positioned for the sustainability of our business from a balance sheet perspective.

We fully embrace our responsibility to keep our valued employees safe, healthy and informed and have implemented measures including the following:

Throughout our headquarters and regional operating facilities, we are applying the social distancing guidelines by having up to 70% of our office employees work from their homes and by staggering shift and break times for our maintenance personnel.

Throughout our headquarters and regional operating facilities, we are applying the social distancing guidelines by having a number of our office employees work from their homes and by staggering shift and break times for our maintenance personnel.

We have increased the frequency and extent of disinfecting and cleaning of each of our facilities and thoroughly disinfect all tractors prior to assignment to our drivers.

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The following table sets forth for the periods indicated certain operating statistics regarding our revenue and operations:

Ended June 30,

Ended September 30,

Truckload Segment:

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Includes tractors driven by both company-employed drivers and independent contractors.

Independent contractors provided 124 and 55 tractors as of June 30, 2020 and 2019, respectively.

Comparison of Three Months Ended June 30 , 2020 to Three Months Ended June 30 , 2019

Independent contractors provided 132 and 75 tractors as of September 30, 2020 and 2019, respectively.

Comparison of Three Months Ended September 30 , 2020 to Three Months Ended September 30 , 2019

The following table sets forth for the periods indicated our operating revenue, operating income and operating ratio by segment, along with the change for each component:

September 30,

(Dollars in thousands)

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Represents operating expenses as a percentage of operating revenue.

Our operating revenue increased $294,000, or 0.1%, to $212.4 million in the 2020 period from $212.1 million in the 2019 period.

Our operating revenue increased $1.0 million, or 0.5%, to $216.0 million in the 2020 period from $215.0 million in the 2019 period.

Our operating revenue, net of fuel surcharges, increased $7.2 million, or 3.8%, to $196.1 million in the 2020 period from $188.9 million in the 2019 period.

This increase was due to a $10.9 million increase in Dedicated revenue, net of fuel surcharges, a $2.8 million increase in Truckload revenue, net of fuel surcharges, and a $1.0 million increase in Intermodal revenue, net of fuel surcharges, partially offset by a $6.0 million decrease in Brokerage revenue.

This increase was due to a $9.7 million increase in Dedicated revenue, net of fuel surcharges, a $2.1 million increase in Truckload revenue, net of fuel surcharges, and a $655,000 increase in Intermodal revenue, net of fuel surcharges, partially offset by a $5.3 million decrease in Brokerage revenue.

Fuel surcharge revenue decreased to $19.9 million in the 2020 period from $26.1 million in the 2019 period due to significantly lower fuel prices.

Truckload segment revenue decreased $1.4 million, or 1.4%, to $93.6 million in the 2020 period from $95.0 million in the 2019 period.

Truckload segment revenue, net of fuel surcharges, increased $2.8 million, or 3.3%, to $86.0 million in the 2020 period from $83.2 million in the 2019 period, primarily due to an increase in our average number of tractors.

Truckload segment revenue, net of fuel surcharges, increased $2.1 million, or 2.6%, to $85.1 million in the 2020 period from $82.9 million in the 2019 period, primarily due to an increase in our average revenue per tractor, partially offset by a decrease in our average number of tractors.

The improvement in the operating ratio in the 2020 period was primarily due to a decrease in net fuel expense as a percentage of revenue along with multiple cost control measures.

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Dedicated segment revenue, net of fuel surcharges, increased 16.4% primarily due to fleet growth driven by an increase in the number of Dedicated contracts we have with our customers.

The improvement in the operating ratio in the 2020 period was primarily due to a decrease in net fuel expense as a percentage of revenue along with multiple cost control measures.

The operating ratio was consistent in both the 2020 and 2019 periods.

Intermodal segment revenue decreased $321,000, or 1.4%, to $22.0 million in the 2020 period from $22.3 million in the 2019 period.

Intermodal segment revenue, net of fuel surcharges, increased 3.4% from the 2019 period primarily due to an increase in load volume.

The increase in the operating ratio in the 2020 period was primarily due to an increase in salaries and wages as a percentage of revenue.

Brokerage segment revenue decreased $6.0 million, or 21.1%, to $22.5 million in the 2020 period from $28.5 million in the 2019 period primarily due to a decrease in revenue per load and in load volume.

The improvement in the operating ratio in the 2020 period was primarily due to a decrease in net fuel expense as a percentage of revenue.

Brokerage segment revenue decreased $5.3 million, or 19.3%, to $22.1 million in the 2020 period from $27.4 million in the 2019 period primarily due to a decrease in both revenue per load and load volume.

The increase in the operating ratio in the 2020 period was primarily due to an increase in the amounts payable to carriers for transportation services which we arranged as a percentage of our Brokerage revenue.

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Operating Revenue

September 30,

(Dollars in thousands)

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Gain on disposition of revenue equipment

Gain on disposition of facility

Total operating expenses

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Salaries, wages and benefits expense increased $5.5 million, or 7.9%, in the 2020 period from the 2019 period.

This increase resulted primarily from additional company driver compensation expense of $4.3 million and an increase in bonus compensation expense for our non-driver employees of $1.1 million, partially offset by a $1.6 million decrease in employees’

health insurance expense, due to a decrease in our self-insured medical claims.

This increase resulted primarily from additional company driver compensation expense of $2.7 million, a $1.2 million increase in employees’

health insurance expense as a result of increased self-insured medical claims and a $935,000 increase in bonus compensation expense for our non-driver employees.

Purchased transportation consists of amounts payable to railroads and carriers for transportation services we arrange in connection with Brokerage and Intermodal operations and to independent contractor providers of revenue equipment.

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Amounts payable to railroads and drayage carriers for transportation services within our Intermodal segment decreased $913,000 to $13.9 million in the 2020 period from $14.8 million in the 2019 period.

Amounts payable to carriers for transportation services we arranged in our Brokerage segment decreased $4.7 million to $18.7 million in the 2020 period from $23.4 million in the 2019 period, primarily due to a decrease in revenue per load and in load volume.

Amounts payable to carriers for transportation services we arranged in our Brokerage segment decreased $4.4 million to $18.7 million in the 2020 period from $23.1 million in the 2019 period, primarily due to a decrease in both revenue per load and load volume.

The portion of purchased transportation expense related to independent contractors within our Truckload and Dedicated segments, including fuel surcharges, increased $1.9 million in the 2020 period as the number of independent contractors rose.

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These expenses will vary primarily based upon the frequency and severity of our accident experience, our self-insured retention levels and the market for insurance.

The $1.8 million increase in insurance and claims in the 2020 period was primarily due to increases in the cost of physical damage claims related to our tractors and trailers and our self-insured workers’

compensation claims, along with an increase in our insurance premiums.

The $1.6 million, or 16.9%, increase in insurance and claims in the 2020 period was primarily due to an increase in our insurance premiums along with an increase in the cost of physical damage claims related to our revenue equipment.

Our significant self-insured retention exposes us to the possibility of significant fluctuations in claims expense between periods which could materially impact our financial results depending on the frequency, severity and timing of claims.

Gain on disposition of revenue equipment increased to $2.2 million in the 2020 period from $1.2 million in the 2019 period primarily due to an increase in the number of tractors sold.

Gain on disposition of revenue equipment decreased to $2.1 million in the 2020 period from $2.6 million in the 2019 period primarily due to a decrease in the number of trailers sold.

Future gains or losses on dispositions of revenue equipment will be impacted by the market for used revenue equipment, which is beyond our control.

The $1.1 million decrease in other operating expenses in the 2020 period was primarily due to decreased costs associated with travel and entertainment and with recruiting and retaining drivers.

Gain on disposition of facility was $1.7 million in the 2020 period.

The disposition of the facility, located in Forest Park, GA, was part of our long-term program to expand and update the footprint of our facilities throughout the United States.

We held the facility as rental property since 2011 after constructing a larger facility in the area.

Any future gains or losses on disposition of facilities will be impacted by the market for real estate, which is beyond our control.

The $585,000 decrease in other operating expenses in the 2020 period was primarily due to decreased costs associated with travel and entertainment.

As a result of the foregoing factors, our operating income improved 21.8% to $24.4 million in the 2020 period from $20.0 million in the 2019 period.

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improved to 88.7% in the 2020 period from 90.7% in the 2019 period.

The operating ratio for our Truckload segment was 88.3% in the 2020 period and 91.6% in the 2019 period, for our Dedicated segment was 84.8% in the 2020 period and 88.5% in the 2019 period, for our Intermodal segment was 95.3% in the 2020 period and 92.5% in the 2019 period, and for our Brokerage segment was 91.9% in the 2020 period and 90.6% in the 2019 period.

Operating expenses as a percentage of operating revenue, with both amounts net of fuel surcharges, were 87.0% in the 2020 period and 89.2% in the 2019 period.

The operating ratio for our Truckload segment was 88.7% in the 2020 period and 92.7% in the 2019 period, for our Dedicated segment was 85.9% in each of the 2020 and 2019 periods, for our Intermodal segment was 94.1% in the 2020 period and 94.6% in the 2019 period, and for our Brokerage segment was 93.1% in the 2020 period and 92.9% in the 2019 period.

Operating expenses as a percentage of operating revenue, with both amounts net of fuel surcharges, improved to 87.6% in the 2020 period from 89.4% in the 2019 period.

Our effective income tax rate increased to 26.1% in the 2020 period from 18.2% in the 2019 period.

The 2020 period includes additional income tax expense of $1.1 million to adjust for certain discrete tax benefit reserves, which we evaluate based on the current facts, circumstances and information available.

The 2019 period included additional income tax benefits of $1.4 million resulting from certain discrete tax benefits included in our tax filings in the period which were not previously recognized.

These estimated benefits are net of reserves which are based on our evaluation of the current facts, circumstances and information available.

As a result of the factors described above, net income improved 8.8% to $18.0 million, or $0.22 per diluted share, in the 2020 period from $16.6 million, or $0.20 per diluted share, in the 2019 period.

Comparison of Six Months Ended June 30 , 2020 to Six Months Ended June 30 , 2019

Comparison of Nine Months Ended September 30 , 2020 to Nine Months Ended September 30 , 2019

The following table sets forth for the periods indicated our operating revenue, operating income and operating ratio by segment, along with the change for each component:

September 30,

(Dollars in thousands)

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Our operating revenue, net of fuel surcharges, increased $33.9 million, or 6.2%, to $583.6 million in the 2020 period from $549.7 million in the 2019 period.

This increase was due to a $26.2 million increase in Dedicated revenue, net of fuel surcharges, a $6.4 million increase in Truckload revenue, net of fuel surcharges, and a $1.9 million increase in Intermodal revenue, net of fuel surcharges, partially offset by a $7.8 million decrease in Brokerage revenue.

Fuel surcharge revenue decreased to $43.6 million in the 2020 period from $50.3 million in the 2019 period.

Truckload segment revenue increased $1.6 million, or 0.8%, to $189.3 million in the 2020 period from $187.7 million in the 2019 period.

Truckload segment revenue, net of fuel surcharges, increased $6.4 million, or 3.9%, to $169.8 million in the 2020 period from $163.4 million in the 2019 period, primarily due to an increase in our average number of tractors.

This increase was due to a $35.9 million increase in Dedicated revenue, net of fuel surcharges, an $8.6 million increase in Truckload revenue, net of fuel surcharges, and a $2.5 million increase in Intermodal revenue, net of fuel surcharges, partially offset by a $13.1 million decrease in Brokerage revenue.

Fuel surcharge revenue decreased to $63.5 million in the 2020 period from $76.4 million in the 2019 period due to significantly lower fuel prices.

Truckload segment revenue increased $224,000, or 0.1%, to $283.0 million in the 2020 period from $282.7 million in the 2019 period.

Truckload segment revenue, net of fuel surcharges, increased $8.6 million, or 3.5%, to $254.9 million in the 2020 period from $246.3 million in the 2019 period, primarily due to fleet growth and an increase in our average revenue per tractor.

The improvement in the operating ratio in the 2020 period was primarily due to a decrease in net fuel expense as a percentage of revenue along with multiple cost control measures.

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The increase in the operating ratio in the 2020 period was primarily due to increases in salaries and wages and purchased transportation as a percentage of revenue.

Brokerage segment revenue decreased $7.8 million, or 14.2%, to $47.3 million in the 2020 period from $55.1 million in the 2019 period primarily due to a decrease in revenue per load.

Brokerage segment revenue decreased $13.1 million, or 15.9%, to $69.3 million in the 2020 period from $82.4 million in the 2019 period primarily due to a decrease in both revenue per load and load volume.

The following table sets forth for the periods indicated the dollar and percentage increase or decrease of the items in our unaudited consolidated condensed statements of operations, and those items as a percentage of operating revenue:

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Operating Revenue

September 30,

(Dollars in thousands)

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Gain on disposition of revenue equipment

Gain on disposition of facility

Total operating expenses

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Income taxes expense

Salaries, wages and benefits expense increased $19.6 million, or 9.7%, in the 2020 period from the 2019 period.

This increase resulted primarily from additional company driver compensation expense of $10.9 million.

Purchased transportation expense decreased $307,000 in total, or 0.4%, in the 2020 period from the 2019 period.

Amounts payable to railroads and drayage carriers for transportation services within our Intermodal segment increased $1.0 million to $29.1 million in the 2020 period from $28.1 million in the 2019 period, primarily due to increased load volume.

Amounts payable to carriers for transportation services we arranged in our Brokerage segment decreased $5.7 million to $39.9 million in the 2020 period from $45.5 million in the 2019 period, primarily due to a decrease in revenue per load.

This increase resulted primarily from additional company driver compensation expense of $13.6 million and a $1.0 million increase in employees’

health insurance expense as a result of increased self-insured medical claims.

Purchased transportation expense decreased $3.7 million in total, or 3.1%, in the 2020 period from the 2019 period.

Amounts payable to railroads and drayage carriers for transportation services within our Intermodal segment increased $104,000 to $43.0 million in the 2020 period from $42.9 million in the 2019 period.

Amounts payable to carriers for transportation services we arranged in our Brokerage segment decreased $10.0 million to $58.5 million in the 2020 period from $68.6 million in the 2019 period, primarily due to a decrease in both revenue per load and load volume.

The portion of purchased transportation expense related to independent contractors within our Truckload and Dedicated segments, including fuel surcharges, increased $6.3 million in the 2020 period as the number of independent contractors rose.

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The $6.7 million, or 9.5%, increase in depreciation in the 2020 period was primarily due to an increase in the size of our fleet of tractors.

The $4.2 million, or 21.2%, increase in insurance and claims in the 2020 period was primarily due to increases in the cost of our self-insured auto liability and workers’

compensation claims, along with an increase in our insurance premiums.

The $5.8 million, or 19.8%, increase in insurance and claims in the 2020 period was primarily due to an increase in our insurance premiums along with increases in the cost of our self-insured auto liability, workers’

compensation and revenue equipment physical damage claims.

Gain on disposition of revenue equipment increased to $5.9 million in the 2020 period from $5.3 million in the 2019 period primarily due to an increase in the number of tractors sold.

Future gains or losses on dispositions of revenue equipment will be impacted by the market for used revenue equipment, which is beyond our control.

The $587,000 decrease in other operating expenses in the 2020 period was primarily due to decreased costs associated with travel and entertainment and with recruiting and retaining drivers.

Gain on disposition of facility was $1.7 million in the 2020 period.

The disposition of the facility, located in Forest Park, GA, was part of our long-term program to expand and update the footprint of our facilities throughout the United States.

We held the facility as rental property since 2011 after constructing a larger facility in the area.

Any future gains or losses on disposition of facilities will be impacted by the market for real estate, which is beyond our control.

The $1.2 million decrease in other operating expenses in the 2020 period was primarily due to decreased costs associated with travel and entertainment.

As a result of the foregoing factors, our operating income improved 17.3% to $67.7 million in the 2020 period from $57.7 million in the 2019 period.

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The operating ratio for our Truckload segment was 90.0% in the 2020 period and 92.0% in the 2019 period, for our Dedicated segment was 86.4% in the 2020 period and 88.1% in the 2019 period, for our Intermodal segment was 94.6% in the 2020 period and 92.2% in the 2019 period, and for our Brokerage segment was 93.2% in the 2020 period and 91.7% in the 2019 period.

Operating expenses as a percentage of operating revenue, with both amounts net of fuel surcharges, were 88.8% in the 2020 period and 89.6% in the 2019 period.

Operating expenses as a percentage of operating revenue, with both amounts net of fuel surcharges, improved to 88.4% in the 2020 period from 89.5% in the 2019 period.

Our effective income tax rate increased to 26.4% in the 2020 period from 22.7% in the 2019 period.

The 2020 period included additional income tax expense of $1.1 million to adjust for certain discrete tax benefit reserves, which we evaluate based on the current facts, circumstances and information available.

The 2019 period included additional income tax benefits of $1.4 million resulting from certain discrete tax benefits included in our tax filings in the period which were not previously recognized.

As a result of the factors described above, net income improved 10.1% to $49.9 million, or $0.60 per diluted share, in the 2020 period from $45.3 million, or $0.55 per diluted share, in the 2019 period.

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The table below reflects our net cash flows provided by operating activities, net cash flows used for investing activities and net cash flows used for financing activities for the periods indicated.

Ended June 30,

Ended September 30,

(In thousands)

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In 2015, our Board of Directors approved and we announced an increase in the share repurchase program, providing for the repurchase of up to $40 million, or approximately two million shares, of our common stock, which was increased by our Board of Directors to 3.3 million shares in August 2017 to reflect the five-for-three stock split effected in the form of a stock dividend on July 7, 2017.

In August 2019, our Board of Directors approved and we announced an increase from current availability in our existing share repurchase program providing for the repurchase of up to $34 million, or approximately 1.8 million shares, of our common stock, which was increased by our Board of Directors to 2.7 million shares in August 2020 to reflect the three-for-two stock split effected in the form of a stock dividend on August 13, 2020.

The timing and extent to which we repurchase shares depends on market conditions and other corporate considerations.

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We repurchased and retired 53,064 shares of common stock for $597,000 in the first quarter of 2020.

We did not repurchase any shares in the second quarter of 2020 or in 2019.

As of June 30, 2020, future repurchases of up to $33.4 million, or approximately 1.8 million shares, were available in the share repurchase program.

In the first six months of 2019, net cash flows provided by operating activities of $75.1 million were primarily used to purchase new revenue equipment, net of proceeds from dispositions, in the amount of $43.5 million, to upgrade regional operating facilities in the amount of $1.4 million, and to pay cash dividends of $3.3 million, resulting in a $26.0 million increase in cash and cash equivalents.

We did not repurchase any shares in the second or third quarters of 2020 or in 2019.

As of September 30, 2020, future repurchases of up to $33.4 million, or approximately 2.6 million shares, were available in the share repurchase program.

In the first nine months of 2019, net cash flows provided by operating activities of $122.0 million were primarily used to purchase new revenue equipment, net of proceeds from dispositions, in the amount of $95.0 million, to pay cash dividends of $40.4 million, and to upgrade regional operating facilities in the amount of $2.1 million, resulting in a $16.3 million decrease in cash and cash equivalents.

Beginning in 2018, our net cash flows have been increased by the new tax laws established by the Tax Cuts and Jobs Act of 2017, which reduces the federal corporate statutory income tax rate and establishes bonus depreciation that allows for full expensing of qualified assets.

We estimate that capital expenditures, net of proceeds from dispositions, will be approximately $26 million for the remainder of 2020.

A quarterly cash dividend of $0.04 per share of common stock was declared in each of the first two quarters of 2020 which totaled $4.4 million.

A quarterly cash dividend of $0.03 per share of common stock was declared in each of the first two quarters of 2019 which totaled $3.3 million.

A quarterly cash dividend of $0.027 per share of common stock was declared in each of the first two quarters of 2020 and of $0.04 per share of common stock was declared in the third quarter of 2020 which totaled $7.7 million.

We paid cash dividends totaling $40.4 million in the first three quarters of 2019 which consisted of a special dividend of $0.433 per share of common stock in September, along with quarterly cash dividends of $0.02 per share of common stock in each of the first three quarters of 2019.

We currently expect to continue to pay quarterly cash dividends in the future.

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In August 2018, we entered into an amendment to our unsecured committed credit facility which reduces the aggregate principal amount of the facility from $40.0 million to $30.0 million and extends the term of the facility to August 2023.

At June 30, 2020, there was no outstanding principal balance on the facility.

At September 30, 2020, there was no outstanding principal balance on the facility.

As of that date, we had outstanding standby letters of credit to guarantee settlement of self-insurance claims of $17.0 million and remaining borrowing availability of $13.0 million.

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This facility also contains restrictive covenants which, among other matters, require us to maintain compliance with cash flow leverage and fixed charge coverage ratios.

We were in compliance with all covenants at June 30, 2020 and December 31, 2019.

The following is a summary of our contractual obligations as of June 30, 2020.

We were in compliance with all covenants at September 30, 2020 and December 31, 2019.

The following is a summary of our contractual obligations as of September 30, 2020.

Payments Due by Period

(In thousands)

Remainder of 2020

Purchase obligations for revenue equipment

Operating lease obligations

Due to uncertainty with respect to the timing of future cash flows, the obligation under our nonqualified deferred compensation plan at June 30, 2020 of 235,022 shares of Company common stock with a value of $5.9 million has been excluded from the above table.

Due to uncertainty with respect to the timing of future cash flows, the obligation under our nonqualified deferred compensation plan at September 30, 2020 of 353,398 shares of Company common stock with a value of $5.8 million has been excluded from the above table.

Off-balance Sheet Arrangements

Other than standby letters of credit maintained in connection with our self-insurance programs in the amount of $16.3 million along with purchase obligations and operating leases summarized above in our summary of contractual obligations, we did not have any other material off-balance sheet arrangements at June 30, 2020.

Other than standby letters of credit maintained in connection with our self-insurance programs in the amount of $17.0 million along with purchase obligations and operating leases summarized above in our summary of contractual obligations, we did not have any other material off-balance sheet arrangements at September 30, 2020.

Inflation and Fuel Costs

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Trade accounts receivable are recorded at the invoiced amounts, net of an allowance for credit losses.

Our allowance for credit losses was $348,000 as of June 30, 2020 and $382,000 as of December 31, 2019.

Our allowance for credit losses was $348,000 as of September 30, 2020 and $382,000 as of December 31, 2019.

A considerable amount of judgment is required in assessing the realization of these receivables including the current creditworthiness of each customer and related aging of the past-due balances, including any billing disputes.

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The transportation industry requires significant capital investments.

Our net property and equipment was $644.2 million as of June 30, 2020 and $640.4 million as of December 31, 2019.

Our depreciation expense was $51.4 million for the first six months of 2020 and $46.0 million for the first six months of 2019.

Our net property and equipment was $664.6 million as of September 30, 2020 and $640.4 million as of December 31, 2019.

Our depreciation expense was $77.0 million for the first nine months of 2020 and $70.3 million for the first nine months of 2019.

We compute depreciation of our property and equipment for financial reporting purposes based on the cost of each asset, reduced by its estimated salvage value, using the straight-line method over its estimated useful life.

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Actual results could differ from these estimates.

A 5% decrease in estimated salvage values would have decreased our net property and equipment as of June 30, 2020 by approximately $14.5 million, or 2.2%.

A 5% decrease in estimated salvage values would have decreased our net property and equipment as of September 30, 2020 by approximately $13.0 million, or 2.0%.

Impairment of Assets.

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We have $17.0 million in standby letters of credit to guarantee settlement of claims under agreements with our insurance carriers and regulatory authorities.

The insurance and claims accruals in our consolidated condensed balance sheets were $35.8 million as of June 30, 2020 and $31.7 million as of December 31, 2019.

The insurance and claims accruals in our consolidated condensed balance sheets were $36.6 million as of September 30, 2020 and $31.7 million as of December 31, 2019.

We reserve currently for the estimated cost of the uninsured portion of pending claims.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements