What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2020-11-06 compared with 2020-08-06 · 291 added, 231 removed, 555 unchanged (48% of the section changed)

4 unchanged sentences

(in thousands, except share and per share data)

September 3 0 ,

Current assets:

61 unchanged sentences

11,692,344 and 11,656,160 shares issued;

5,775,906 and 5,748,897 shares outstanding at June 30, 2020 and December 31, 2019, respectively

5,735,326 and 5,748,897 shares outstanding at September 30, 2020 and December 31, 2019, respectively

Additional paid-in capital

2 unchanged sentences

Treasury stock, at cost;

5,916,438 and 5,907,263 shares at June 30, 2020 and December 31, 2019, respectively

5,957,018 and 5,907,263 shares at September 30, 2020 and December 31, 2019, respectively

( 158,630 )  

14 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

OPERATING REVENUES:

Revenue, before fuel surcharge

$ 109,854  

$ 110,149  

$ 307,441  

$ 332,846  

Fuel surcharge

12,088  

18,845  

36,634  

57,834  

Total operating revenues

121,942  

128,994  

344,075  

390,680  

OPERATING EXPENSES AND COSTS:

Salaries, wages and benefits

30,618  

32,920  

90,991  

94,586  

Operating supplies and expenses

20,875  

25,455  

62,866  

73,487  

Rent and purchased transportation

41,402  

40,740  

114,688  

128,647  

13,403  

14,173  

41,936  

40,974  

Insurance and claims

Loss (gain) on sale or disposition of equipment

11,872  

10,411  

10,321  

(Gain) Loss on sale or disposition of equipment

( 174 )  

( 71 )  

Total operating expenses and costs

OPERATING (LOSS) INCOME

NON-OPERATING INCOME (EXPENSE)

111,868  

121,461  

326,522  

360,249  

OPERATING INCOME

10,074  

17,553  

30,431  

NON-OPERATING (EXPENSE) INCOME

( 94 )  

( 6,209 )  

INTEREST EXPENSE

(LOSS) INCOME BEFORE INCOME TAXES

FEDERAL AND STATE INCOME TAX (BENEFIT) EXPENSE:

Total federal and state income tax (benefit) expense

NET (LOSS) INCOME

(LOSS) INCOME PER COMMON SHARE:

( 2,211 )  

( 2,178 )  

( 6,601 )  

INCOME BEFORE INCOME TAXES

27,919  

FEDERAL AND STATE INCOME TAX EXPENSE:

Total federal and state income tax expense

$ 6,000  

$ 4,581  

$ 3,874  

$ 21,536  

INCOME PER COMMON SHARE:

$ 1.04  

$ 0.80  

$ 0.67  

$ 3.68  

$ 1.04  

$ 0.79  

$ 0.67  

$ 3.65  

AVERAGE COMMON SHARES OUTSTANDING:

4 unchanged sentences

(in thousands)

Six M onths Ended

Nine M onths Ended

September 30 ,

OPERATING ACTIVITIES:

Net (loss) / income

Adjustments to reconcile net (loss) income to net cash provided by operating activities:

Adjustments to reconcile net income to net cash provided by operating activities:

Bad debt expense

Stock compensation-net of excess tax benefits

Provision for deferred income (benefit) /taxes

Provision for deferred income taxes

Recognized loss / (gain) on marketable equity securities

Loss / (gain) on sale or disposition of equipment

(Gain) / loss on sale or disposition of equipment

Changes in operating assets and liabilities:

35 unchanged sentences

Balance at January 1, 2020

Exercise of stock awards-shares issued including tax benefits

Stock awards-shares issued including tax benefits

Treasury stock repurchases

1 unchanged sentence

Balance at March 31, 2020

Exercise of stock awards-shares issued including tax benefits

Stock awards-shares issued including tax benefits

Treasury stock repurchases

1 unchanged sentence

Balance at June 30, 2020

Stock awards-shares issued including tax benefits

Treasury stock repurchases

Stock based compensation

Balance at September 30, 2020

See notes to condensed consolidated financial statements.

TRANSPORTATION SERVICES, INC.

AND SUBSIDIARIES

Condensed Consolidated Statements of Stockholders’

(in thousands)

Shares / Amount

Paid-In Capital

Treasury Stock

Retained Earnings

Balance at January 1, 2019

$ 82,776  

$ ( 142,552 )  

$ 199,107  

$ 139,447  

Exercise of stock awards-shares issued including tax benefits

Stock awards-shares issued including tax benefits

Treasury stock repurchases

( 40 )  

( 1,618 )  

Stock based compensation (1)

Balance at March 31, 2019

$ 82,992  

$ ( 144,170 )  

$ 207,408  

$ 146,346  

Exercise of stock awards-shares issued including tax benefits

Stock awards-shares issued including tax benefits

Treasury stock repurchases

( 196 )  

( 11,823 )  

Stock based compensation

Balance at June 30, 2019

$ 83,302  

$ ( 155,993 )  

$ 216,062  

$ 143,487  

Stock awards-shares issued including tax benefits

Treasury stock repurchases

Stock based compensation

Balance at September 30, 2019

Approximately $90,000 was accrued as share-based compensation at March 31, 2019 for restricted stock earned by non-employee directors but for which shares were not issued until April 2019.

3 unchanged sentences

Notes to Condensed Consolidated Financial Statements (unaudited)

June 30, 20 20

NOTE A:  

September 30, 20 20

BASIS OF PRESENTATION

10 unchanged sentences

The consolidated balance sheet at December 31, 2019 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements.

Operating results for the three and six -month period ended June 30, 2020 are not necessarily indicative of the results that may be expected for the year ending December 31, 2020.

Operating results for the three and nine -month period ended September 30, 2020 are not necessarily indicative of the results that may be expected for the year ending December 31, 2020.

For further information, refer to the consolidated financial statements and the footnotes thereto included in the Company’s annual report on Form 10 -K for the year ended December 31, 2019.

NOTE B :  

RECENT ACCOUNTING PRONOUNCEMENTS

6 unchanged sentences

The Company has evaluated the provisions of this standard and determined that it is applicable to our line of credit and investment margin account.

The London Interbank Offered Rate “LIBOR”

is the basis for interest charges on outstanding borrowings for both our line of credit and investment margin account.

The London Interbank Offered Rate (“LIBOR”) is the basis for interest charges on outstanding borrowings for both our line of credit and investment margin account.

The scheduled discontinuation of LIBOR is not expected to materially alter any provisions of either of these debt instruments, except for the identification of a replacement reference rate.

8 unchanged sentences

The adoption of this guidance on January 1, 2020 did not have a material impact on the Company’s financial condition, results of operations, or cash flows.

NOTE C:  

REVENUE RECOGNITION

25 unchanged sentences

There are no assets or liabilities recorded in conjunction with revenue recognized, other than Accounts Receivable and Estimated Credit Losses.

NOTE D:  

MARKETABLE EQUITY SECURITIES

3 unchanged sentences

The fair value of marketable equity securities is determined based on quoted market prices in active markets, as described in Note J.

The following table sets forth market value, cost, and unrealized gains on equity securities as of June 30, 2020 and December 31, 2019.

June 30, 2020

The following table sets forth market value, cost, and unrealized gains on equity securities as of September 30, 2020 and December 31, 2019.

September 30, 2020

December 31, 2019

8 unchanged sentences

$ 5,365  

The following table sets forth the gross unrealized gains and losses on the Company’s marketable securities as of June 30, 2020 and December 31, 2019.

June 30, 2020

The following table sets forth the gross unrealized gains and losses on the Company’s marketable securities as of September 30, 2020 and December 31, 2019.

September 30, 2020

December 31, 2019

7 unchanged sentences

$ 5,365  

The following table shows the Company’s net realized gains during the three and six months ending on June 30 of 2020 and 2019, respectively, on certain marketable equity securities.

The following table shows the Company’s net realized gains during the three and nine months ending on September 30, 2020 and 2019, respectively, on certain marketable equity securities.

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

(in thousands, except per share data)

Sales proceeds

Cost of securities sold

Realized (loss) / gain

$ 1,645  

Cost of securities sold

Realized gain / (loss)

$ ( 605 )  

For the quarter ended June 30, 2020, the Company recognized dividends received of approximately $ 326,000 in non-operating income in its consolidated statements of operations.

For the quarter ended June 30, 2019, the Company recognized dividends received of approximately $ 307,000 in non-operating income in its consolidated statements of operations.

For the six months ended June 30, 2020, the Company recognized dividends received of approximately $ 631,000 in non-operating income in its consolidated statements of operations.

For the six months ended June 30, 2019, the Company recognized dividends received of approximately $ 586,000 in non-operating income in its consolidated statements of operations.

For the quarter ended September 30, 2020, the Company recognized dividends received of approximately $ 314,000 in non-operating income in its condensed consolidated statements of operations.

For the quarter ended September 30, 2019, the Company recognized dividends received of approximately $ 348,000 in non-operating income in its condensed consolidated statements of operations.

For the nine months ended September 30, 2020, the Company recognized dividends received of approximately $ 946,000 in non-operating income in its condensed consolidated statements of operations.

For the nine months ended September 30, 2019, the Company recognized dividends received of approximately $ 931,000 in non-operating income in its condensed consolidated statements of operations.

The Company’s equity securities are periodically used as collateral against any outstanding margin account borrowings.

As of June 30, 2020, and December 31, 2019, the Company had outstanding borrowings of approximately $ 9,986,000 and $ 7,474,000 , respectively, under its margin account.

As of September 30, 2020, and December 31, 2019, the Company had outstanding borrowings of approximately $ 12,705,000 and $ 7,474,000 , respectively, under its margin account.

Margin account borrowings are used for the purchase of marketable equity securities and as a source of short-term liquidity and are included in accrued expenses and other liabilities on our balance sheets.

Our marketable equity securities portfolio had a net unrealized pre-tax gain in market value of approximately $ 2,482,000 during the second quarter of 2020, and a net unrealized pre-tax loss in market value of approximately $ 589,000 during the second quarter of 2019, which were reported as non-operating income for the respective periods.

NOTE E :  

Our marketable equity securities portfolio had a net unrealized pre-tax loss in market value of approximately $ 498,000 during the third quarter of 2020, and a net unrealized pre-tax gain in market value of approximately $ 133,000 during the third quarter of 2019, which were reported as non-operating income for the respective periods.

STOCK - BASED COMPENSATION

9 unchanged sentences

This stock award has a grant date fair value of $ 41.40 per share, based on the closing price of the Company’s stock on the date of grant, and vested immediately.

The total grant date fair value of stock vested during the first six months of 2020 was approximately $ 636,000 .

Total pre-tax stock-based compensation expense, recognized in Salaries, wages and benefits during the first six months of 2020, was approximately $ 326,000 and includes approximately $ 90,000 recognized as a result of the grant of shares to each non-employee director.

The recognition of stock-based compensation expense decreased both diluted and basic earnings per common share by approximately $ 0.04 during the first six months of 2020.

As of June 30, 2020, the Company had stock-based compensation plans with total unvested stock-based compensation expense of approximately $ 603,000 , which is being amortized on a straight-line basis over the remaining vesting period.

As a result, the Company expects to recognize approximately $ 109,000 in additional compensation expense related to unvested option awards during the remainder of 2020 and to recognize approximately $ 215,000 , $ 215,000 , $ 59,000 and $ 5,000 in additional compensation expense related to unvested option awards during the years 2021, 2022, 2023 and 2024, respectively.

The total grant date fair value of stock vested during the first six months of 2019 was approximately $ 685,000 .

Total pre-tax stock-based compensation expense recognized in Salaries, wages and benefits during the first six months of 2019 was approximately $ 526,000 and includes approximately $ 100,000 recognized as a result of the grant of shares to each non-employee director during the first six months of 2019.

The recognition of stock-based compensation expense decreased both diluted and basic earnings per common share by approximately $ 0.07 during the first six months of 2019.

As of June 30, 2019, the Company had stock-based compensation plans with total unvested stock-based compensation expense of approximately $ 1,438,000 , which is being amortized on a straight-line basis over the remaining vesting period.

A summary of the status of the Company’s non-vested restricted stock as of June 30, 2020 and changes during the six months ended June 30, 2020, is as follows:

In August 2020, the Company granted 13,332 shares of common stock to certain key employees.

These stock awards have a grant date fair value of $ 30.25 per share, based on the closing price of the Company’s stock on the date of grant, and vests on the fourth anniversary date in August 2024.

During August 2020, the Company also granted 40,000 shares of common stock to the Company’s Chief Executive Officer which have a grant date fair value of $ 35.37 per share, based on the closing price of the Company’s stock on the date of grant.

This award will vest in installments of 5,000 shares each in 2022, 2023, 2024 and 2027, and 10,000 shares each in 2025 and 2026.

The total grant date fair value of stock vested during the first nine months of 2020 was approximately $ 636,000 .

Total pre-tax stock-based compensation expense, recognized in salaries, wages and benefits during the first nine months of 2020, was approximately $ 430,000 and includes approximately $ 90,000 recognized as a result of the grant of shares to each non-employee director.

The recognition of stock-based compensation expense decreased both diluted and basic earnings per common share by approximately $ 0.06 during the first nine months of 2020.

As of September 30, 2020, the Company had stock-based compensation plans with total unvested stock-based compensation expense of approximately $ 2,318,000 , which is being amortized on a straight-line basis over the remaining vesting period.

As a result, the Company expects to recognize approximately $ 130,000 in additional compensation expense related to unvested stock awards during the remainder of 2020 and to recognize approximately $ 513,000 , $ 513,000 , $ 358,000 , $ 271,000 , $ 200,000 , $ 200,000 and $ 133,000 in additional compensation expense related to unvested stock awards during the years 2021, 2022, 2023, 2024, 2025, 2026 and 2027, respectively.

The total grant date fair value of stock vested during the first nine months of 2019 was approximately $ 685,000 .

Total pre-tax stock-based compensation expense recognized in salaries, wages and benefits during the first nine months of 2019 was approximately $ 736,000 and includes approximately $ 100,000 recognized as a result of the grant of shares to each non-employee director during the first nine months of 2019.

The recognition of stock-based compensation expense decreased both diluted and basic earnings per common share by approximately $ 0.09 during the first nine months of 2019.

As of September 30, 2019, the Company had stock-based compensation plans with total unvested stock-based compensation expense of approximately $ 1,228,000 , which was being amortized on a straight-line basis over the remaining vesting period.

A summary of the status of the Company’s non-vested restricted stock as of September 30, 2020 and changes during the nine months ended September 30, 2020, is as follows:

Restricted Stock

4 unchanged sentences

$ 24.35  

63,182  

Canceled/forfeited/expired

1 unchanged sentence

( 36,184 )  

Non-vested at June 30, 2020

Non-vested at September 30, 2020

70,743  

$ 35.86  

NOTE F :  

SEGMENT INFORMATION

3 unchanged sentences

Truckload Services revenues and Brokerage and Logistics Services revenues, each before fuel surcharges, were as follows:

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

(in thousands, except percentage data)

14 unchanged sentences

$ 332,846  

NOTE G :  

TREASURY STOCK

The Company’s stock repurchase program has been extended and expanded several times, most recently in April 2017, when the Board of Directors reauthorized 500,000 shares of common stock for repurchase under the initial June 2011 authorization.

During the six months ended June 30, 2020, the Company repurchased 9,175 shares of its common stock at an aggregate cost of approximately $ 321,000 under this program.

The Company accounts for Treasury stock using the cost method, and as of June 30, 2020, 5,916,438 shares were held in the treasury at an aggregate cost of approximately $ 157,158,000 .

NOTE H :  

During the nine months ended September 30, 2020, the Company repurchased 49,755 shares of its common stock at an aggregate cost of approximately $ 1,793,134 under this program.

The Company accounts for Treasury stock using the cost method.

As of September 30, 2020, 5,957,018 shares were held in the treasury at an aggregate cost of approximately $ 158,630,000 .

EARNINGS PER SHARE

2 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

(in thousands, except per share data)

Net (loss) income

$ 6,000  

5 unchanged sentences

Diluted weighted average common shares outstanding

Basic (loss) earnings per share

Basic earnings per share

$ 1.04  

2 unchanged sentences

$ 3.68  

Diluted (loss) earnings per share

Diluted earnings per share

$ 1.04  

2 unchanged sentences

$ 3.65  

NOTE I :  

The Company and its subsidiaries are subject to U.S.

3 unchanged sentences

If negative conditions exist which indicate a valuation allowance might be necessary, consideration is then given to what effect the future reversals of existing taxable temporary differences and the availability of tax strategies might have on future taxable income to determine the amount, if any, of the required valuation allowance.

As of June 30, 2020, management determined that the future reversals of existing taxable temporary differences and available tax strategies would generate sufficient future taxable income to realize its tax assets and therefore a valuation allowance was not necessary.

As of September 30, 2020, management determined that the future reversals of existing taxable temporary differences and available tax strategies would generate sufficient future taxable income to realize its tax assets and therefore a valuation allowance was not necessary.

The Company recognizes a tax benefit from an uncertain tax position only if it is more likely than not that the position will be sustained on examination by taxing authorities, based on the technical merits of the position.

As of June 30, 2020, an adjustment to the Company’s condensed consolidated financial statements for uncertain tax positions has not been required as management believes that the Company’s tax positions taken in income tax returns filed or to be filed are supported by clear and unambiguous income tax laws.

As of September 30, 2020, an adjustment to the Company’s condensed consolidated financial statements for uncertain tax positions has not been required as management believes that the Company’s tax positions taken in income tax returns filed or to be filed are supported by clear and unambiguous income tax laws.

The Company recognizes interest and penalties related to uncertain income tax positions, if any, in income tax expense.

During the six months ended June 30, 2020 and 2019, the Company has not recognized or accrued any interest or penalties related to uncertain income tax positions.

The Company’s effective income tax rates were 29.7 % and 23.2 % for the six months ended June 30, 2020 and 2019, respectively.

Our effective tax rate for the six months ended June 30, 2020 differs from amounts computed by applying the United States federal statutory rates to pre-tax income primarily due to state income taxes and the tax benefits related to stock compensation.

NOTE J:  

During the nine months ended September 30, 2020 and 2019, the Company has not recognized or accrued any interest or penalties related to uncertain income tax positions.

The Company’s effective income tax rates were 18.33 % and 22.9 % for the nine months ended September 30, 2020 and 2019, respectively.

Our effective tax rate for the nine months ended September 30, 2020 differs from amounts computed by applying the United States federal statutory rates to pre-tax income primarily due to state income taxes and the tax benefits related to stock compensation.

FAIR VALUE OF FINANCIAL INSTRUMENTS

11 unchanged sentences

The Company utilizes the market approach to measure fair value for its financial assets and liabilities. The market approach uses prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities.

At June 30, 2020, the following items are measured at fair value on a recurring basis:

At September 30, 2020, the following items are measured at fair value on a recurring basis:

(in thousands)

6 unchanged sentences

For long-term debt other than the lines of credit, the fair values are estimated using discounted cash flow analyses, based on the Company’s current incremental borrowing rates for similar types of borrowing arrangements.

The carrying value and estimated fair value of this other long-term debt at June 30, 2020 was as follows:

The carrying value and estimated fair value of this other long-term debt at September 30, 2020 was as follows:

(in thousands)

3 unchanged sentences

The Company has not elected the fair value option for any of its financial instruments.

NOTE K :  

NOTES PAYABLE

During the first six months of 2020, the Company’s subsidiaries entered into installment obligations totaling approximately $ 18.4 million for the purpose of purchasing revenue equipment.

During the first nine months of 2020, the Company’s subsidiaries entered into installment obligations totaling approximately $ 43.9 million for the purpose of purchasing revenue equipment and $ 17.6 million for the purchase of a terminal.

These obligations are payable in monthly installments and are recorded in long term debt and current maturities on the condensed consolidated balance sheets.

The terms of these obligations range from 36 months for trucks to 84 months for trailers.

NOTE L :  

Other than the lawsuit discussed below, the Company is not a party to any pending legal proceeding which management believes to be material to the financial statements of the Company.

The terms of these obligations vary from 36 months for trucks, to 84 months for trailers, and to 10 years for the terminal.

The Company is not currently a party to any pending legal proceeding which management believes to be material to the financial statements of the Company.

The Company maintains liability insurance against risks arising out of the normal course of its business.

We are a defendant in a collective- and class-action lawsuit which was filed on December 9, 2016, in the United States District Court for the Western District of Arkansas.

The plaintiffs, who include current and former employee drivers who worked for the Company during the period of December 9, 2013, through December 31, 2019, allege violations under the Fair Labor Standards Act and the Arkansas Minimum Wage Law including “failure to pay minimum wage during orientation, failure to pay minimum wage to team drivers after initial orientation, failure to pay minimum wage to solo-drivers after initial orientation, failure to pay for compensable travel time, Comdata card fees, unlawful deductions, and breach of contract.”

The plaintiffs are seeking actual and liquidated damages to include court costs and legal fees.

On February 18, 2020, the United States District Court for the Western District of Arkansas granted preliminary approval of a $ 16.5 million settlement reached with the plaintiffs.

The settlement is subject to final approval by the court.

As of June 30, 2020, the preliminary settlement amount of $ 16.5 million is reserved in accrued expenses and other liabilities in the Company’s condensed consolidated balance sheets.

Management has determined that any losses under this claim will not be covered by existing insurance policies.

We were a defendant in a collective- and class-action lawsuit which was filed on December 9, 2016, in the United States District Court for the Western District of Arkansas.

The plaintiffs, who included current and former employee drivers who worked for the Company during the period of December 9, 2013, through December 31, 2019, alleged violations under the Fair Labor Standards Act and the Arkansas Minimum Wage Law including “failure to pay minimum wage during orientation, failure to pay minimum wage to team drivers after initial orientation, failure to pay minimum wage to solo-drivers after initial orientation, failure to pay for compensable travel time, Comdata card fees, unlawful deductions, and breach of contract.”

The plaintiffs were seeking actual and liquidated damages to include court costs and legal fees.

During July 2020, the United States District Court for the Western District of Arkansas granted final approval of a $ 16.5 million settlement reached with the plaintiffs and the settlement payment was disbursed by the Company during August 2020.

Management has determined that the loss under this claim will not be covered by existing insurance policies.

On March 31, 2020, the United States District Court for the Western District of Arkansas dismissed the collective- and class-action lawsuit filed against the Company on May 29, 2019 by plaintiffs who were independent contractors alleging violations under the Fair Labor Standards Act and the Arkansas Minimum Wage Law.

The plaintiffs, through their attorneys, alleged “misclassification as independent contractors, payment on the basis of miles without regard to the number of hours worked, improper deductions, and failure to pay minimum wage.”

The dismissal of this lawsuit resulted when the Company and plaintiffs reached a settlement agreement and paid approximately $ 421,000 , plus legal fees.

Legal reserve accruals in excess of the amount outlined in the settlement agreement were reversed during the first six months of 2020, resulting in a reduction in accrued expenses and other liabilities in the Company’s condensed consolidated balance sheets.

The dismissal of this lawsuit resulted when the Company and plaintiffs reached a settlement agreement and the Company paid approximately $ 421,000 , plus legal fees.

Legal reserve accruals in excess of the amount outlined in the settlement agreement were reversed during the first nine months of 2020, resulting in a reduction in accrued expenses and other liabilities in the Company’s condensed consolidated balance sheets.

The Company’s participation in the settlements of the above matters does not constitute an admission by the Company of any fault or liability, and the Company does not admit any fault or liability.

NOTE M:  

Adoption of ASU 2016 - 02

15 unchanged sentences

Following the Company’s adoption of ASU 2016 - 02 and related amendments on January 1, 2019, the Company entered into operating leases which include initial terms ranging from three to five years and which do not include an option for early cancellation.

In accordance with the provisions of ASC Topic 842, these leases resulted in the recognition of right-of-use assets and corresponding operating lease liabilities, respectively valued at $ 1.8 million as of June 30, 2020.

These assets and liabilities are recognized based on the present value of future minimum lease payments over the lease term at commencement date, using the Company’s incremental borrowing rate as of the respective dates of lease inception, as the rate implicit in each lease is not readily determinable.

1 unchanged sentence

Lease expense is recorded on a straight-line basis over the lease term and is recorded in rent and purchased transportation in our condensed consolidated statements of operations.

While the lease agreements contain provisions to extend after the initial term for an additional five years, the Company is not reasonably certain these extension options will be exercised.

Therefore, potential lease payments that might occur under this extension period are not included in amounts recorded in our Condensed Consolidated Balance Sheets as of June 30, 2020.

Scheduled amounts and timing of cash flows arising from future right-of-use operating lease payments at June 30, 2020, are:

While these lease agreements may contain provisions to extend after the initial term for an additional five years, the Company is not reasonably certain these extension options will be exercised.

Therefore, potential lease payments that might occur under this extension period are not included in amounts recorded in our condensed consolidated balance sheets as of September 30, 2020.

Scheduled amounts and timing of cash flows arising from future right-of-use operating lease payments at September 30, 2020, are:

Maturity of Lease Liabilities

16 unchanged sentences

Weighted-average discount rate for operating leases

No new right-of-use assets were recognized as a non-cash asset addition that resulted from new operating lease liabilities during the three months ended June 30, 2020.

Cash paid for amounts included in the present value of operating lease liabilities was $ 0.1 million during the three months ended June 30, 2020 and is included in operating cash flows.

No new right-of-use assets were recognized as a non-cash asset addition that resulted from new operating lease liabilities during the three months ended September 30, 2020.

Cash paid for amounts included in the present value of operating lease liabilities was $ 0.1 million during the three months ended September 30, 2020 and is included in operating cash flows.

Cash paid for amounts included in the present value of operating lease liabilities was $ 0.4 million during the nine months ended September 30, 2020 and is included in operating cash flows.

Operating Lease Costs

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

(in thousands)

4 unchanged sentences

In the event that an independent contractor defaults on their lease, the Company generally leases the truck to another independent contractor.

As of June 

As of September 

30, 2020, the gross carrying value of trucks underlying these leases was $ 53.4 million and accumulated depreciation was $ 24.6 million.

2 unchanged sentences

In other cases, where salvage values are not guaranteed, estimates of salvage value are based on the expected market values of equipment at the time of disposal.

During the quarter ended June 30, 2020, the Company incurred $ 1.4 million of depreciation expense for these assets.

During the quarter ended September 30, 2020, the Company incurred $ 1.4 million of depreciation expense for these assets.

During the nine months ended September 30, 2020, the Company incurred $ 4.9 million of depreciation expense for these assets.

The Company leases dock space to a related party at our Laredo, Texas terminal and warehouse and office space to an unrelated lessee at a second Laredo, Texas terminal.

1 unchanged sentence

Lease income is recorded as a component of non-operating income in our condensed consolidated statements of operations.

As of September 30, 2020, the gross carrying value of the buildings underlying these leases was $ 13.7 million and accumulated depreciation was $ 1.2 million.

During the quarter ended September 30, 2020, the Company incurred $ 0.1 million of depreciation expense for the portions of these buildings that are subject to lease.

During the nine months ended September 30, 2020, the Company incurred $ 0.2 million of depreciation expense for the portions of these buildings that are subject to lease.

Lease Revenue

1 unchanged sentence

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

(in thousands)

11 unchanged sentences

Lease Receivables

Future minimum operating lease payments receivable at June 30, 2020:

Future minimum operating lease payments receivable at September 30, 2020:

(i n thousands)

3 unchanged sentences

$ 14,222  

NOTE N :  

EFFECT OF COVID- 19 PANDEMIC

3 unchanged sentences

Because we have a significant concentration of customers within the automotive industry, our freight volumes and revenues have been significantly affected by the closure of North American automotive manufacturing facilities beginning in late March.

Our automotive customers resumed partial operations during the second quarter;

Our automotive customers resumed operations during the second quarter;

however, the extent to which production will return to pre-pandemic levels remains uncertain.

Any additional delays in the resumption of automotive production and other consumer activity affecting our customers, as well as any future wave of the virus or other similar outbreaks could further adversely affect our business.

Any additional delays or interruptions of automotive production and other consumer activity affecting our customers, as well as any future wave of the virus or other similar outbreaks could further adversely affect our business.

In addition, the implementation of measures to protect the health and safety of our employees, customers, vendors and the general public may disrupt our ability to efficiently manage personnel and operations and to recruit and retain driver and non-driver personnel, which could have a material adverse effect on our operating results. Further, negative financial results, an economic downturn or uncertainty, or a tightening of credit markets caused by COVID- 19 or other similar outbreaks could have a material adverse effect on our liquidity and our ability to effectively meet our short- and long-term financial obligations.

NOTE O :  

NONCASH INVESTING AND FINANCING ACTIVITIES

The Company financed approximately $ 18.4 million in equipment purchases during the first six months of 2020 utilizing noncash financing.

The Company financed approximately $ 43.9 million in equipment purchases during the first nine months of 2020 utilizing noncash financing.

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

18 unchanged sentences

our ability to develop and implement suitable information technology systems and prevent failures in or breaches of such systems;

litigation, including litigation related to alleged violations under the Fair Labor Standards Act and the Arkansas Minimum Wage Law;

the impact of pending or future litigation;

general risks associated with doing business in Mexico, including, without limitation, exchange rate fluctuations, inflation, import duties, tariffs, quotas, political and economic instability and terrorism;

15 unchanged sentences

These aspects of our business are carefully managed, and efforts are continuously underway to achieve favorable results.

Truckload services revenues, excluding fuel surcharges, represented 81.6% and 82.7% of total revenues, excluding fuel surcharges, for the three months ended June 30, 2020 and 2019, respectively.

Truckload services revenues, excluding fuel surcharges, represented 81.6% and 82.1% of total revenues, excluding fuel surcharges, for the six months ended June 30, 2020 and 2019, respectively.

Truckload services revenues, excluding fuel surcharges, represented 75.5% and 83.9% of total revenues, excluding fuel surcharges, for the three months ended September 30, 2020 and 2019, respectively.

Truckload services revenues, excluding fuel surcharges, represented 79.4% and 82.7% of total revenues, excluding fuel surcharges, for the nine months ended September 30, 2020 and 2019, respectively.

The remaining revenues, excluding fuel surcharges, were generated from brokerage and logistics services.

2 unchanged sentences

In discussing our results of operations, we use revenue, before fuel surcharge (and fuel expense, net of fuel surcharge), because management believes that eliminating the impact of this sometimes volatile source of revenue allows a more consistent basis for comparing our results of operations from period to period.

During the three months ended June 30, 2020 and 2019, approximately $7.2 million and $20.6 million, respectively, of the Company’s total revenue was generated from fuel surcharges.

During the six months ended June 30, 2020 and 2019, approximately $24.5 million and $39.0 million, respectively, of the Company’s total revenue was generated from fuel surcharges.

During the three months ended September 30, 2020 and 2019, approximately $12.1 million and $18.8 million, respectively, of the Company’s total revenue was generated from fuel surcharges.

During the nine months ended September 30, 2020 and 2019, approximately $36.6 million and $57.8 million, respectively, of the Company’s total revenue was generated from fuel surcharges.

We may also discuss certain changes in our expenses as a percentage of revenue, before fuel surcharge, rather than absolute dollar changes.

We do this because we believe the variable cost nature of certain expenses makes a comparison of changes in expenses as a percentage of revenue more meaningful than absolute dollar changes.

IMPACT OF COVID-19  

The Company’s primary concern during the COVID-19 pandemic is to do its part to protect its employees, customers, vendors and the general public from the spread of COVID-19 while continuing to serve the vital role of supplying essential goods to the nation.

2 unchanged sentences

We will continue to adapt our operations as required to ensure safety while continuing to provide a high level of service to our customers.

As the escalation of the COVID-19 pandemic has extended through the end of the second quarter, the Company has experienced the increasing effects of weakening economic conditions, most notably the late March COVID-19 related shutdown of automotive customers, representing approximately 45% of the Company’s revenue.

While we have vigorously sought to replace lost automotive revenue with freight from customers supporting the effort to supply essential goods to the nation, competition for this freight has increased as industry capacity has collectively focused on freight that has continued to move during this time.

The ultimate magnitude of COVID-19, including the extent of its impact on the Company’s financial and operating results, which could be material, will be determined by the length of time the pandemic continues, its continued severity, government regulations imposed in response to the pandemic, and its general effect on the economy and transportation demand.

During the nine months ended September 30, 2020, the Company has experienced the effects of weakening economic conditions, most notably the late March COVID-19 related shutdown of automotive customers, representing approximately 45% of the Company’s revenue.

While we vigorously sought to replace lost automotive revenue with freight from other customers, competition for freight increased as industry capacity collectively focused on freight that was considered essential.

Our automotive customers resumed operations during the second quarter;

however, the extent to which production will return to pre-pandemic levels remains uncertain.

Any additional delays or interruptions in automotive production and other consumer activity affecting our customers, as well as any future wave of the virus or other similar outbreaks could further adversely affect our business.

The ultimate magnitude of COVID-19, including the extent of its impact on the Company’s financial and operating results, will be determined by the length of time the pandemic continues, its continued severity, government regulations imposed in response to the pandemic, and its general effect on the economy and transportation demand.

While operating cash flows may be negatively impacted by the pandemic, the Company believes we will be able to finance our near-term needs for working capital over the next twelve months, as well as any planned capital expenditures during such period, with cash balances, cash flows from operations, and borrowings believed to be available from financing sources.

4 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

(percentages)

5 unchanged sentences

Insurance and claims

Loss (gain) on sale or disposal of property

(Gain) loss on sale or disposal of property

Total operating expenses

Operating (loss) income

Non-operating income (expense)

Operating income

Non-operating (expense) income

Interest expense

(Loss) income before income taxes

THREE MONTHS ENDED JUNE 30, 20 20 VS.

THREE MONTHS ENDED JUNE 3 0 , 201 9

During the second quarter of 2020, truckload services revenue, before fuel surcharges, decreased 24.7% to $70.0 million as compared to $92.9 million during the second quarter of 2019.

The decrease in revenue was primarily the result of unfavorable market conditions experienced when more than 50% of the Company’s customers imposed COVID-19 related shutdowns during the quarter.

This interruption in our regular sources of freight, particularly in the automotive sector, forced the Company to seek alternative revenue sources, much of which was from the spot market.

These factors combined to be the primary cause of the reduction in revenue, before fuel surcharges, for the second quarter of 2020 compared to the second quarter of 2019.

Salaries, wages and benefits increased from 31.8% of revenues, before fuel surcharges, in the second quarter of 2019 to 38.1% of revenues, before fuel surcharges, during the second quarter of 2020.

The percentage-based increase is primarily a result of the interaction of expenses with fixed-cost characteristics, such as general and administrative wages, maintenance wages, operations wages, and payroll taxes with a decrease in revenues for the periods compared.

On a dollar basis, salaries, wages and benefits decreased from $29.5 million during the second quarter 2019 to $26.6 million during the second quarter of 2020.

Operating supplies and expenses increased from 4.1% of revenues, before fuel surcharges, during the second quarter of 2019 to 15.7% of revenues, before fuel surcharges, during the second quarter of 2020.

Income before income taxes

THREE MONTHS ENDED SEPTEMBER 30, 20 20 VS.

THREE MONTHS ENDED SEPTEMBER 3 0 , 201 9

During the third quarter of 2020, truckload services revenue, before fuel surcharges, decreased 10.3% to $82.9 million as compared to $92.4 million during the third quarter of 2019.

The decrease in revenue was primarily the result of approximately 10% fewer trucks operating within our fleet, primarily due to a reduction in our independent contractor fleet, and of less favorable market conditions caused by the impact of the pandemic on general economic activity.

Salaries, wages and benefits increased from 34.5% of revenues, before fuel surcharges, in the third quarter of 2019 to 35.4% of revenues, before fuel surcharges, during the third quarter of 2020.

This percentage-based increase is primarily a result of the interaction of expenses with fixed-cost characteristics, such as general and administrative wages, maintenance wages, and operations wages with a decrease in revenues for the periods compared.

On a dollar basis, salaries, wages and benefits decreased from $31.9 million during the third quarter 2019 to $29.3 million during the third quarter of 2020.

Operating supplies and expenses increased from 7.1% of revenues, before fuel surcharges, during the third quarter of 2019 to 10.5% of revenues, before fuel surcharges, during the third quarter of 2020.

The increase relates primarily to an increase in the average surcharge-adjusted fuel price paid per gallon of diesel fuel, which was a result of decreased fuel surcharge collections from customers.

Fuel surcharge collections can fluctuate significantly from period to period as they are generally based on changes in fuel prices from period to period so that, during periods of rising fuel prices, fuel surcharge collections increase, while fuel surcharge collections decrease during periods of falling fuel prices.

Also contributing to the increase was an increase in the proportion of total miles driven by company drivers for the quarter ended June 30, 2020 compared to June 30, 2019.

Also contributing to the increase was an increase in the proportion of total miles driven by company drivers during the third quarter of 2020 compared to the third quarter 2019.

This increase in miles driven by company drivers has the effect of increasing our net operating supplies and expenses while decreasing the rent and purchased transportation category, as fuel surcharge revenue generated from transportation services performed by owner-operators is reflected as a reduction in net operating supplies and expenses, while fuel surcharges paid to owner-operators for their services is reported along with their base rate of pay in the rent and purchased transportation category.

Rent and purchased transportation decreased from 28.7% of revenues, before fuel surcharges, during the second quarter of 2019 to 23.7% of revenues, before fuel surcharges, during the second quarter of 2020.

The decrease was primarily due to a decrease in the number of loads transported by third-party carriers during the second quarter 2020 compared to the second quarter 2019.

This decrease occurred as the average number of company-owned trucks increased for the second quarter 2020 compared to the second quarter 2019, providing additional company-owned capacity and diminishing the need to utilize third-party carriers.

Depreciation increased from 14.6% of revenues, before fuel surcharges, during the second quarter of 2019 to 20.2% of revenues, before fuel surcharges, during the second quarter of 2020.

This increase is primarily the result of an increase in the average number of trucks and trailers within our fleet for the second quarter of 2020 compared to the second quarter of 2019.

Due to the fixed nature of depreciation, a decrease in operating revenues, before fuel surcharge, without a corresponding proportional decrease in depreciation increases depreciation expense as a percentage of operating revenues.

Insurance and claims expense decreased from 4.3% of revenues, before fuel surcharges, during the second quarter of 2019 to 3.6% of revenues, before fuel surcharges, during the second quarter of 2020.

Rent and purchased transportation decreased from 27.3% of revenues, before fuel surcharges, during the third quarter of 2019 to 21.3% of revenues, before fuel surcharges, during the third quarter of 2020.

The decrease was primarily due to a decrease in the number of loads transported by third-party carriers during the third quarter of 2020 compared to the third quarter of 2019.

Depreciation increased from 15.2% of revenues, before fuel surcharges, during the third quarter of 2019 to 16.1% of revenues, before fuel surcharges, during the third quarter of 2020.

This percentage-based increase is primarily a result of the interaction of a decrease in operating revenues with the fixed-cost nature of depreciation expense.

On a dollar basis, depreciation expense decreased from $14.1 million during the third quarter 2019 to $13.3 million during the third quarter of 2020.

Insurance and claims expense decreased from 4.0% of revenues, before fuel surcharges, during the third quarter of 2019 to 3.8% of revenues, before fuel surcharges, during the third quarter of 2020.

This decrease primarily resulted from a reduction in auto liability insurance premiums, as the Company became self-insured for certain layers of auto liability claims in excess of $1.0 million commencing September 1, 2019.

During the second quarter of 2019, the Company paid for auto liability insurance coverage for claims in excess of $1.0 million through various third-party insurance carriers.

Non-operating income / (expense) decreased from (0.1)% of revenues, before fuel surcharges, during the second quarter of 2019 to 3.8% of revenues, before fuel surcharges, during the second quarter of 2020.

This decrease primarily resulted from the change in the market values of our portfolio of marketable equity securities.

The Company recorded a $2.5 million increase in the market values of our marketable equity securities in non-operating income / (expense) during the second quarter of 2020, compared to a $0.6 million decrease in the market value of our marketable equity securities during the second quarter of 2019.

Other expense decreased from 3.5% of revenues, before fuel surcharges, during the second quarter 2019 to 2.5% of revenues, before fuel surcharges, during the second quarter 2020.

During the third quarter of 2019, the Company paid for auto liability insurance coverage for claims in excess of $1.0 million through various third-party insurance carriers.

Other expense decreased from 3.8% of revenues, before fuel surcharges, during the third quarter 2019 to 2.8% of revenues, before fuel surcharges, during the third quarter 2020.

This decrease is primarily attributable to a decrease in legal fees incurred in our defense against certain litigation described in Note L to our condensed consolidated financial statements.

The truckload services division operating ratio, which measures the ratio of operating expenses, net of fuel surcharges, to operating revenues, before fuel surcharges, increased from 87.1% for the second quarter of 2019 to 103.9% for the second quarter of 2020.

SIX MONTHS ENDED JUNE 30, 20 20 VS.

SIX MONTHS ENDED JUNE 30, 20 19

For the six months ended June 30, 2020, truckload services revenue, before fuel surcharges, decreased 11.8% to $161.3 million as compared to $182.9 million for the six months ended June 30, 2019.

Non-operating income / (expense) decreased from income of 0.5% of revenues, before fuel surcharges, during the third quarter of 2019 to expense of 0.1% of revenues, before fuel surcharges, during the third quarter of 2020.

This decrease primarily resulted from the change in the market values of our portfolio of marketable equity securities.

The Company recorded a $0.5 million decrease in the market values of our marketable equity securities in non-operating income / (expense) during the third quarter of 2020, compared to a $0.1 million increase in the market value of our marketable equity securities during the third quarter of 2019.

The truckload services division operating ratio, which measures the ratio of operating expenses, net of fuel surcharges, to operating revenues, before fuel surcharges, improved from 92.6% for the third quarter of 2019 to 89.7% for the third quarter of 2020.

NINE MONTHS ENDED SEPTEMBER 30, 20 20 VS.

NINE MONTHS ENDED SEPTEMBER 30, 20 19

For the nine months ended September 30, 2020, truckload services revenue, before fuel surcharges, decreased 11.3% to $244.2 million as compared to $275.3 million for the nine months ended September 30, 2019.

The decrease in revenue was primarily the result of unfavorable market conditions experienced when more than 50% of the Company’s customers imposed COVID-19 related shutdowns during the second quarter of 2020.

This interruption in our regular sources of freight, particularly in the automotive sector, forced the Company to seek alternative revenue sources, much of which was from the spot market.

These factors combined to be the primary cause of the reduction in revenue, before fuel surcharges, for the six months ended June 30, 2020 compared to the six months ended June 30, 2019.

Salaries, wages and benefits increased from 32.5% of revenues, before fuel surcharges, in the first six months of 2019 to 36.2% of revenues, before fuel surcharges, during the first six months of 2020.

On a dollar basis, salaries, wages and benefits decreased from $59.5 million during the second quarter 2019 to $58.3 million during the second quarter of 2020.

Operating supplies and expenses increased from 4.9% of revenues, before fuel surcharges, during the first six months of 2019 to 10.7% of revenues, before fuel surcharges, during the first six months of 2020.

Also contributing to the decrease was a reduction in our independent contractor fleet during the first nine months of 2020 as compared to the first nine months of 2019.

Salaries, wages and benefits increased from 33.2% of revenues, before fuel surcharges, in the first nine months of 2019 to 35.9% of revenues, before fuel surcharges, during the first nine months of 2020.

The percentage-based increase is primarily a result of the interaction of expenses with fixed-cost characteristics, such as general and administrative wages, maintenance wages, and operations wages with a decrease in revenues for the periods compared.

On a dollar basis, salaries, wages and benefits decreased from $91.4 million during the nine months ended September 30, 2019 to $87.7 million during the nine months ended September 30, 2020.

Operating supplies and expenses increased from 5.6% of revenues, before fuel surcharges, during the first nine months of 2019 to 10.7% of revenues, before fuel surcharges, during the first nine months of 2020.

The increase relates primarily to an increase in the average surcharge-adjusted fuel price paid per gallon of diesel fuel, which was a result of decreased fuel surcharge collections from customers.

Also contributing to the increase was an increase in the proportion of total miles driven by company drivers for the six months ended June 30, 2020 compared to June 30, 2019.

Also contributing to the increase was an increase in the proportion of total miles driven by company drivers during the first nine months of 2020 compared to the first nine months of 2019.

Rent and purchased transportation decreased from 29.5% of revenues, before fuel surcharges, during the first six months of 2019 to 25.5% of revenues, before fuel surcharges, during the first six months of 2020.

The decrease was primarily due to a decrease in the number of loads transported by third-party carriers during the first six months 2020 compared to the first six months 2019.

This decrease occurred as the average number of company-owned trucks increased for the first six months 2020 compared to the first six months 2019, providing additional company-owned capacity and diminishing some of the need to utilize third-party carriers.

Depreciation increased from 14.5% of revenues, before fuel surcharges, during the first six months of 2019 to 17.6% of revenues, before fuel surcharges, during the first six months of 2020.

This increase is primarily the result of an increase in the average number of trucks and trailers within our fleet for the first six months of 2020 compared to the first six months of 2019.

Rent and purchased transportation decreased from 28.8% of revenues, before fuel surcharges, during the first nine months of 2019 to 24.1% of revenues, before fuel surcharges, during the first nine months of 2020.

The decrease was primarily due to a decrease in the number of loads transported by third-party carriers during the first nine months of 2020 compared to the first nine months of 2019.

This decrease occurred as the average number of company-owned trucks increased for the first nine months 2020 compared to the first nine months 2019, providing additional company-owned capacity which diminished the need to utilize as many third-party carriers.

Depreciation increased from 14.8% of revenues, before fuel surcharges, during the first nine months of 2019 to 17.1% of revenues, before fuel surcharges, during the first nine months of 2020.

This increase is primarily the result of an increase in the average number of company-owned trucks and trailers within our fleet for the first nine months of 2020 compared to the first nine months of 2019.

Due to the fixed nature of depreciation, a decrease in operating revenues, before fuel surcharge, without a corresponding proportional decrease in depreciation, increases depreciation expense as a percentage of operating revenues.

Insurance and claims expense decreased from 4.4% of revenues, before fuel surcharges, during the first six months of 2019 to 1.6% of revenues before fuel surcharges, during the first six months of 2020.

Insurance and claims expense decreased from 4.3% of revenues, before fuel surcharges, during the first nine months of 2019 to 2.3% of revenues before fuel surcharges, during the first nine months of 2020.

During the first three months of 2019, the Company paid for auto liability insurance coverage for claims in excess of $1.0 million through various third-party insurance carriers.

Also contributing to the decrease was the first quarter 2020 settlement of a lawsuit brought against the Company by individuals who asserted they were misclassified as owner-operators.

The amount of the settlement was less than the amount previously reserved for the suit.

Non-operating income / (expense) decreased from 1.6% of revenues, before fuel surcharges, during the first six months of 2019 to (3.4%) of revenues, before fuel surcharges, during the first six months of 2020.

During the first eight months of 2019, the Company paid for auto liability insurance coverage for claims in excess of $1.0 million through various third-party insurance carriers.

Also contributing to the decrease was the settlement of a lawsuit in the first quarter of 2020 for an amount less than the amount reserved by the Company during the fourth quarter of 2019.

Non-operating income / (expense) decreased from income of 1.2% of revenues, before fuel surcharges, during the first nine months of 2019 to expense of 2.2% of revenues, before fuel surcharges, during the first nine months of 2020.

This decrease primarily resulted from the change in the market values of our portfolio of marketable equity securities.

The Company recorded a $6.3 million decrease in the market value of our marketable equity securities in non-operating income / (expense) during the first six months of 2020, compared to a $2.6 million increase in the market value of our marketable equity securities during the first six months of 2019.

The truckload services division operating ratio, which measures the ratio of operating expenses, net of fuel surcharges, to operating revenues, before fuel surcharges, increased from 89.0% for the first six months of 2019 to 96.1% for the first six months of 2020.

The Company recorded a $7.4 million decrease in the market value of our marketable equity securities in non-operating income / (expense) during the first nine months of 2020, compared to a $2.7 million increase in the market value of our marketable equity securities during the first nine months of 2019.

The truckload services division operating ratio, which measures the ratio of operating expenses, net of fuel surcharges, to operating revenues, before fuel surcharges, increased from 90.2% for the first nine months of 2019 to 94.0% for the first nine months of 2020.

RESULTS OF OPERATIONS –

4 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

(percentages)

8 unchanged sentences

Income before income taxes

THREE MONTHS ENDED JUNE 30, 20 20 VS.

THREE MONTHS ENDED JUNE 3 0 , 20 19

During the second quarter of 2020, logistics and brokerage services revenue, before fuel surcharges, decreased 18.9% to $15.8 million as compared to $19.5 million during the second quarter of 2019.

The decrease relates to a decrease in average rates charged during the second quarter of 2020 as compared to the second quarter of 2019.

Salaries, wages and benefits increased from 5.5% of revenues, before fuel surcharges, in the second quarter of 2019 to 6.0% of revenues, before fuel surcharges, during the second quarter of 2020.

The increase relates primarily to the effect of lower revenues without a corresponding decrease in those wages with fixed cost characteristics, such as general and administrative wages.

The logistics and brokerage services division operating ratio, which measures the ratio of operating expenses, net of fuel surcharges, to operating revenues, before fuel surcharges, increased from 93.9% for the second quarter of 2019 to 95.2% for the second quarter of 2020.

Non-operating income/(expense) increased from (0.1%) of revenues, before fuel surcharges, during the second quarter of 2020 to 2.1% of revenues, before fuel surcharges, during the second quarter of 2020.

THREE MONTHS ENDED SEPTEMBER 30, 20 20 VS.

THREE MONTHS ENDED SEPTEMBER 3 0 , 20 19

During the third quarter of 2020, logistics and brokerage services revenue, before fuel surcharges, increased 52.0% to $26.9 million as compared to $17.7 million during the third quarter of 2019.

The increase relates to an increase in in the number of loads serviced and to an increase in the average rates charged to customers during the third quarter of 2020 as compared to the third quarter of 2019.

Salaries, wages and benefits decreased from 5.9% of revenues, before fuel surcharges, in the third quarter of 2019 to 4.7% of revenues, before fuel surcharges, during the third quarter of 2020.

The decrease relates primarily to the effect of higher revenues without a corresponding increase in those wages with fixed-cost characteristics, such as general and administrative wages.

The logistics and brokerage services division operating ratio, which measures the ratio of operating expenses, net of fuel surcharges, to operating revenues, before fuel surcharges, improved from 96.0% for the third quarter of 2019 to 94.3% for the third quarter of 2020.

Non-operating income / (expense) decreased from income of 0.3% of revenues, before fuel surcharges, during the third quarter of 2019 to expense of 0.1% of revenues, before fuel surcharges, during the third quarter of 2020.

This increase primarily resulted from the change in the market values of our portfolio of marketable equity securities.

SIX MONTHS ENDED JUNE 30, 20 20 VS.

SIX MONTHS ENDED JUNE 30, 20 19

During the first six months of 2020, logistics and brokerage services revenue, before fuel surcharges, decreased 8.8% to $36.3 million as compared to $39.8 million during the first six months of 2019.

The decrease relates to a decrease in average rates charged during the first six months of 2020 as compared to the first six months of 2019.

Salaries, wages and benefits decreased from 6.4% of revenues, before fuel surcharges, in the first six months of 2019 to 5.7% of revenues, before fuel surcharges, during the first six months of 2020.

The decrease relates primarily to a decrease in the average number of employees utilized by logistics and brokerage service operations.

Rents and purchased transportation increased from 85.5% of revenues, before fuel surcharges, during the first six months of 2019 to 88.3% of revenues, before fuel surcharges, during the first six months of 2020.

NINE MONTHS ENDED SEPTEMBER 30, 20 20 VS.

NINE MONTHS ENDED SEPTEMBER 30, 20 19

During the first nine months of 2020, logistics and brokerage services revenue, before fuel surcharges, increased 9.9% to $63.2 million as compared to $57.5 million during the first nine months of 2019.

The increase relates to an increase in the average rates charged to customers during the first nine months of 2020 as compared to the first nine months of 2019.

Salaries, wages and benefits decreased from 5.6% of revenues, before fuel surcharges, in the first nine months of 2019 to 5.3% of revenues, before fuel surcharges, during the first nine months of 2020.

The decrease relates primarily to the effect of higher revenues without a corresponding increase in those wages with fixed-cost characteristics, such as general and administrative wages.

Rents and purchased transportation increased from 87.0% of revenues, before fuel surcharges, during the first nine months of 2019 to 89.0% of revenues, before fuel surcharges, during the first nine months of 2020.

The increase resulted from paying third-party carriers a larger percentage of customer revenue.

The logistics and brokerage services division operating ratio, which measures the ratio of operating expenses, net of fuel surcharges, to operating revenues, before fuel surcharges, increased from 93.1% for the first six months of 2019 to 96.5% for the first six months of 2020.

Non-operating income / (expense) decreased from 0.8% of revenues, before fuel surcharges, during the first six months of 2019 to (2.0%) of revenues, before fuel surcharges, during the first six months of 2020.

The logistics and brokerage services division operating ratio, which measures the ratio of operating expenses, net of fuel surcharges, to operating revenues, before fuel surcharges, increased from 94.0% for the first nine months of 2019 to 95.6% for the first nine months of 2020.

Non-operating income / (expense) decreased from income of 0.7% of revenues, before fuel surcharges, during the first nine months of 2019 to expense of 1.2% of revenues, before fuel surcharges, during the first nine months of 2020.

This decrease primarily resulted from the change in the market values of our portfolio of marketable equity securities.

RESULTS OF OPERATIONS –

COMBINED SERVICES

THREE MONTHS ENDED JUNE 30, 20 20 VS.

THREE MONTHS ENDED JUNE 30 , 20 19

Net loss for all divisions was approximately $0.8 million, or 1.0% of revenues, before fuel surcharges for the second quarter of 2020 as compared to net income of $8.7 million, or 7.7% of revenues, before fuel surcharges for the second quarter of 2019.

The decrease in net income resulted in diluted loss per share of $0.14 for the second quarter of 2020 as compared to diluted earnings per share of $1.45 for the second quarter of 2019.

SIX MONTHS ENDED JUNE 30, 20 20 VS.

SIX MONTHS ENDED JUNE 30, 20 19

Net loss for all divisions was approximately $2.1 million, or 1.1% of revenues, before fuel surcharges for the first six months of 2020 as compared to net income of $17.0 million, or 7.6% of revenues, before fuel surcharges for the first six months of 2019.

The decrease in net income resulted in a diluted loss per share of $0.37 for the first six months of 2020 as compared to diluted earnings per share of $2.84 for the first six months of 2019.

THREE MONTHS ENDED SEPTEMBER 30, 20 20 VS.

THREE MONTHS ENDED SEPTMEBER 30 , 20 19

Net income for all divisions was approximately $6.0 million, or 5.5% of revenues, before fuel surcharges for the third quarter of 2020 as compared to net income of $4.6 million, or 4.2% of revenues, before fuel surcharges for the third quarter of 2019.

The increase in net income resulted in diluted earnings per share of $1.04 for the third quarter of 2020 as compared to diluted earnings per share of $0.79 for the third quarter of 2019.

NINE MONTHS ENDED SEPTEMBER 30, 20 20 VS.

NINE MONTHS ENDED SEPTEMBER 30, 20 19

Net income for all divisions was approximately $3.9 million, or 1.3% of revenues, before fuel surcharges for the first nine months of 2020 as compared to net income of $21.5 million, or 6.5% of revenues, before fuel surcharges for the first nine months of 2019.

The decrease in net income resulted in a diluted earnings per share of $0.67 for the first nine months of 2020 as compared to diluted earnings per share of $3.65 for the first nine months of 2019.

LIQUIDITY AND CAPITAL RESOURCES

Our business has required, and will continue to require, a significant investment in new revenue equipment.

Our primary sources of liquidity have been funds provided by operations, proceeds from the sales of revenue equipment, and borrowings under our lines of credit, installment notes, and our investment margin account.

During the first six months of 2020, we generated $44.0 million in cash from operating activities.

Investing activities used $19.0 million in cash in the first six months of 2020.

Financing activities used $24.9 million in cash in the first six months of 2020.

Our primary sources of liquidity have been funds provided by operations, proceeds from the sales of revenue equipment, and borrowings under our credit facilities, installment notes, and investment margin account.

During the first nine months of 2020, we generated $53.1 million in cash from operating activities.

Investing activities used $29.4 million in cash in the first nine months of 2020.

Financing activities used $23.7 million in cash in the first nine months of 2020.

Our primary use of funds is for the purchase of revenue equipment.

We typically use installment notes, our existing line of credit on an interim basis, proceeds from the sale or trade of equipment, and cash flows from operations to finance capital expenditures and repay long-term debt.

During the first six months of 2020, we utilized cash on hand, installment notes, and our line of credit to finance purchases of revenue equipment and other assets of approximately $41.4 million.

During the first nine months of 2020, we utilized cash on hand, installment notes, and our line of credit to finance purchases of revenue equipment and other assets of approximately $83.7 million.

We commonly finance the acquisition of revenue equipment through installment notes with fixed interest rates and terms ranging from 36 to 84 months.

During the first six months of 2020, the Company’s subsidiary, P.A.M.

Transport, Inc., entered into installment obligations totaling approximately $18.4 million for the purpose of purchasing revenue equipment.

During the first nine months of 2020, the Company’s subsidiary, P.A.M.

Transport, Inc., entered into installment obligations totaling approximately $61.5 million for the purpose of purchasing revenue equipment and other assets.

These obligations are payable in monthly installments.

5 unchanged sentences

We currently intend to retain our future earnings to finance our growth and do not anticipate paying cash dividends in the foreseeable future.

During the first six months of 2020, we maintained a revolving line of credit.

Amounts outstanding under the line bear interest at LIBOR (determined as of the first day of each month) plus 1.25% (1.43% at June 30, 2020), are secured by our trade accounts receivable and mature on July 1, 2022.

During the first nine months of 2020, we maintained a revolving line of credit.

Amounts outstanding under the line bear interest at LIBOR (determined as of the first day of each month) plus 1.25% (1.41% at September 30, 2020), are secured by our trade accounts receivable and mature on July 1, 2022.

An “unused fee”

of 0.25% is charged if average borrowings are less than $18.0 million.

At June 30, 2020 outstanding advances on the line of credit were approximately $12.9 million, including approximately $0.4 million in letters of credit, with availability to borrow $47.1 million.

Trade accounts receivable decreased from $61.8 million at December 31, 2019 to $56.4 million at June 30, 2020.

The decrease resulted from a decrease in freight revenues, which flow through accounts receivable, during the second quarter of 2020 as compared to the fourth quarter of 2019.

Prepaid expenses and deposits decreased from $8.7 million at December 31, 2019 to $7.3 million at June 30, 2020.

At September 30, 2020 outstanding advances on the line of credit were approximately $11.4 million, including approximately $0.3 million in letters of credit, with availability to borrow $48.6 million.

During the third quarter of 2020, we borrowed $17.6 million under a ten-year term loan to refinance our purchase during the first quarter of 2020 of a terminal in Laredo, Texas, which was initially financed using funds from our line of credit.

The term loan bears interest at a fixed rate of 3.021% and is secured by a mortgage and assignment of rents on the Laredo terminal property.

Trade accounts receivable increased from $61.8 million at December 31, 2019 to $70.0 million at September 30, 2020.

The increase resulted from an increase in freight revenues, which flow through accounts receivable, during the third quarter of 2020 as compared to the fourth quarter of 2019.

Prepaid expenses and deposits decreased from $8.7 million at December 31, 2019 to $7.6 million at September 30, 2020.

The decrease relates to the normal amortization of items prepaid as of December 31, 2019.

Marketable equity securities decreased from $29.5 million at December 31, 2019 to $25.7 million at June 30, 2020.

The $3.8 million decrease was due to a decrease in the market value of held marketable equity securities of $6.9 million, the purchase of marketable equity securities with a combined market value of approximately $3.9 million and the sale of marketable equity securities with a combined market value of $0.8 million during the first six months of 2020.

The Company purchased a 51.6-acre terminal in Laredo, TX which includes office, shop, and yard space during the six months ended June 30, 2020.

This transaction resulted in an increase of $8.8 million in land and $10.9 million in structures and improvements recorded in our Condensed Consolidated Balance Sheet as of June 30, 2020.

Accounts payable increased from $16.6 million at December 31, 2019 to $29.5 million at June 30, 2020.

Marketable equity securities decreased from $29.5 million at December 31, 2019 to $25.2 million at September 30, 2020.

The $4.3 million decrease was due to a decrease in the market value of held marketable equity securities of $7.4 million, the purchase of marketable equity securities with a combined purchase cost of approximately $3.9 million and the sale of marketable equity securities with a combined market value of $0.8 million during the first nine months of 2020.

The Company’s purchase during the first quarter of 2020 of a 51.6-acre terminal in Laredo, Texas which includes office, shop, and yard space resulted in an increase of $8.8 million in land and $10.9 million in structures and improvements recorded in our condensed consolidated balance sheet as of September 30, 2020.

Accounts payable increased from $16.6 million at December 31, 2019 to $42.2 million at September 30, 2020.

This increase was primarily attributable to extended payment terms with certain suppliers.

Long-term debt and current maturities of long term-debt are reviewed on an aggregate basis, as the classification of amounts in each category are typically affected merely by the passage of time.

Long-term debt and current maturities of long-term debt, on an aggregate basis, decreased from $241.8 million at December 31, 2019 to $233.1 million at June 30, 2020.

The decrease was primarily related to note payments made during the first six months of 2020, partially offset by the addition of $18.4 million in equipment installment notes entered into during the first six months of the year.

Long-term debt and current maturities of long-term debt, on an aggregate basis, increased from $241.8 million at December 31, 2019 to $258.5 million at September 30, 2020.

The increase was primarily related to the financing of additional revenue equipment during the first nine months of 2020 and to the financing of the Laredo, Texas terminal purchase which occurred earlier this year.

Additional financings were partially offset by note payments made during the first nine months of 2020.

NEW ACCOUNTING PRONOUNCEMENTS

1 unchanged sentence

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