What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2021-05-07 compared with 2020-11-06 · 101 added, 409 removed, 544 unchanged (48% of the section changed)

2 unchanged sentences

CONSOLIDATED CONDENSED BALANCE SHEETS

September 30,

(In thousands, except share information)

5 unchanged sentences

83,426  

11,055  

Prepaid expenses and other

42 unchanged sentences

192,000,000 shares authorized;

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

82,774,936 shares at March 31, 2021, and 82,705,005 shares at December 31, 2020, issued and outstanding

Additional paid-in capital

10 unchanged sentences

$ 831,636  

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

1 unchanged sentence

CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS

Ended September 30,

Ended March 31,

(In thousands, except per share information)

2 unchanged sentences

$ 218,646  

$ 647,041  

$ 626,086  

Operating expenses (income):

2 unchanged sentences

72,761  

221,034  

201,449  

Purchased transportation

1 unchanged sentence

40,445  

113,676  

117,352  

Fuel and fuel taxes

1 unchanged sentence

28,297  

73,433  

89,904  

Supplies and maintenance

3 unchanged sentences

25,427  

25,580  

24,290  

76,979  

70,295  

Operating taxes and licenses

2 unchanged sentences

12,284  

29,355  

Communications and utilities

Gain on disposition of revenue equipment

Gain on disposition of facility

16,223  

17,395  

Total operating expenses

1 unchanged sentence

200,614  

579,353  

568,375  

Operating income

1 unchanged sentence

18,032  

67,688  

57,711  

Income before income taxes

1 unchanged sentence

18,129  

67,815  

58,639  

Income taxes expense

1 unchanged sentence

$ 13,718  

$ 18,044  

$ 16,587  

$ 49,896  

$ 45,323  

Basic earnings per common share

1 unchanged sentence

$ 0.17  

$ 0.61  

$ 0.55  

Diluted earnings per common share

1 unchanged sentence

$ 0.17  

$ 0.60  

$ 0.55  

Dividends declared per common share

1 unchanged sentence

$ 0.027  

$ 0.093  

$ 0.493  

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

1 unchanged sentence

CONSOLIDATED CONDENSED STATEMENTS OF STOCKHOLDERS ’

 (Unaudited)

holders’

22 unchanged sentences

Dividends on common stock

Balance at June 30, 2020

82,662  

83,816  

544,755  

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.  

MARTEN TRANSPORT, LTD.

CONSOLIDATED CONDENSED STATEMENTS OF STOCKHOLDERS’

 (Unaudited)

holders’

(In thousands)

Balance at December 31, 2020

14 unchanged sentences

$ 634,978  

15,190  

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 June 30, 2019

81,950  

77,789  

523,782  

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.  

1 unchanged sentence

CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS

Ended September 30,

Ended March 31,

(In thousands)

7 unchanged sentences

Gain on disposition of revenue equipment

Gain on disposition of facility

Deferred income taxes

Share-based payment arrangement compensation expense

Equity in loss from affiliate

Changes in other current operating items:

16,847  

Prepaid expenses and other

9 unchanged sentences

13,896  

32,114  

Buildings and land, office equipment and other additions

Proceeds from buildings and land, office equipment and other dispositions

Net cash used for investing activities

19 unchanged sentences

Operating lease assets and liabilities acquired

$ 1,664  

Supplemental disclosure of cash flow information:

1 unchanged sentence

$ 1,350  

$ 4,447  

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

1 unchanged sentence

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

NINE MONTHS ENDED SEPTEMBER 30 , 2020

THREE MONTHS ENDED MARCH 31, 2021

( 1 ) Consolidated Condensed Financial Statements

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

Ended September 30,

Ended March 31,

(In thousands, except per share amounts)

1 unchanged sentence

$ 13,718  

$ 49,896  

$ 45,323  

Basic earnings per common share - weighted-average shares

1 unchanged sentence

82,214  

82,472  

81,912  

Effect of dilutive stock options

2 unchanged sentences

82,864  

83,098  

82,618  

Basic earnings per common share

1 unchanged sentence

$ 0.17  

$ 0.61  

$ 0.55  

Diluted earnings per common share

1 unchanged sentence

$ 0.17  

$ 0.60  

$ 0.55  

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.

Options totaling 193,750 and 294,450 equivalent shares for the three -month periods ended March 31, 2021 and 2020, 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 40,263 and 77,066 equivalent shares for the three -month periods ended March 31, 2021 and 2020, 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

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

We maintain a credit agreement that provides for an unsecured committed credit facility with an aggregate principal amount of $ 30.0 million which matures in August 2023.

At March 31, 2021, 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.

At December 31, 2020, there was also no outstanding principal balance on the facility.

As of that date, we had outstanding standby letters of credit of $ 15.7 million on the facility.

As of that date, we also had outstanding standby letters of credit of $ 17.0 million on the facility.

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 0.84 % at September 30, 2020.

The interest rate for the facility that would apply to outstanding principal balances was 0.78 % at March 31, 2021.

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.

A waiver allowing stock redemptions and dividends in excess of the 25% limitation in a total amount of up to $ 65 million in 2019 was obtained from the lender in August 2019.

A waiver allowing stock redemptions and dividends in excess of the 25% limitation in a total amount of up to $ 60 million in 2020 was obtained from the lender in November 2020.

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 September 30, 2020 and December 31, 2019.

We were in compliance with all covenants at March 31, 2021 and December 31, 2020.

( 5 ) Related Party Transactions

We purchase fuel and tires and obtain related services from Bauer Built, Inc., or BBI.

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

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.

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

We paid BBI $ 76,000 in the first three months of 2021 and $ 90,000 in the first three months of 2020 for fuel, tires and related services.

In addition, we paid $ 396,000 in the first three months of 2021 and $ 917,000 in the first three months of 2020 to tire manufacturers for tires that were provided by BBI.

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

We provided transportation services to MW Logistics, LLC, or MWL, a 45 % owned affiliate through October 31, 2019, as described in Note 10.

( 6 ) Share Repurchase Program

In 2007, our Board of Directors approved, and we announced a share repurchase program to repurchase up to one million shares of our common stock either through purchases on the open market or through private transactions and in accordance with Rule 10b - 18 of the Exchange Act.

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 share repurchase program allows purchases on the open market or through private transactions in accordance with Rule 10b - 18 of the Exchange Act.

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

1 unchanged sentence

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 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.

We did not repurchase any shares in the rest of 2020 or in the first quarter of 2021.

As of March 31, 2021, 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 $ 0.027 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.

A quarterly cash dividend of $ 0.04 per share of common stock was declared in the first quarter of 2021 which totaled $ 3.3 million.

A quarterly cash dividend of $ 0.027 per share of common stock was declared in the first quarter of 2020 which totaled $ 2.2 million.

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.

A waiver allowing stock redemptions and dividends in excess of the 25% limitation in a total amount of up to $ 65 million in 2019 was obtained from the lender in August 2019.

A waiver allowing stock redemptions and dividends in excess of the 25% limitation in a total amount of up to $ 60 million in 2020 was obtained from the lender in November 2020.

( 8 ) Accounting for Share-based Payment Arrangement Compensation

1 unchanged sentence

Stock Compensation .

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.

During the first three months of 2021, 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 three months of 2021 and 2020 was $ 336,000 and $ 246,000 , respectively.

( 9 ) Termination of Deferred Compensation Plan

2 unchanged sentences

The termination is effective May 5, 2021.

( 10 ) Equity Investment

We owned a 45 % equity interest in MWL, a third -party provider of logistics services to the transportation industry, until October 31, 2019, at which time we sold our entire membership interest for approximately $ 1.3 million.

Prior to the sale of our interest, a non-related party owned the other 55 % equity interest in MWL.

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

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.

( 10 ) Fair Value of Financial Instruments

1 unchanged sentence

( 11 ) Commitments and Contingencies

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.

We are committed to new revenue equipment purchases of $ 89.3 million through the remainder of 2021.

Operating lease obligation expenditures through 2025 total $ 826,000 .

We self-insure, in part, for losses relating to workers’

5 unchanged sentences

( 12 ) Revenue and Business Segments

We account for our revenue in accordance with FASB ASC 606, Revenue from Contracts with Customers , which we adopted on January 1, 2018 using the modified retrospective method.

We account for our revenue in accordance with FASB ASC 606, Revenue from Contracts with Customers .

We combine our five current operating segments into four reporting segments (Truckload, Dedicated, Intermodal and Brokerage) for financial reporting purposes.

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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 $ 2.2 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.

Contract assets for this estimated revenue which are classified within prepaid expenses and other within our consolidated condensed balance sheets were $ 2.4 million and $ 1.5 million as of March 31, 2021 and December 31, 2020, respectively.

We had no impairment losses on contract assets in the first quarter of 2021 or in 2020.

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

6 unchanged sentences

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

Ended September 30,

Ended March 31,

(In thousands)

3 unchanged sentences

$ 83,857  

$ 254,897  

$ 246,313  

Truckload fuel surcharge revenue

1 unchanged sentence

11,275  

36,418  

Total Truckload revenue

1 unchanged sentence

95,132  

282,955  

282,731  

Dedicated revenue, net of fuel surcharge revenue

1 unchanged sentence

64,159  

200,237  

164,365  

Dedicated fuel surcharge revenue

1 unchanged sentence

10,878  

30,704  

Total Dedicated revenue

1 unchanged sentence

75,037  

228,801  

195,069  

Intermodal revenue, net of fuel surcharge revenue

1 unchanged sentence

20,594  

59,127  

56,618  

Intermodal fuel surcharge revenue

2 unchanged sentences

23,680  

65,957  

65,871  

Brokerage revenue

1 unchanged sentence

24,797  

69,328  

82,415  

Total operating revenue

1 unchanged sentence

$ 218,646  

$ 647,041  

$ 626,086  

Operating income:

1 unchanged sentence

$ 6,785  

$ 28,367  

$ 22,556  

11,024  

31,009  

23,135  

Total operating income

1 unchanged sentence

$ 18,032  

$ 67,688  

$ 57,711  

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

We adopted FASB Accounting Standards Update, or ASU, No.

2016 - 13, Measurement of Credit Losses on Financial Instruments , as of January 1, 2020.

The adoption of this standard was not material to our consolidated condensed balance sheets, statements of operations or statements of cash flows.

( 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 $ 2.4 million reclassification from investing to operating activities for the nine months ended September 30, 2019.

Truckload segment depreciation expense was $ 13.2 million and $ 13.8 million, Dedicated segment depreciation expense was $ 10.7 million and $ 9.9 million, Intermodal segment depreciation expense was $ 1.5 million and $ 1.4 million, and Brokerage segment depreciation expense was $ 282,000 and $ 362,000 in the three -month periods ended March 31, 2021 and 2020, respectively.

( 13 ) Use of Estimates

4 unchanged sentences

Ultimate results could differ from these estimates.

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

              The following discussion and analysis of our financial condition and results of operations should be read together with the selected consolidated financial data and our consolidated condensed financial statements and the related notes appe a ring elsewhere in this report.

Management ’

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

This discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions.

Our actual results may differ materially from those anticipated in these forward-looking statements as a result of many factors, including but not limited to those included in our Form 10-K, Part I , Item 1A for th e year ended December 31, 201 9 and in our Form 10-Q , Part II , Item 1A for the quarter ended March 31, 2020 .

We do not assume, and specifically disclaim, any obligation to update any forward-looking statement contained in this report.

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Our agreements with customers are typically for one year.

Our Dedicated segment provides customized transportation solutions tailored to meet individual customers’

requirements, utilizing temperature-controlled trailers, dry vans and other specialized equipment within the United States.

Our Dedicated segment provides customized transportation solutions tailored to meet each individual customer’s requirements, utilizing temperature-controlled trailers, dry vans and other specialized equipment within the United States.

Our agreements with customers range from three to five years and are subject to annual rate reviews.

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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 $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 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 operating revenue increased $4.4 million, or 2.0%, in the first three months of 2021 from the first three months of 2020.

Our operating revenue, net of fuel surcharges, increased $4.8 million, or 2.5%, compared with the first three months of 2020.

Truckload segment revenue, net of fuel surcharges, increased 0.1% from the first three months of 2020 due to an increase in our average revenue per tractor, substantially offset by a reduction in our average number of tractors.

Dedicated segment revenue, net of fuel surcharges, increased 4.3% from the first three months of 2020 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, decreased 5.6% primarily due to decreased load volume.

Brokerage segment revenue increased 12.5% primarily due to an increase in revenue per load in the first three months of 2021.

Fuel surcharge revenue decreased slightly to $24.9 million in the first three months of 2021 from $25.2 million in the first three months of 2020.

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 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 income improved 33.1% from $18.0 million in the first three months of 2020 to $24.0 million in the first three months of 2021, a period in which we overcame the impact of the severe winter weather in February 2021.

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

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.

improved to 89.2% in the first three months of 2021 from 91.8% in the first three months of 2020.

Operating expenses as a percentage of operating revenue, with both amounts net of fuel surcharges, improved to 87.9% in the first three months of 2021 from 90.7% in the first three months of 2020.

Our net income improved 31.3% to $18.0 million, or $0.22 per diluted share, in the first three months of 2021 from $13.7 million, or $0.17 per diluted share, in the first three months of 2020.

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

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

At March 31, 2021, we had $88.6 million of cash and cash equivalents, $635.0 million in stockholders’

equity and no long-term debt outstanding.

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.

In the first three months of 2021, net cash flows provided by operating activities of $43.6 million were primarily used to purchase new revenue equipment, net of proceeds from dispositions, in the amount of $16.3 million, to pay cash dividends of $3.3 million, and to upgrade regional operating facilities in the amount of $591,000, resulting in a $22.5 million increase in cash and cash equivalents.

We estimate that capital expenditures, net of proceeds from dispositions, will be approximately $135 million for the remainder of 2021.

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We continue to invest considerable time and capital resources to actively implement and promote long-term environmentally sustainable solutions that drive reductions in our fuel and electricity consumption and decrease our carbon footprint.

These initiatives include (i) reducing idle time for our tractors by installing and tightly managing the use of auxiliary power units, which are powered by solar panels and provide climate control and electrical power for our drivers without idling the tractor engine, (ii) improving the energy efficiency of our newer, more aerodynamic and well-maintained tractor and trailer fleets by optimizing the equipment’s specifications, weight and tractor speed, equipping our tractors with automatic transmissions, converting the refrigeration units in our refrigerated trailers to the new, more-efficient CARB refrigeration units along with increasing the insulation in the trailer walls and installing trailer skirts, and using ultra-fuel efficient and wide-based tires, and (iii) upgrading all of our facilities to indoor and outdoor LED lighting along with converting all of our facilities to solar power by the end of 2020.

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.

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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.

C OVID -19 Update

COVID-19 Update

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 –

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

Ended September 30,

Ended March 31,

Truckload Segment:

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

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

Independent contractors provided 133 and 106 tractors as of March 31, 2021 and 2020, respectively.

Comparison of Three Months Ended March 31, 2021 to Three Months Ended March 31, 2020

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 $4.8 million, or 2.5%, to $198.2 million in the 2021 period from $193.4 million in the 2020 period.

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 $2.1 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.

This increase was due to a $3.1 million increase in Brokerage revenue, a $2.7 million increase in Dedicated revenue, net of fuel surcharges, and a $62,000 increase in Truckload revenue, net of fuel surcharges, partially offset by a $1.1 million decrease in Intermodal revenue, net of fuel surcharges.

Fuel surcharge revenue decreased slightly to $24.9 million in the 2021 period from $25.2 million in the 2020 period.

Truckload segment revenue decreased $217,000, or 0.2%, to $94.9 million in the 2021 period from $95.1 million in the 2020 period.

Truckload segment revenue, net of fuel surcharges, increased $62,000, or 0.1%, and was $83.9 million in each of the 2021 and 2020 periods.

During the 2021 period, an increase in our average revenue per tractor was substantially offset by a reduction in our average number of tractors.

The improvement in the operating ratio in the 2021 period was primarily due to an increase in our average revenue per tractor due to increased rates with our customers.

Dedicated segment revenue increased $3.2 million, or 4.3%, to $78.2 million in the 2021 period from $75.0 million in the 2020 period.

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The operating ratio was consistent in both the 2021 and 2020 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 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.

Intermodal segment revenue decreased $1.7 million, or 7.1%, to $22.0 million in the 2021 period from $23.7 million in the 2020 period.

Intermodal segment revenue, net of fuel surcharges, decreased 5.6% from the 2020 period primarily due to a decrease in load volume.

The improvement in the operating ratio in the 2021 period was primarily due to a decrease in the amounts payable to railroads as a percentage of our revenue.

Brokerage segment revenue increased $3.1 million, or 12.5%, to $27.9 million in the 2021 period from $24.8 million in the 2020 period primarily due to an increase in revenue per load.

The improvement in the operating ratio in the 2021 period was primarily due to a decrease in the amounts payable to carriers for transportation services which we arranged as a percentage of our Brokerage revenue and increased rates with our customers.

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 consist of compensation for our employees, including both driver and non-driver employees, employees’

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health insurance claims, changes in health care premiums and other factors.

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 $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.

Salaries, wages and benefits expense increased $237,000, or 0.3%, in the 2021 period from the 2020 period.

Bonus compensation expense for our non-driver employees increased by $1.1 million in the 2021 period.

This increase, along with other smaller increases in the components of salaries, wages and benefits, were partially offset by a $1.4 million decrease in employees’

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

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.

This category will vary depending upon the amount and rates, including fuel surcharges, we pay to third-party railroad and motor carriers, the ratio of company drivers versus independent contractors and the amount of fuel surcharges passed through to independent contractors.

Purchased transportation expense decreased $3.4 million in total, or 8.3%, in the 2020 period from the 2019 period.

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 $4.4 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.

Purchased transportation expense increased $320,000 in total, or 0.8%, in the 2021 period from the 2020 period.

Amounts payable to railroads and drayage carriers for transportation services within our Intermodal segment decreased $3.2 million to $12.6 million in the 2021 period from $15.8 million in the 2020 period, primarily due to a decrease in the volume of loads moved on the rail.

Amounts payable to carriers for transportation services we arranged in our Brokerage segment increased $2.5 million to $23.6 million in the 2021 period from $21.1 million in the 2020 period, primarily due to an increase in the cost per load within the tight freight market.

The portion of purchased transportation expense related to independent contractors within our Truckload and Dedicated segments, including fuel surcharges, increased $1.1 million in the 2021 period as the number of independent contractors rose.

We expect our purchased transportation expense to increase as we grow our Intermodal and Brokerage segments.

Fuel and fuel taxes decreased by $7.0 million, or 22.4%, in the 2020 period from the 2019 period due to significantly lower fuel prices.

Net fuel expense (fuel and fuel taxes net of fuel surcharge revenue and surcharges passed through to independent contractors, outside drayage carriers and railroads) decreased $1.6 million, or 19.5%, to $6.6 million in the 2020 period from $8.2 million in the 2019 period.

Fuel and fuel taxes increased by $640,000, or 2.3%, in the 2021 period from the 2020 period.

Net fuel expense (fuel and fuel taxes net of fuel surcharge revenue and surcharges passed through to independent contractors, outside drayage carriers and railroads) increased $332,000, or 5.3%, to $6.6 million in the 2021 period from $6.3 million in the 2020 period.

Fuel surcharges passed through to independent contractors, outside drayage carriers and railroads decreased to $2.6 million from $3.2 million in the 2020 period.

The United States Department of Energy, or DOE, national average cost of fuel decreased to $2.43 per gallon from $3.02 per gallon in the 2019 period.

Net fuel expense decreased to 3.8% of Truckload, Dedicated and Intermodal segment revenue, net of fuel surcharges, from 5.1% in the 2019 period.

This decrease in the percentage of revenue from the 2019 period reduced our net fuel expense by $2.2 million in the 2020 period.

The United States Department of Energy, or DOE, national average cost of fuel increased slightly to $2.91 per gallon from $2.88 per gallon in the 2020 period.

Net fuel expense increased to 3.9% of Truckload, Dedicated and Intermodal segment revenue, net of fuel surcharges, from 3.7% in the 2020 period.

We have worked diligently to control fuel usage and costs by improving our volume purchasing arrangements and optimizing our drivers’

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Auxiliary power units, which we have installed in our company-owned tractors, provide climate control and electrical power for our drivers without idling the tractor engine.

Depreciation relates to owned tractors, trailers, containers, auxiliary power units, communication units, terminal facilities and other assets.

The $1.3 million, or 5.3%, increase in depreciation in the 2020 period was primarily due to an increase in the size of our fleet of tractors.

We expect our annual cost of tractor and trailer ownership will increase in future periods as a result of higher prices of new equipment, which will result in greater depreciation over the useful life.

Supplies and maintenance consist of repairs, maintenance, tires, parts, oil and engine fluids, along with load-specific expenses including loading/unloading, tolls, pallets and trailer hostling.

Our supplies and maintenance expense decreased $1.2 million, or 9.9%, from the 2020 period primarily due to lower parts, tires and outside repair costs.

Insurance and claims consist of the costs of insurance premiums and accruals we make for claims within our self-insured retention amounts, primarily for personal injury, property damage, physical damage to our equipment, cargo claims and workers’

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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 $1.6 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.

The $838,000, or 6.8%, decrease in insurance and claims in the 2021 period was primarily due to a decrease in the cost of our self-insured auto liability claims, partially offset by increased insurance premiums.

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 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.

Gain on disposition of revenue equipment was $2.0 million in the 2021 period, up from $1.6 million in the 2020 period primarily due to an increase in the number of tractors and 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.

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 $714,000 decrease in other operating expenses in the 2021 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.

Our operating income improved 33.1% to $24.0 million in the 2021 period from $18.0 million in the 2020 period as a result of the foregoing factors and by overcoming the impact of the severe winter weather in February 2021.

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

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Our effective income tax rate increased to 25.0% in the 2021 period from 24.3% in the 2020 period.

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 31.3% to $18.0 million, or $0.22 per diluted share, in the 2021 period from $13.7 million, or $0.17 per diluted share, in the 2020 period.

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)

Operating revenue:

Truckload revenue, net of fuel surcharge revenue

Truckload fuel surcharge revenue

Total Truckload revenue

Dedicated revenue, net of fuel surcharge revenue

Dedicated fuel surcharge revenue

Total Dedicated revenue

Intermodal revenue, net of fuel surcharge revenue

Intermodal fuel surcharge revenue

Total Intermodal revenue

Brokerage revenue

Total operating revenue

Operating income:

Total operating income

Operating ratio (1) :

Consolidated operating ratio

 Represents operating expenses as a percentage of operating revenue.

Our operating revenue increased $21.0 million, or 3.3%, to $647.0 million in the 2020 period from $626.1 million in the 2019 period.

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 $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.

Dedicated segment revenue increased $33.7 million, or 17.3%, to $228.8 million in the 2020 period from $195.1 million in the 2019 period.

Dedicated segment revenue, net of fuel surcharges, increased 21.8% 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.

Intermodal segment revenue increased $86,000, or 0.1%, to $66.0 million in the 2020 period from $65.9 million in the 2019 period.

Intermodal segment revenue, net of fuel surcharges, increased 4.4% 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 increases in salaries and wages and purchased transportation as a percentage of revenue.

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.

Percentage of

Operating Revenue

September 30,

(Dollars in thousands)

Operating revenue

Operating expenses (income):

Salaries, wages and benefits

Purchased transportation

Fuel and fuel taxes

Supplies and maintenance

Operating taxes and licenses

Insurance and claims

Communications and utilities

Gain on disposition of revenue equipment

Gain on disposition of facility

Total operating expenses

Operating income

Income before income taxes

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 $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.

We expect our purchased transportation expense to increase as we grow our Intermodal and Brokerage segments.

Fuel and fuel taxes decreased by $16.5 million, or 18.3%, in the 2020 period from the 2019 period.

Net fuel expense (fuel and fuel taxes net of fuel surcharge revenue and surcharges passed through to independent contractors, outside drayage carriers and railroads) decreased $4.6 million, or 20.7%, to $17.6 million in the 2020 period from $22.2 million in the 2019 period.

Fuel surcharges passed through to independent contractors, outside drayage carriers and railroads decreased to $7.6 million from $8.7 million in the 2019 period.

The United States Department of Energy, or DOE, national average cost of fuel decreased to $2.58 per gallon from $3.06 per gallon in the 2019 period.

Net fuel expense decreased to 3.4% of Truckload, Dedicated and Intermodal segment revenue, net of fuel surcharges, from 4.7% in the 2019 period.

This decrease in the percentage of revenue from the 2019 period reduced our net fuel expense by $6.8 million in the 2020 period.

We have worked diligently to control fuel usage and costs by improving our volume purchasing arrangements and optimizing our drivers’

fuel purchases with national fuel centers, focusing on shorter lengths of haul, installing and tightly managing the use of auxiliary power units in our tractors to minimize engine idling and improving fuel usage in the temperature-control units on our trailers.

Auxiliary power units, which we have installed in our company-owned tractors, provide climate control and electrical power for our drivers without idling the tractor engine.

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 $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.

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.

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

improved to 89.5% in the 2020 period from 90.8% in the 2019 period.

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, 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.

Liquidity and Capital Resources  

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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 September 30,

Ended March 31,

(In thousands)

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Net cash flows used for financing activities

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 share repurchase program allows purchases on the open market or through private transactions in accordance with Rule 10b-18 of the Exchange Act.

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 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.

We did not repurchase any shares in the rest of 2020 or in the first quarter of 2021.

As of March 31, 2021, future repurchases of up to $33.4 million, or approximately 2.6 million shares, were available in the share repurchase program.

In the first three months of 2020, net cash flows provided by operating activities of $43.5 million were primarily used to purchase new revenue equipment, net of proceeds from dispositions, in the amount of $34.6 million, to pay cash dividends of $2.2 million, and to upgrade regional operating facilities in the amount of $983,000, resulting in a $4.7 million increase 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 $135 million for the remainder of 2021.

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.

A quarterly cash dividend of $0.04 per share of common stock was declared in the first quarter of 2021 which totaled $3.3 million.

A quarterly cash dividend of $0.027 per share of common stock was declared in the first quarter of 2020 which totaled $2.2 million.

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

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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 do not anticipate any significant liquidity constraints in the foreseeable future.

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

We maintain a credit agreement that provides for an unsecured committed credit facility with an aggregate principal amount of $30.0 million which matures in August 2023.

At March 31, 2021, 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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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.

A waiver allowing stock redemptions and dividends in excess of the 25% limitation in a total amount of up to $65 million in 2019 was obtained from the lender in August 2019.

A waiver allowing stock redemptions and dividends in excess of the 25% limitation in a total amount of up to $60 million in 2020 was obtained from the lender in November 2020.

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 September 30, 2020 and December 31, 2019.

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

We were in compliance with all covenants at March 31, 2021 and December 31, 2020.

The following is a summary of our contractual obligations as of March 31, 2021.

Payments Due by Period

(In thousands)

Remainder of 2021

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 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.

The obligation to issue shares of our common stock under our nonqualified deferred compensation plan at March 31, 2021 of 394,985 shares of Company common stock with a value of $6.7 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 $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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Critical Accounting Policies

The preparation of financial statements in conformity with U.S.

generally accepted accounting principles requires management to make estimates and assumptions about future events and apply judgments that affect the reported amounts of assets, liabilities, revenue and expenses in our consolidated condensed financial statements and related notes.

We base our estimates, assumptions and judgments on historical experience, current trends and other factors believed to be relevant at the time our consolidated condensed financial statements are prepared.

However, because future events and their effects cannot be determined with certainty, actual results could differ from our estimates and assumptions, and such differences could be material.

We believe that the following critical accounting policies affect our more significant estimates, assumptions and judgments used in the preparation of our consolidated condensed financial statements.

Revenue Recognition.

We account for our revenue in accordance with FASB ASC 606, Revenue from Contracts with Customers , which we adopted on January 1, 2018 using the modified retrospective method.

The current revenue standard requires us to recognize revenue and related expenses within each of our four reporting segments over time, compared with our former policy in which we recorded revenue and related expenses on the date shipment of freight was completed.

We account for revenue of our Intermodal and Brokerage segments and revenue on freight transported by independent contractors within our Truckload and Dedicated segments on a gross basis because we are the principal service provider controlling the promised service before it is transferred to each customer.

We are primarily responsible for fulfilling the promise to provide each specified service to each customer.

We bear the primary risk of loss in the event of cargo claims by our customers.

We also have complete control and discretion in establishing the price for each specified service.

Accordingly, all such revenue billed to customers is classified as operating revenue and all corresponding payments to carriers for transportation services we arrange in connection with brokerage and intermodal activities and to independent contractor providers of revenue equipment are classified as purchased transportation expense within our consolidated condensed statements of operations.

Accounts Receivable.

We are dependent upon a limited number of customers, and, as a result, our trade accounts receivable are highly concentrated.

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 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.

In order to assess the collectibility of these receivables, we perform ongoing credit evaluations of our customers’

financial condition.

Through these evaluations, we may become aware of a situation where a customer may not be able to meet its financial obligations due to deterioration of its financial viability, credit ratings or bankruptcy.

The allowance for credit losses is based on the best information available to us and is reevaluated and adjusted as additional information is received.

We evaluate the allowance based on historical write-off experience, the size of the individual customer balances, past-due amounts and the overall national economy.

We review the adequacy of our allowance for credit losses monthly.

Property and Equipment.

The transportation industry requires significant capital investments.

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.

We determine and periodically evaluate our estimate of the projected salvage values and useful lives primarily by considering the market for used equipment, prior useful lives and changes in technology.

We have not changed our policy regarding salvage values as a percentage of initial cost or useful lives of tractors and trailers within the last ten years.

We believe that our policies and past estimates have been reasonable.

Actual results could differ from these estimates.

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.

Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.

Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future net undiscounted cash flows expected to be generated by the asset.

If such assets were considered to be impaired, the impairment to be recognized would be measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets.

Assets to be disposed of are reported at the lower of the carrying amount or fair value less the costs to sell.

Insurance and Claims.

We self-insure, in part, for losses relating to workers’

compensation, auto liability, general liability, cargo and property damage claims, along with employees’

health insurance with varying risk retention levels.

We maintain insurance coverage for per-incident and total losses in excess of these risk retention levels in amounts we consider adequate based upon historical experience and our ongoing review.

However, we could suffer a series of losses within our self-insured retention limits or losses over our policy limits, which could negatively affect our financial condition and operating results.

We are responsible for the first $1.0 million on each auto liability claim and for the first $750,000 on each workers’

compensation claim.

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 $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.

We periodically evaluate and adjust these reserves based on our evaluation of the nature and severity of outstanding individual claims and our estimate of future claims development based on historical development.

Actual results could differ from these current estimates.

In addition, to the extent that claims are litigated and not settled, jury awards are difficult to predict.

Share-based Payment Arrangement Compensation.

We have granted stock options to certain employees and non-employee directors.

We recognize compensation expense for all stock options net of an estimated forfeiture rate and only record compensation expense for those shares expected to vest on a straight-line basis over the requisite service period (normally the vesting period).

Determining the appropriate fair value model and calculating the fair value of stock options require the input of highly subjective assumptions, including the expected life of the stock options and stock price volatility.

We use the Black-Scholes model to value our stock option awards.

We believe that future volatility will not materially differ from our historical volatility.

Thus, we use the historical volatility of our common stock over the expected life of the award.

The assumptions used in calculating the fair value of stock options represent our best estimates, but these estimates involve inherent uncertainties and the application of judgment.

As a result, if factors change and we use different assumptions, stock option compensation expense could be materially different in the future.

We have also granted performance unit awards to certain employees which are subject to vesting requirements over a five-year period, primarily based on our earnings growth.

The fair value of each performance unit is based on the closing market price on the date of grant.

We recognize compensation expense for these awards based on the estimated number of units probable of achieving the performance and service vesting requirements of the awards, net of an estimated forfeiture rate.

Our critical accounting policies are described in “Management’s Discussion and Analysis of Financial Condition and Results of Operations –

Critical Accounting Policies”

in our Annual Report on Form 10-K for the year ended December 31, 2020.

We have reviewed and determined that those critical accounting policies remain our critical accounting policies as of and for the three months ended March 31, 2021, and that there have been no material changes to our critical accounting policies during this period.

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