PAMT CORP 10-K

Item 5. Market for Registrant ’ s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.   Our common stock is traded on the NASDAQ Global Market under the symbol PTSI. As of February 24, 2021, there were approximately 62 holders of record of our common stock.   Dividends   The Company paid cash dividends of $1.00 per common share during each of the months of April 2012 and December 2012. No dividends were paid during any year prior to 2012 or subsequent to 2012. Future dividend policy and the payment of dividends, if any, will be determined by the Board of Directors in light of circumstances then existing, including our earnings, financial condition and other factors deemed relevant by the Board of Directors. Currently, the Company does not intend to pay dividends in the foreseeable future.   Repurchases of Equity Securities by the Issuer   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 September 2011 authorization. Since the reauthorization, the Company has repurchased 331,565 shares of its common stock under this repurchase program.   In addition, during 2019 and 2018 the Company repurchased 192,743 shares and 185,597 shares, respectively, through publicly announced Dutch auction tender offers. See “Item 8. Financial Statements and Supplementary Data, Note 9 to the Consolidated Financial Statements – Capital Stock” for additional information regarding these tender offers. The Company did not engage in any tender offers during 2020.   The following table summarizes the Company’s common stock repurchases during the fourth quarter of 2020. No shares were purchased during the quarter other than through the repurchase program described above, and all purchases were made by or on behalf of the Company and not by any “affiliated purchaser.”       Total number of shares     Average price paid     Total number of shares purchased as part of publicly announced plans or     Maximum number of shares that may yet be purchased under the plans or   Period   purchased     per share     programs     programs(1)   October 1-31, 2020     983       37.86       --       178,258   November 1-30, 2020     --       --       --       178,258   December 1-31, 2020     9,823       45.91       --       168,435   Total     10,806     $ 45.18       --             (1) The Company’s stock repurchase program does not have an expiration date.   Securities Authorized for Issuance Under Equity Compensation Plans   See Part III, Item 12, “Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters” of this Annual Report for a presentation of compensation plans under which equity securities of the Company are authorized for issuance.   - 18 - Table of Contents   Performance Graph   Set forth below is a line graph comparing the yearly percentage change in the cumulative total stockholder return on our common stock against the cumulative total return of the NASDAQ OMX Index for the NASDAQ Stock Market (U.S. companies) and the NASDAQ OMX Index for the NASDAQ Trucking and Transportation Stocks for the period of five years commencing December 31, 2015 and ending December 31, 2020. The graph assumes that the value of the investment in our common stock and in each index was $100 on December 31, 2015 and that all dividends were reinvested.     COMPARISON OF CUMULATIVE TOTAL RETURN AMONG OUR COMMON STOCK, THE NASDAQ OMX INDEX FOR THE NASDAQ STOCK MARKET (U.S. COMPANIES) AND THE NASDAQ TRUCKING AND TRANSPORTATION STOCKS INDEX THROUGH DECEMBER 31, 2020       - 19 - Table of Contents   Item 6. Selected Financial Data.   The following selected financial and operating data should be read in conjunction with the Consolidated Financial Statements and notes thereto included elsewhere in this Report.       Year Ended December 31,       2020     2019     2018     2017     2016       (in thousands, except per share amounts)   Statement of Operations Data:                                         Operating revenues:                                         Operating revenues, before fuel surcharge   $ 438,987     $ 439,511     $ 445,855     $ 373,523     $ 382,737   Fuel surcharge     47,838       74,666       87,406       64,315       50,115   Total operating revenues     486,825       514,177       533,261       437,838       432,852                                             Operating expenses:                                         Salaries, wages and benefits     124,098       129,738       119,819       102,227       112,235   Operating supplies and expenses     84,275       98,420       93,130       79,505       82,993   Rent and purchased transportation     165,984       168,399       201,455       174,477       158,298   Depreciation     56,168       55,107       49,387       42,274       39,114   Insurance and claims     8,866       35,622       17,191       17,484       16,632   Other     13,138       13,761       11,983       9,249       8,352   Loss (gain) on sale or disposal of property     373       583       (1,306 )     (58 )     (4,700 ) Total operating expenses     452,902       501,630       491,659       425,158       412,924   Operating income     33,923       12,547       41,602       12,680       19,928   Non-operating (expense) income     (1,699 )     6,222       (4,016 )     5,853       1,485   Interest expense     (8,815 )     (8,654 )     (6,245 )     (3,902 )     (3,641 ) Income before income taxes     23,409       10,115       31,341       14,631       17,772   Income tax expense (benefit)     5,582       2,215       7,347       (24,268 )     6,671   Net income   $ 17,827     $ 7,900     $ 23,994     $ 38,899     $ 11,101                                             Earnings per common share:                                         Basic   $ 3.10     $ 1.35     $ 3.94     $ 6.14     $ 1.68   Diluted   $ 3.09     $ 1.34     $ 3.90     $ 6.08     $ 1.67                                             Average common shares outstanding – Basic     5,752       5,832       6,083       6,331       6,627   Average common shares outstanding – Diluted (1)     5,768       5,880       6,159       6,398       6,649                                             Cash dividends declared per common share   $ -     $ -     $ -     $ -     $ -   __________   (1) Diluted income per share for 2020, 2019, 2018, 2017, and 2016 assumes the exercise/vesting of stock to purchase an aggregate of 20,611, 25,545, 25,516, 50,177, and 39,093 shares of common stock, respectively.   - 20 - Table of Contents       At December 31,       2020     2019     2018     2017     2016   Balance Sheet Data:   (in thousands)   Total assets   $ 578,592     $ 498,009     $ 466,066     $ 392,185     $ 380,066   Long-term debt, excluding current portion     228,330       174,187       157,315       98,995       124,391   Stockholders' equity     149,981       133,975       139,447       127,604       94,158         Year Ended December 31,       2020     2019     2018     2017     2016   Operating Data:                                         Operating ratio (1)     92.3 %     97.1 %     90.7 %     96.6 %     94.8 % Average number of truckloads per week     6,859       8,405       8,420       7,134       6,827   Average miles per trip     553       499       521       635       684   Total miles traveled (in thousands)     193,481       213,048       222,738       229,392       237,266   Average miles per truck     96,532       102,674       117,169       125,009       125,471   Average revenue, before fuel surcharge per truck per day   $ 863     $ 834     $ 923     $ 805     $ 797   Average revenue, before fuel surcharge per loaded mile   $ 1.91     $ 1.84     $ 1.71     $ 1.51     $ 1.53   Empty mile factor     8.8 %     7.3 %     6.3 %     6.8 %     6.8 %                                           At end of period:                                         Total company-owned/leased trucks (2)     2,013       2,130       2,031       1,721       1,855   Average age of company-owned trucks (in years)     1.44       1.46       1.20       1.49       1.49   Total company-owned/leased trailers (3)     7,220       7,081       6,397       5,795       5,699   Average age of company-owned trailers (in years)     4.92       4.18       3.54       3.38       2.71   Number of employees and independent contract drivers     2,996       3,242       3,345       2,969       3,216   __________   (1) Total operating expenses, net of fuel surcharge as a percentage of operating revenues, before fuel surcharge.   (2) Includes the following numbers of independent contractor trucks: 355 in 2020, 553 in 2019, 597 in 2018, 560 in 2017, and 578 in 2016.   (3) Includes the following numbers of leased trailers: 0 in 2020, 56 in 2019, 43 in 2018, zero in 2017, and 232 in 2016.   Item 7. Management ’ s Discussion and Analysis of Financial Condition and Results of Operations.   Business Overview   The Company's administrative headquarters are in Tontitown, Arkansas. From this location we manage operations conducted through our wholly owned subsidiaries based in various locations around the United States, Mexico, and Canada. The operations of these subsidiaries can generally be classified into either truckload services or brokerage and logistics services. This designation is based primarily on the ownership of the asset that performed the freight transportation service. Truckload services are performed by Company divisions that generally utilize Company- owned trucks, long-term contractors, or single-trip contractors to transport loads of freight for customers, while brokerage and logistics services coordinate or facilitate the transport of loads of freight for customers and generally involve the utilization of single-trip contractors. Both our truckload operations and our brokerage/logistics operations have similar economic characteristics and are impacted by virtually the same economic factors as discussed elsewhere in this Report. All of the Company's operations are in the motor carrier segment.   For both operations, substantially all of our revenue is generated by transporting freight for customers and is predominantly affected by the rates per mile received from our customers, equipment utilization, and our percentage of non-compensated miles. These aspects of our business are carefully managed and efforts are continuously underway to achieve favorable results. Truckload services revenues, excluding fuel surcharges, represented 76.9%, 82.7% and 80.0% of total revenues, excluding fuel surcharges for the twelve months ended December 31, 2020, 2019 and 2018, respectively.   The main factors that impact our profitability on the expense side are costs incurred in transporting freight for our customers. Currently, our most challenging costs include fuel, driver recruitment, training, wage and benefit costs, independent broker costs (which we record as purchased transportation), insurance and claims, and maintenance and capital equipment costs.   - 21 - Table of Contents   In discussing our results of operations we use revenue, before fuel surcharge (and operating supplies and 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 2020, 2019 and 2018, approximately $47.8 million, $74.7 million and $87.4 million, respectively, of the Company's total revenue was generated from fuel surcharges. We 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 high variable cost nature of certain expenses makes a comparison of changes in expenses as a percentage of revenue more meaningful than absolute dollar changes.   Results of Operations - Truckload Services   The following table sets forth, for truckload services, the percentage relationship of expense items to operating revenues, before fuel surcharges, for the periods indicated. Operating supplies and expenses are shown net of fuel surcharges.       Years Ended December 31,       2020     2019     2018   Operating revenues, before fuel surcharge     100.0 %     100.0 %     100.0 % Operating expenses:                         Salaries, wages and benefits     35.3       34.5       32.4   Operating supplies and expenses, net of fuel surcharge     10.7       6.5       1.5   Rent and purchased transportation     23.2       28.3       34.4   Depreciation     16.5       15.0       13.7   Insurance and claims     2.6       9.8       4.8   Other     3.6       3.6       3.0   Gain on sale or disposal of property     0.1       0.0       (0.1 ) Total operating expenses     92.0       97.7       89.7   Operating income     8.0       2.3       10.3   Non-operating (expense) income     (0.5 )     1.5       (1.0 ) Interest expense     (2.2 )     (2.1 )     (1.6 ) Income before income taxes     5.3 %     1.7 %     7.7 %   2020 Compared to 2019   For the year ended December 31, 2020, truckload services revenue, before fuel surcharges, decreased 7.2% to $337.5 million as compared to $363.6 million for the year ended December 31, 2019. The decrease relates primarily to temporary plant shutdowns in early 2020 experienced by some of our major customers due to COVID-19, and to a decrease in the average number of trucks in service from 2,075 during 2019 to 2,004 during 2020. These decreases were partially offset by a 3.9% increase in our rate per loaded mile, from $1.84 for the year ended December 31, 2019 to $1.91 for the year ended December 31, 2020   Salaries, wages and benefits increased from 34.5% of revenues, before fuel surcharges, during 2019 to 35.3% of revenues, before fuel surcharges, during 2020. The percentage-based increase relates primarily to an increase in amounts expensed for group health insurance expense and workers compensation claims expense. Also contributing to the percentage-based increase was 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. In addition, the proportion of total miles driven by company drivers increased as the number of company drivers increased year-over-year.   Operating supplies and expenses increased from 6.5% of revenues, before fuel surcharges, during 2019 to 10.7% of revenues, before fuel surcharges, during 2020. The increase relates primarily to an increase in the proportion of total miles driven by company drivers for the year ended December 31, 2020 compared to December 31, 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.   - 22 - Table of Contents   Rent and purchased transportation decreased from 28.3% of revenues, before fuel surcharges, during 2019 to 23.2% of revenues, before fuel surcharges, during 2020. The decrease was primarily due to a reduction in the proportion of total miles driven by owner-operators for the year ended December 31, 2020 compared to the year ended December 31, 2019.   Depreciation increased from 15.0% of revenues, before fuel surcharges, during 2019 to 16.5% of revenues, before fuel surcharges, during 2020. The increase relates primarily to the interaction of a decrease in operating revenues with the fixed-cost nature of depreciation expense. Also contributing to the increase was an increase in the average number of trailers owned by the company and to a general increase in truck and trailer replacement costs. During 2020, the average number of company-owned trailers increased by 634 as compared to 2019. The Company uses a three-year replacement cycle for trucks it intends to trade back or sell and a five-year life cycle for tractors it intends to place in its lease to own program. Trailers are on a seven-year replacement cycle. The cost of new trucks and trailers have increased significantly over the previous three-year and seven-year periods and depreciating higher cost equipment over the same length of time will result in an increase in depreciation expense during the respective period.   Insurance and claims decreased from 9.8% of revenues, before fuel surcharges, during 2019 to 2.6% of revenues, before fuel surcharges, during 2020. This decrease relates primarily to the negative impact, recognized in 2019, of the settlement of a lawsuit which claimed that the Company was in violation of minimum wage laws with regard to certain activities performed by employee drivers and for a lawsuit brought against the Company by certain individuals who asserted that they were misclassified as owner-operators. In addition, the Company became self-insured for certain lower layers of auto liability claims commencing September 1, 2019. During the first nine months of 2019, the Company paid for auto liability insurance coverage in these lower levels through various third-party insurance carriers. The decision to self-insure these layers reduced insurance premium costs from that point through to the annual renewal date of September 1, 2020.   Non-operating income decreased from a gain of 1.5% of revenues, before fuel surcharges, during 2019 to a loss of 0.5% of revenues, before fuel surcharges, during 2020. This decrease resulted primarily from a decrease in the market value of our marketable equity securities portfolio at December 31, 2020 as compared to December 31, 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 97.7% for 2019 to 92.0% for 2020.   2019 Compared to 2018   For the year ended December 31, 2019, truckload services revenue, before fuel surcharges, increased 2.0% to $363.6 million as compared to $356.6 million for the year ended December 31, 2018. The increase related primarily to a 7.8% increase in our rate per loaded mile, from $1.71 for the year ended December 31, 2018 to $1.84 for the year ended December 31, 2019, and to an increase in the average number of trucks in service from 1,901 during 2018 to 2,075 during 2019. These increases were partially offset by a decrease in the average number of miles travelled per day by our trucks in 2019 compared to 2018, which was a result of a decrease in the average length of haul of shipments offered by our customers.   Salaries, wages and benefits increased from 32.4% of revenues, before fuel surcharges, during 2018 to 34.5% of revenues, before fuel surcharges, during 2019. The increase related primarily to an increase in company driver wages paid during 2019 compared to 2018. The increase in driver wages related primarily to route specific raises that were phased in throughout 2019 and to an increase in wages and benefits paid to regional and short-haul drivers. In addition, the proportion of total miles driven by company drivers increased as the number of company drivers increased year-over-year.   - 23 - Table of Contents   Operating supplies and expenses increased from 1.5% of revenues, before fuel surcharges, during 2018 to 6.5% of revenues, before fuel surcharges, during 2019. The increase related 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 year ended December 31, 2019 compared to December 31, 2018. 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 34.4% of revenues, before fuel surcharges, during 2018 to 28.3% of revenues, before fuel surcharges, during 2019. The decrease was primarily due to a reduction in the proportion of total miles driven by owner-operators for the year ended December 31, 2019 compared to the year ended December 31, 2018.   Depreciation increased from 13.7% of revenues, before fuel surcharges, during 2018 to 15.0% of revenues, before fuel surcharges, during 2019. This increase was primarily the result of an increase in the average number of trucks and trailers owned by the company. During 2019, the average number of company-owned trucks and trailers increased by 199 and 503, respectively, compared to 2018. The Company uses a three-year replacement cycle for trucks it intends to trade back or sell and a five-year life cycle for tractors it intends to place in its lease to own program. Trailers are on a seven-year replacement cycle. The cost of new trucks and trailers had increased significantly over the previous three-year and seven-year periods. Depreciating higher cost equipment over the same length of time will result in an increase in depreciation expense during the respective period.   Insurance and claims increased from 4.8% of revenues, before fuel surcharges, during 2018 to 9.8% of revenues, before fuel surcharges, during 2019. This increase was primarily the result of the negative impact of estimated amounts reserved for the settlement of a lawsuit which claims that the Company was in violation of minimum wage laws with regard to certain activities performed by employee drivers and for a similar suit brought against the Company by certain individuals who assert that they were misclassified as owner-operators. This increase was partially offset by decreases in insurance premiums resulting from the election to become self-insured for certain categories of property damage and liability risk. The Company became self-insured for property damage on company-owned trucks commencing on September 1, 2018. Prior to this, the Company paid insurance premiums and was insured for property damage insurance coverage for company-owned trucks through a third-party insurance carrier. In addition, the Company became self-insured for certain layers of auto liability claims in excess of $1.0 million commencing September 1, 2019. During the first nine months of 2019, and for the entire year of 2018, the Company paid for auto liability insurance coverage for claims in excess of $1.0 million through various third-party insurance carriers.   Other expenses increased from 3.0% of revenues, before fuel surcharges, during 2018 to 3.6% of revenues, before fuel surcharges, during 2019. This increase related primarily to an increase in amounts expensed for legal fees and other supplies and expenses. This increase was partially offset by a decrease for amounts expensed for uncollectible revenue.   Non-operating income increased from a loss of 1.0% of revenues, before fuel surcharges, during 2018 to 1.5% of revenue, before fuel surcharges, during 2019. This increase resulted primarily from an increase in the market value of our marketable equity securities portfolio at December 31, 2019 compared to December 31, 2018. The unrealized pre-tax gain in market value for 2019 was approximately $3,698,000 compared to a net unrealized pre-tax loss in market value of approximately $5,763,000 reported as Non-operating expense for 2018.   Interest expense increased from 1.6% of revenues, before fuel surcharges, during 2018 to 2.1% of revenues, before fuel surcharges, during 2019. This increase was attributable to market increases in interest rates and to increases in amounts financed by the Company for new equipment. The increase in amounts financed was the result of growth in the number of company-owned trucks and trailers operated within our fleet.   - 24 - Table of Contents   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 89.7% for 2018 to 97.7% for 2019.   Results of Operations - Logistics and Brokerage Services   The following table sets forth, for logistics and brokerage services, the percentage relationship of expense items to operating revenues, before fuel surcharges, for the periods indicated. Brokerage operations occur specifically in certain divisions; however, brokerage operations occur throughout the Company in similar operations having substantially similar economic characteristics. Rent and purchased transportation, which includes costs paid to third-party carriers, are shown net of fuel surcharges.       Years Ended December 31,       2020     2019     2018   Operating revenues, before fuel surcharge     100.0 %     100.0 %     100.0 % Operating expenses:                         Salaries, wages and benefits     5.0       5.8       4.6   Rent and purchased transportation     86.5       86.4       88.1   Insurance and claims     0.1       0.1       0.1   Other     1.7       2.4       1.6   Total operating expenses     93.3       94.7       94.4   Operating income     6.7       5.3       5.6   Non-operating (expense) income     0.0       0.8       (0.5 ) Interest expense     (1.1 )     (1.1 )     (0.7 ) Income before income taxes     5.6 %     5.0 %     4.4 %   2020 Compared to 2019   For the year ended December 31, 2020, logistics and brokerage services revenues, before fuel surcharges, increased 33.6% to $101.5 million as compared to $75.9 million for the year ended December 31, 2019. The increase was primarily related to a 36.0% increase in the number of loads carried for customers during 2020 as compared to 2019.   Salaries, wages and benefits decreased from 5.8% of revenues, before fuel surcharges, in 2019 to 5.0% of revenues, before fuel surcharges, in 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.   Rent and purchased transportation increased from 86.4% of revenues, before fuel surcharges, in 2019 to 86.5% of revenues, before fuel surcharges, in 2020. The increase results 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, improved from 94.7% for 2019 to 93.3% for 2020.   2019 Compared to 2018   For the year ended December 31, 2019, logistics and brokerage services revenues, before fuel surcharges, decreased 15.0% to $75.9 million as compared to $89.3 million for the year ended December 31, 2018. The decrease was primarily the result of a decrease in freight rates charged to customers during 2019 as compared to 2018.   Salaries, wages and benefits increased from 4.6% of revenues, before fuel surcharges, in 2018 to 5.8% of revenues, before fuel surcharges, in 2019. The increase related primarily to the effect of lower revenues without a corresponding decrease in those wages with fixed cost characteristics, such as general and administrative wages.   Rent and purchased transportation decreased from 88.1% of revenues, before fuel surcharges, in 2018 to 86.4% of revenues, before fuel surcharges, in 2019. The decrease results from paying third-party carriers a smaller percentage of customer revenue.   - 25 - Table of Contents   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 94.4% for 2018 to 94.7% for 2019.   Results of Operations - Combined Services   2020 Compared to 2019   Income tax expense was approximately $5.6 million in 2020, resulting in an effective rate of 23.8%, as compared to approximately $2.2 million, or an effective tax rate of 21.9% in 2019. The effective tax rate is impacted by the existence of partially non-deductible meal and incidental expense per-diem payments to company drivers. Per-diem payments may cause a significant difference in the Company’s effective tax rate from period-to-period as the proportion of non-deductible expenses to pre-tax net income increases or decreases.   In determining whether a tax asset valuation allowance is necessary, management, in accordance with the provisions of Accounting Standards Codification (“ASC”) 740-10-30, weighs all available evidence, both positive and negative to determine whether, based on the weight of that evidence, a valuation allowance is necessary. 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 December 31, 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 December 31, 2020, an adjustment to the Company’s 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 2020 and 2019, the Company has not recognized or accrued any interest or penalties related to uncertain income tax positions.   The Company and its subsidiaries are subject to U.S. and Canadian federal income tax laws as well as the income tax laws of multiple state jurisdictions. The major tax jurisdictions in which we operate generally provide for a deficiency assessment statute of limitation period of three years and as a result, the Company’s tax years 2017 and forward remain open to examination in those jurisdictions.   The combined net income for all divisions was $17.8 million, or 4.1% of revenues, before fuel surcharge, for 2020 as compared to the combined net income for all divisions of $7.9 million or 1.8% of revenues, before fuel surcharge, for 2019. Diluted earnings per share increased from $1.34 for the year ended December 31, 2019 to $3.09 for the year ended December 31, 2020.   2019 Compared to 2018   Income tax expense was approximately $2.2 million in 2019, resulting in an effective rate of 21.9%, as compared to approximately $7.3 million, or an effective tax rate of 23.4% in 2018. The effective tax rate is impacted by the existence of partially non-deductible meal and incidental expense per-diem payments to company drivers. Per-diem payments may cause a significant difference in the Company’s effective tax rate from period-to-period as the proportion of non-deductible expenses to pre-tax net income increases or decreases.   - 26 - Table of Contents   In determining whether a tax asset valuation allowance is necessary, management, in accordance with the provisions of ASC 740-10-30, weighs all available evidence, both positive and negative to determine whether, based on the weight of that evidence, a valuation allowance is necessary. 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 December 31, 2019, 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 December 31, 2019, an adjustment to the Company’s consolidated financial statements for uncertain tax positions was not 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 2019 and 2018, the Company did not recognize or accrued any interest or penalties related to uncertain income tax positions.   The Company and its subsidiaries are subject to U.S. and Canadian federal income tax laws as well as the income tax laws of multiple state jurisdictions. The major tax jurisdictions in which we operate generally provide for a deficiency assessment statute of limitation period of three years and as a result, as of December 31, 2019, the Company’s tax years 2016 and forward remained open to examination in those jurisdictions.   The combined net income for all divisions was $7.9 million, or 1.8% of revenues, before fuel surcharge, for 2019 as compared to the combined net income for all divisions of $24.0 million or 5.4% of revenues, before fuel surcharge, for 2018. Diluted earnings per share decreased from $3.90 for the year ended December 31, 2018 to $1.34 for the year ended December 31, 2019.   Quarterly Results of Operations   The following table presents selected consolidated financial information for each of our last eight fiscal quarters through December 31, 2020. The information has been derived from unaudited consolidated financial statements that, in the opinion of management, reflect all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of the quarterly information.       Quarter Ended       Mar. 31, 2020     June 30, 2020     Sept. 30, 2020     Dec. 31, 2020     Mar. 31, 2019     June 30, 2019     Sept. 30, 2019     Dec. 31, 2019       (unaudited)       (in thousands, except earnings per share data)   Operating revenues   $ 129,155     $ 92,979     $ 121,942     $ 142,750     $ 128,686     $ 133,000     $ 128,994     $ 123,497   Total operating expenses     119,669       94,986       111,868       126,380       118,999       119,789       121,461       141,381   Operating income (loss)     9,486       (2,007 )     10,074       16,370       9,687       13,211       7,533       (17,884 ) Net (loss) income     (1,304 )     (823 )     6,000       13,953       8,301       8,654       4,581       (13,636 ) (Loss) income per common share:                                                                 Basic   $ (0.23 )   $ (0.14 )   $ 1.04     $ 2.43     $ 1.40     $ 1.47     $ 0.80     $ (2.37 ) Diluted   $ (0.23 )   $ (0.14 )   $ 1.04     $ 2.43     $ 1.39     $ 1.45     $ 0.79     $ (2.37 )   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, borrowings under our lines of credit, installment notes and investment margin account, and issuances of equity securities.   - 27 - Table of Contents   During 2020, we generated $67.6 million in cash from operating activities compared to $84.3 million and $82.3 million in 2019 and 2018, respectively. Investing activities used $32.7 million in cash during 2020 compared to $62.3 million and $55.3 million in 2019 and 2018, respectively. The cash used for investing activities in all three years related primarily to the purchase of revenue equipment such as trucks and trailers and related equipment such as auxiliary power units. Financing activities used $34.9 million in cash during 2020 compared to using $22.0 million during 2019 and $27.0 million during 2018. See the Consolidated Statements of Cash Flows in Item 8 of this Report.   Our primary use of funds is for the purchase of revenue equipment. We typically use installment notes, our existing lines 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 2020 and 2019, we utilized cash on hand, installment notes, and our lines of credit to finance revenue equipment purchases of approximately $106.9 million and $100.1 million, respectively.   We often finance the acquisition of revenue equipment through installment notes with fixed interest rates and terms ranging from 36 to 84 months. At December 31, 2020, the Company’s subsidiaries had combined outstanding indebtedness under such installment notes of $250.6 million. These installment notes are payable in monthly installments, ranging from 36 monthly installments to 84 monthly installments, at a weighted average interest rate of 3.30%. At December 31, 2019, the Company’s subsidiaries had combined outstanding indebtedness under such installment notes of $224.8 million. These installment notes were payable in monthly installments, ranging from 36 to 84 months at a weighted average interest rate of 3.65%.   In order to maintain our truck and trailer fleet count, it is often necessary to purchase replacement units and place them in service before trade units are removed from service. The timing of this process often requires the Company to pay for new units without any reduction in price for trade units. In this situation, the Company later receives payment for the trade units as they are delivered to the equipment vendor and have passed vendor inspection. During the twelve months ended December 31, 2020 and 2019, the Company received approximately $14.8 million and $11.2 million, respectively, for units delivered for trade.   During 2020, we maintained a revolving line of credit with a borrowing limit of $60.0 million. Under this credit facility, amounts outstanding under the line bear interest at LIBOR (determined as of the first day of each month) plus 1.25% (1.40% at December 31, 2020), are secured by our trade accounts receivable and mature on July 1, 2022. The credit facility also establishes an “unused fee” of 0.25% if average borrowings are less than $18.0 million. At December 31, 2020 outstanding advances on the line of credit were approximately $18.6 million, including approximately $0.3 million in letters of credit, with availability to borrow $41.4 million.   During 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 3.02% 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 $77.7 million at December 31, 2020. The increase relates to a general increase in freight revenue and fuel surcharge revenue, which flows through the accounts receivable account, during the fourth quarter of 2020 as compared to the freight revenue and fuel surcharge revenue generated during the fourth quarter of 2019.   Prepaid expenses and deposits increased from $8.7 million at December 31, 2019 to $10.2 million at December 31, 2020. The increase primarily relates to an increase in prepaid taxes and licenses.   - 28 - Table of Contents   Marketable equity securities at December 31, 2020 decreased approximately $1.6 million as compared to December 31, 2019. The decrease resulted from sales of marketable equity securities of approximately $2.0 million and a decrease in the market value of the remaining portfolio of approximately $3.5 million, offset by purchases of marketable equity securities of $3.9 million. At December 31, 2020, the remaining marketable equity securities have a combined cost basis of approximately $25.8 million and a combined fair market value of approximately $27.9 million. The Company has developed a strategy to invest in securities from which it expects to receive dividends that qualify for favorable tax treatment, as well as appreciate in value. During 2020, the Company received dividends of approximately $1.3 million. The holding term of these securities depends largely on the general economic environment, the equity markets, borrowing rates, and the Company's cash requirements.   Land increased from $7.2 million at December 31, 2019 to $18.5 million at December 31, 2020. The increase relates primarily to the purchase of an additional terminal location in Laredo, Texas for approximately $20 million, of which $8.8 million was allocated to land. In addition, we purchased $2.5 million of land in Nuevo Laredo, Mexico for future growth in our cross border business.   Structures and improvements increased from $20.2 million at December 31, 2019 to $32.3 million at December 31, 2020. The increase relates primarily to the purchase of an additional terminal location in Laredo, Texas for approximately $20 million, of which $10.9 million was allocated to the terminal buildings.   Revenue equipment at December 31, 2020, which generally consists of trucks, trailers, and revenue equipment accessories such as Qualcomm™ satellite tracking units and auxiliary power units, increased approximately $67.9 million as compared to December 31, 2019. The increase relates primarily to overall fleet growth of company-owned trucks and trailers utilized by the company at December 31, 2020 compared to December 31, 2019 and to the higher purchase price of new trucks and trailers compared to the trucks and trailers which are being replaced and sold. Also contributing to the increase was a delay in the surrender of trade trucks in exchange for the new replacement trucks. These delayed trades will be surrendered when payment is received during 2021 which will reduce the balance in both the Revenue equipment and Accumulated depreciation category.   Accounts payable increased from $16.6 million at December 31, 2019 to $46.1 million at December 31, 2020. This increase was primarily attributable to extended payment terms with certain suppliers. Also contributing to the increase was a $8.7 million increase in amounts accrued for fixed asset purchases from $0.4 million at the end of 2019 to $9.1 million at the end of 2020. In addition, $5.0 million of the increase was related to an increase in bank overdrafts outstanding, from $2.6 million at December 31, 2019 to $7.6 million at December 31, 2020. Accounts payable accruals can vary significantly at the end of each reporting period depending on the timing of the actual date of payment in relation to the last day of the reporting period.   Accrued expenses and other liabilities decreased from $40.6 million at December 31, 2019 to $26.6 million at December 31, 2020. The decrease was primarily related to the payment of certain litigation settlements recorded during 2019 and paid for during 2020. See “Item 3. Legal Proceedings” for more information regarding litigation.   Current maturities of long term-debt and long-term debt fluctuations are reviewed on an aggregate basis as the classification of amounts in each category are typically affected merely by the passage of time. Current maturities of long-term debt and long-term debt, on an aggregate basis, at December 31, 2020, increased approximately $44.3 million as compared to December 31, 2019. The increase was related to additional borrowings on our revolving line of credit and under installment notes entered into during 2020, net of the principal portion of scheduled installment note payments made during 2020.   - 29 - Table of Contents   For 2021, we expect to purchase 125 new trucks while continuing to sell or trade equipment that has reached the end of its life cycle, which we expect to result in net capital expenditures of approximately $20.5 million. Management believes we will be able to finance our existing needs for working capital over the next twelve months, as well as acquisitions of revenue equipment and any other asset acquisitions or capital transactions during such period, with cash balances, cash flows from operations, and borrowings believed to be available from financing sources. We will continue to have significant capital requirements over the long-term, which may require us to incur debt or seek additional equity capital. The availability of additional capital will depend upon prevailing market conditions, the market price of our common stock and several other factors over which we have limited control, as well as our financial condition and results of operations. Nevertheless, based on our anticipated future cash flows and sources of financing that we expect will be available to us, we do not expect that we will experience any significant liquidity constraints in the foreseeable future.   Contractual Obligations and Commercial Commitments   The following table sets forth the Company's contractual obligations and commercial commitments as of December 31, 2020:       Payments due by period (in thousands)       Total     Less than 1 Year     1 to 3 Years     3 to 5 Years     More than 5 Years                                             Long-term debt (1)   $ 288,676     $ 66,068     $ 125,985     $ 86,119     $ 10,504   Operating leases (2)     1,840       842       884       114       -   Total   $ 290,516     $ 66,910     $ 126,869     $ 86,233     $ 10,504       (1) Including interest.   (2) Represents building, facilities, and drop yard operating leases.   Inflation   Inflation has an impact on most of our operating costs. Over the past three years, the effect of inflation has been minimal.   Adoption of Accounting Policies   See “Item 8. Financial Statements and Supplementary Data, Note 1 to the Consolidated Financial Statements – Accounting Policies, Recent Accounting Pronouncements.”   Critical Accounting Policies   The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America requires management to adopt accounting policies and make significant judgments and estimates that impact the amounts reported in our consolidated financial statements and accompanying notes. Therefore, the reported amounts of assets, liabilities, revenue, expenses, and associated disclosures of contingent assets and liabilities are affected by judgments and estimates. In many cases, there are alternative assumptions, policies, or estimation techniques that could be used. Management evaluates its assumptions, policies, and estimates on an ongoing basis, utilizing historical experience, and other methods considered reasonable in the particular circumstances. Nevertheless, actual results may differ significantly from our estimates and assumptions, and it is possible that materially different amounts would be reported using differing estimates or assumptions. Management considers our critical accounting policies to be those that require more significant judgments and estimates when we prepare our consolidated financial statements. Our critical accounting policies include the following:   - 30 - Table of Contents   Accounts receivable and current expected credit losses . Accounts receivable are presented in the Company’s consolidated financial statements net of current expected credit losses. Management estimates expected credit losses based upon an evaluation of the aging of our customer receivables and historical write-offs, as well as other trends and factors surrounding the credit risk of specific customers. The Company continually updates the history it uses to make these estimates so as to reflect the most recent trends, factors and other information available. In order to gather information regarding these trends and factors, the Company also performs ongoing credit evaluations of its customers. Customer receivables are considered to be past due when payment has not been received by the invoice due date. Write-offs occur when we determine an account to be uncollectible and could differ from the current expected credit losses estimate as a result of a number of factors, including unanticipated changes in the overall economic environment or factors and risks surrounding a particular customer. Management believes its methodology for estimating current expected credit losses to be reliable; however, additional credit losses may be incurred if the financial condition of our customers were to deteriorate and could have a material effect on the Company’s consolidated financial statements.   Depreciation of trucks and trailers . Depreciation of trucks and trailers is calculated by the straight-line method over the assets’ estimated useful lives, which range from three to seven years, down to an estimated salvage value at the end of the assets’ estimated useful lives. Management must use its judgment in the selection of estimated useful lives and salvage values for purposes of this calculation. In some cases, the Company has agreements in place with certain manufacturers whereby salvage values are guaranteed by the manufacturer. 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.   The depreciation of trucks and trailers over their estimated useful lives and the determination of any salvage value also require management to make judgments about future events. Therefore, the Company’s management periodically evaluates whether changes to estimated useful lives or salvage values are necessary to ensure these estimates accurately reflect the economic reality of the assets. This periodic evaluation may result in changes in the estimated lives and/or salvage values used by the Company to depreciate its assets, which can affect the amount of periodic depreciation expense recognized and, ultimately, the gain or loss on the disposal of an asset. Future changes in our estimated useful life or salvage value estimates, or fluctuations in market value that are not reflected in current estimates, could have a material effect on the Company’s consolidated financial statements.   Impairment of long-lived assets. Long-lived assets are reviewed for impairment in accordance with ASC Topic 360, “Property, Plant, and Equipment.” This authoritative guidance provides that whenever there are certain significant events or changes in circumstances, the value of long-lived assets or groups of assets must be tested to determine if their value can be recovered from their future cash flows. In the event that undiscounted cash flows expected to be generated by the asset are less than the carrying amount, the asset or group of assets must be evaluated for impairment. Impairment exists if the carrying value of the asset exceeds its fair value.   Significantly all of the Company’s cash flows from operations are generated by trucks and trailers, and as such, the cost of other long-lived assets are funded by those operations. Therefore, management tests for the recoverability of all of the Company’s long-lived assets as a single group at the entity level and examines the forecasted future cash flows generated by trucks and trailers, including their eventual disposition, to determine if those cash flows exceed the carrying value of the long-lived assets. Forecasted cash flows are estimated using assumptions about future operations. To the extent that facts and circumstances change in the future, our estimates of future cash flows may also change either positively or negatively. In light of the Company’s market capitalization during 2020 and net operating profits of the Company for the years ended December 31, 2020 and 2019, no impairment indicators existed which required management to test the Company’s long-lived assets for recoverability as of December 31, 2020. As such, no impairment losses were recorded during 2020.   - 31 - Table of Contents   Claims accruals . The Company is self-insured for health and workers' compensation benefits up to certain stop-loss limits. Such costs are accrued based on known claims and an estimate of incurred but not reported (IBNR) claims. IBNR claims are estimated using historical lag information and other data either provided by outside claims administrators or developed internally. Actual claims payments may differ from management’s estimates as a result of a number of factors, including evaluation of severity, increases in legal or medical costs, and other case-specific factors. The actual claims payments are charged against the Company’s recorded accrued claims liabilities and have been historically reasonable with respect to the estimates of the liabilities made under the Company’s methodology. However, the estimation process is generally subjective, and to the extent that future actual results materially differ from original estimates made by management, adjustments to recorded accruals may be necessary which could have a material effect on the Company’s consolidated financial statements. Based upon our 2020 health and workers' compensation expenses, a 10% increase in both claims incurred and IBNR claims would increase our annual health and workers' compensation expenses by approximately $0.6 million.   On September 1, 2020, the Company elected to become self-insured for certain layers of auto liability claims in excess of $2.0 million. The Company specifically reserves for claims that are expected to exceed $2.0 million when fully developed, based on the facts and circumstances of those claims.   Revenue recognition . Revenue is recognized over time as freight progresses towards its destination and the transportation service obligation is fulfilled. For loads picked up during the reporting period, but delivered in a subsequent reporting period, revenue is allocated to each period based on the transit time in each period as a percentage of total transit time. See “Item 8. Financial Statements and Supplementary Data, Note 2 to the Consolidated Financial Statements – Revenue Recognition.”   Income Taxes . The Company’s deferred tax assets and liabilities represent items that will result in taxable income or a tax deduction in future years for which the Company has already recorded the related tax expense or benefit in its consolidated statements of operations. Deferred tax accounts arise as a result of timing differences between when items are recognized in the Company’s consolidated financial statements compared to when they are recognized in the Company’s tax returns. In establishing the Company’s deferred income tax assets and liabilities, management makes judgments and interpretations based on the enacted tax laws and published tax guidance that are applicable to its operations. Deferred income tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.   In determining whether a tax asset valuation allowance is necessary, management, in accordance with the provisions of ASC 740-10-30, weighs all available evidence, both positive and negative to determine whether, based on the weight of that evidence, a valuation allowance is necessary. 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. Significant management judgment is required as it relates to future taxable income, future capital gains, tax settlements, valuation allowances, and the Company’s ability to utilize tax loss and credit carryforwards. As of December 31, 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.   Management believes that future tax consequences have been adequately provided for based on the current facts and circumstances and current tax law. However, should current circumstances change or the Company’s tax positions be challenged, different outcomes could result which could have a material effect on the Company’s consolidated financial statements.