What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2021-05-07 compared with 2020-11-06 · 158 added, 359 removed, 487 unchanged (51% of the section changed)

4 unchanged sentences

(in thousands, except share and per share data)

September 3 0 ,

Current assets:

5 unchanged sentences

Prepaid expenses and deposits

10,172  

Marketable equity securities

7 unchanged sentences

18,486  

Structures and improvements

45 unchanged sentences

11,695,719 and 11,695,719 shares issued;

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

5,724,939 and 5,727,895 shares outstanding at March 31, 2021 and December 31, 2020, respectively

Additional paid-in capital

2 unchanged sentences

Treasury stock, at cost;

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

5,970,780 and 5,967,824 shares at March 31, 2021 and December 31, 2020, respectively

( 159,262 )  

5 unchanged sentences

149,981  

TOTAL LIABILITIES AND S TOCKH OLDERS' EQUITY

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY

$ 573,406  

6 unchanged sentences

Three 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

11,872  

10,411  

10,321  

(Gain) / Loss on sale or disposition of equipment

( 174 )  

( 71 )  

Total operating expenses and costs

111,868  

121,461  

326,522  

360,249  

OPERATING INCOME

10,074  

17,553  

30,431  

NON-OPERATING (EXPENSE) INCOME

( 94 )  

( 6,209 )  

NON-OPERATING INCOME/(EXPENSE)

INTEREST EXPENSE

( 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  

INCOME/(LOSS) BEFORE INCOME TAXES

FEDERAL AND STATE INCOME TAX EXPENSE/(BENEFIT):

Total federal and state income tax expense/(benefit)

NET INCOME/(LOSS)

INCOME/(LOSS) PER COMMON SHARE:

AVERAGE COMMON SHARES OUTSTANDING:

4 unchanged sentences

(in thousands)

Nine M onths Ended

September 30 ,

Three Months Ended

OPERATING ACTIVITIES:

Net income/(loss)

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

1 unchanged sentence

Stock compensation-net of excess tax benefits

Provision for deferred income taxes

Recognized loss / (gain) on marketable equity securities

Provision for / (benefit from) deferred income taxes

Recognized (gain) / loss on marketable equity securities

(Gain) / loss on sale or disposition of equipment

11 unchanged sentences

Purchases of marketable equity securities, net of return of capital

Net cash used in investing activities

Net cash provided by/(used in) investing activities

FINANCING ACTIVITIES:

7 unchanged sentences

Net cash used in financing activities

NET INCREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH

NET (DECREASE)/INCREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH

CASH, CASH EQUIVALENTS AND RESTRICTED CASH -Beginning of period

10 unchanged sentences

Shares / Amount

Paid-In Capital

Additional Paid-In Capital

Balance at January 1, 2021

3 unchanged sentences

Balance at March 31, 2021

Stock awards-shares issued including tax benefits

Treasury stock repurchases

Stock based compensation

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

Additional Paid-In Capital

Balance at January 1, 2020

3 unchanged sentences

Balance at March 31, 2020

Stock awards-shares issued including tax benefits

Treasury stock repurchases

Stock based compensation

Balance at June 30, 2019

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.

See notes to condensed consolidated financial statements.

2 unchanged sentences

Notes to Condensed Consolidated Financial Statements (unaudited)

September 30, 20 20

March 31, 2021

BASIS OF PRESENTATION

10 unchanged sentences

The consolidated balance sheet at December 31, 2020 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 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.

Operating results for the three -month period ended March 31, 2021 are not necessarily indicative of the results that may be expected for the year ending December 31, 2021.

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, 2020.

10 unchanged sentences

The Company has evaluated the new guidance and does not expect it to have a material impact on its financial condition, results of operations, or cash flows.

In June 2016, the FASB issued ASU No.

2016 - 13, (“ASU 2016 - 13”

), Accounting for Credit Losses (Topic 326 ).

ASU 2016 - 13 requires the use of an “expected loss”

model on certain types of financial instruments.

The standard also amends the impairment model for available-for-sale debt securities and requires estimated credit losses to be recorded as allowances instead of reductions to the amortized cost of the securities.

For smaller reporting companies, ASU 2016 - 13 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2022, with early adoption permitted.

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.

REVENUE RECOGNITION

30 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 September 30, 2020 and December 31, 2019.

September 30, 2020

The following table sets forth market value, cost, and unrealized gains on equity securities as of March 31, 2021 and December 31, 2020.

March 31, 2021

December 31, 2020

5 unchanged sentences

25,860  

Unrealized (loss) / gain

Unrealized gain

$ 5,766  

$ 2,081  

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

The following table sets forth the gross unrealized gains and losses on the Company’s marketable securities as of March 31, 2021 and December 31, 2020.

March 31, 2021

December 31, 2020

4 unchanged sentences

Gross unrealized losses

Net unrealized (loss) / gain

Net unrealized gain

$ 5,766  

$ 2,081  

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.

The following table shows the Company’s net realized gains during the three months ending on March 31, 2021, on certain marketable equity securities.

Three Months Ended

Nine Months Ended

September 30,

(in thousands, except per share data)

(in thousands)

Sales proceeds

$ 1,645  

Cost of securities sold

Realized gain / (loss)

$ ( 605 )  

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.

For the quarter ended March 31, 2021, the Company recognized dividends received of approximately $ 352,000 in non-operating income in its condensed consolidated statements of operations.

For the quarter ended March 31, 2020, the Company recognized dividends received of approximately $ 305,000 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 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.

As of March 31, 2021, and December 31, 2020, the Company had outstanding borrowings of approximately $ 10,675,000 and $ 11,251,000 , 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 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.

Our marketable equity securities portfolio had a net unrealized pre-tax gain in market value of approximately $ 4,204,000 during the first quarter of 2021, and a net unrealized pre-tax loss in market value of approximately $ 8,805,000 during the first quarter of 2020, which were reported as non-operating income for the respective periods.

STOCK-BASED COMPENSATION

3 unchanged sentences

The fair market value is determined by the closing price of the Company’s common stock, on its primary exchange, on the same date that the option or award is granted.

In January 2020, the Company granted 7,000 shares of common stock to certain key employees.

These stock awards have a grant date fair value of $ 56.45 per share, based on the closing price of the Company’s stock on the date of grant, and vest on the fourth anniversary date in January 2024.

In March 2020, the Company granted 2,608 shares of common stock to non-employee directors.

These stock awards have a grant date fair value of $ 30.75 per share, based on the closing price of the Company’s stock on the date of grant, and vested immediately.

In April 2020, the Company granted 242 shares of common stock to a new non-employee director upon his election to the board of directors.

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.

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.

No shares of common stock were granted during the first three months of 2021, and no stock grants vested during the first three months of 2021.

The total pre-tax stock-based compensation expense, recognized in salaries, wages and benefits during the first three months of 2021, was approximately $ 160,000 and includes approximately $ 80,000 recognized as a result of the accrual of 163 shares to each non-employee director during the first three months of 2021.

The recognition of stock-based compensation expense decreased both diluted and basic earnings per common share by approximately $ 0.02 during the first three months of 2021.

As of March 31, 2021, the Company had stock-based compensation plans with total unvested stock-based compensation expense of approximately $ 1,977,000 , which is being amortized on a straight-line basis over the remaining vesting period.

As a result, the Company expects to recognize approximately $ 253,000 in additional compensation expense related to unvested stock awards during the remainder of 2021 and to recognize approximately $ 370,000 , $ 305,000 , $ 296,000 , $ 354,000 , $ 288,000 and $ 111,000 in additional compensation expense related to unvested stock awards during the years 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:

The total grant date fair value of stock vested during the first three months of 2020 was approximately $ 80,000 .

Total pre-tax stock-based compensation expense recognized in salaries, wages and benefits during the first three months of 2020 was approximately $ 305,000 and includes approximately $ 80,000 recognized as a result of the grant of shares to each non-employee director during the first three months of 2020.

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

As of March 31, 2020, the Company had stock-based compensation plans with total unvested stock-based compensation expense of approximately $ 1,074,000 , 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 March 31, 2021 and changes during the three months ended March 31, 2021, is as follows:

Restricted Stock

4 unchanged sentences

$ 36.12  

63,182  

Canceled/forfeited/expired

( 357 )  

( 36,184 )  

Non-vested at September 30, 2020

Non-vested at March 31, 2021

60,678  

5 unchanged sentences

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

Three Months Ended September 30,

Nine Months Ended September 30,

Three Months Ended March 31,

(in thousands, except percentage data)

2 unchanged sentences

$ 91,311  

$ 244,217  

$ 275,323  

Brokerage and Logistics Services revenue

1 unchanged sentence

20,511  

63,224  

57,523  

Total revenues

1 unchanged sentence

$ 111,822  

$ 307,441  

$ 332,846  

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 September 2011 authorization.

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.

During the three months ended March 31, 2021, the Company repurchased 2,956 shares of its common stock at an aggregate cost of approximately $ 144,000 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 .

As of March 31, 2021, 5,970,780 shares were held in the treasury at an aggregate cost of approximately $ 159,262,000 .

EARNINGS PER SHARE

2 unchanged sentences

Three Months Ended

Nine Months Ended

September 30,

(in thousands, except per share data)

$ 6,000  

$ 4,581  

$ 3,874  

Net income/(loss)

$ 11,949  

2 unchanged sentences

Diluted weighted average common shares outstanding

Basic earnings per share

$ 1.04  

$ 0.80  

$ 0.67  

$ 3.68  

Diluted earnings per share

$ 1.04  

$ 0.79  

Basic (loss)/earnings per share

$ 2.09  

Diluted (loss)/earnings per share

$ 2.08  

4 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 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.

As of March 31, 2021, 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 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.

As of March 31, 2021, 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 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.

During the three months ended March 31, 2021 and 2020, 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 25.7 % and 27.6 % for the three months ended March 31, 2021 and 2020, respectively.

Our effective tax rate for the three months ended March 31, 2021 differs from amounts computed by applying the United States federal statutory rates to pre-tax income primarily due to state income taxes, tax benefits related to stock compensation and non-deductible expenses.

FAIR VALUE OF FINANCIAL INSTRUMENTS

9 unchanged sentences

Unobservable inputs that are supported by little or no market activity.

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

At March 31, 2021, 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 September 30, 2020 was as follows:

The carrying value and estimated fair value of this other long-term debt at March 31, 2021 was as follows:

(in thousands)

4 unchanged sentences

NOTES PAYABLE

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.

During the first three months of 2021, the Company’s subsidiaries entered into installment obligations totaling approximately $ 13.4 million for the purpose of purchasing revenue equipment.

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 vary from 36 months for trucks, to 84 months for trailers, and to 10 years for the terminal.

The terms of these obligations are for 84 months.

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 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 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.

Adoption of ASU 2016 - 02

10 unchanged sentences

The Company leases trucks to owner-operators under our lease-to-own program.

We also lease dock space to a related party at our Laredo, Texas terminal.

We also lease dock space to a related party and office space to a non-related party at our Laredo, Texas terminals.

We have reviewed these operating leases and determined that the adoption of ASU 2016 - 02 did not require a change to our financial statements, as our method of accounting for related assets and lease revenue is consistent with the provisions of the new standard.

2 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 $ 1.7 million as of September 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.

2 unchanged sentences

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:

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 March 31, 2021.

Scheduled amounts and timing of cash flows arising from future right-of-use operating lease payments at March 31, 2021, 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 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.

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 March 31, 2021.

Cash paid for amounts included in the present value of operating lease liabilities was $ 0.1 million during the three months ended March 31, 2021 and is included in operating cash flows.

Operating Lease Costs

Three Months Ended

Nine Months Ended

September 30,

(in thousands)

$ 2,083  

$ 1,755  

Lessor Disclosures under ASC Topic 842

1 unchanged sentence

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

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.

As of March 31, 2021, the gross carrying value of trucks underlying these leases was $ 56.3 million and accumulated depreciation was $ 29.6 million.

Depreciation is calculated on a straight-line basis over the estimated useful life of the equipment, down to an estimated salvage value.

1 unchanged sentence

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 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.

During the quarter ended March 31, 2021, the Company incurred $ 1.4 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.

As of March 31, 2021, the gross carrying value of the buildings underlying these leases was $ 13.7 million and accumulated depreciation was $ 1.4 million.

During the quarter ended March 31, 2021, 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

Nine Months Ended

September 30,

(in thousands)

2 unchanged sentences

$ 2,394  

$ 5,302  

$ 7,024  

Leased building space revenue (recorded in non-operating income)

Leased facility space revenue (recorded in non-operating income)

Total lease revenue

1 unchanged sentence

$ 2,461  

$ 5,706  

$ 7,140  

Lease Receivables

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

(i n thousands)

Future minimum operating lease payments receivable as of March 31, 2021:

(in thousands)

2021 (remaining)

3 unchanged sentences

EFFECT OF COVID- 19 PANDEMIC

The rapid spread of COVID- 19 has resulted in governmental authorities implementing numerous measures to try to contain the virus, such as travel bans and restrictions, quarantines, shelter in place orders, increased border and port controls and closures, and shutdowns.

These measures and the public health concerns resulting from the outbreak have severely disrupted economic and commercial activity.

The resulting impact on domestic and global supply chains has caused slowdowns and reduced freight demand for transportation companies such as ours.

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 operations during the second quarter;

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

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.

The rapid spread of COVID- 19 resulted in governmental authorities implementing numerous measures to try to contain the virus, such as travel bans and restrictions, quarantines, shelter in place orders, increased border and port controls and closures, and shutdowns.

These measures and the public health concerns resulting from the outbreak severely disrupted economic and commercial activity.

The resulting impact on domestic and global supply chains caused slowdowns and reduced freight demand for transportation companies such as ours.

Because we have a significant concentration of customers within the automotive industry, our freight volumes and revenues were significantly affected by the closure of North American automotive manufacturing facilities beginning in late March of 2020.

Our automotive customers resumed operations during the second quarter of 2020.

Any future 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.

NONCASH INVESTING AND FINANCING ACTIVITIES

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 .

The Company financed approximately $ 13.4 million in equipment purchases during the first three months of 2021 utilizing noncash financing.

Management ’

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

FORWARD-LOOKING INFORMATION

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within the meaning of the Private Securities Litigation Reform Act of 1995.

In this Quarterly Report, the words “believe,”

“may,”

“will,”

“estimate,”

“continue,”

“anticipate,”

“intend,”

“expect,”

“project,”

“could,”

“should,”

“would”

and similar expressions, as they relate to us, out management, and our industry are intended to identify forward-looking statements.

Such forward-looking statements may relate to expected future financial and operating results, prospects, plans or events, and are thus prospective.

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CRITICAL ACCOUNTING POLICIES

There have been no material changes to our critical accounting policies and estimates from the information provided in Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, included in our Form 10-K for the fiscal year ended December 31, 2019.

There have been no material changes to our critical accounting policies and estimates from the information provided in Item 7, Management ’

s Discussion and Analysis of Financial Condition and Results of Operations, included in our Form 10-K for the fiscal year ended December 31, 2020.

BUSINESS OVERVIEW

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

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.

Truckload services revenues, excluding fuel surcharges, represented 66.9% and 81.7% of total revenues, excluding fuel surcharges, for the three months ended March 31, 2021 and 2020, respectively.

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

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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 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.

During the three months ended March 31, 2021 and 2020, approximately $13.7 million and $17.3 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.

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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.

Where possible, our employees are working remotely from their homes.

For essential functions, including our driving professionals, we have distributed cleaning and protective supplies to various terminals so that they are available to those that need them, increased cleaning frequency and coverage, and provided employees direction on precautionary measures, such as sanitizing truck interiors, personal hygiene, and social distancing.

The Company’s primary concern during the COVID-19 pandemic has been 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.

Where feasible, our employees are working remotely from their homes.

For essential functions, including our driving professionals, we distribute cleaning and protective supplies to various terminals so that they are available to those that need them.

We provide employees direction on precautionary measures, such as sanitizing truck interiors, personal hygiene, and social distancing.

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

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.

While we and most of our customers have returned to normal operations and economic activity continued to increase during the first quarter of 2021, we continue to monitor ongoing developments with the COVID-19 pandemic.

Any future waves or outbreaks of alternative strains of the virus could adversely impact our future operations and financial results.

The ultimate extent of the pandemic’s 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, and further government regulations imposed in response to the pandemic, and its continued 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 continue 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.

RESULTS OF OPERATIONS –

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Three Months Ended

Nine Months Ended

September 30,

(percentages)

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Operating income

Non-operating (expense) income

Non-operating income/(expense)

Interest expense

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 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 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 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.

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.

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.

Income/(loss) before income taxes

THREE MONTHS ENDED MARCH 31, 2021 VS.

THREE MONTHS ENDED MARCH 31, 2020

During the first quarter of 2021, truckload services revenue, before fuel surcharges, decreased 1.0% to $90.4 million as compared to $91.3 million during the first quarter of 2020.

The decrease in revenue was primarily the result of approximately 5% fewer trucks operating within our fleet, primarily due to a reduction in our independent contractor fleet.

Operating supplies and expenses increased from 6.9% of revenues, before fuel surcharges, during the first quarter of 2020 to 10.8% of revenues, before fuel surcharges, during the first quarter of 2021.

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 during the first nine months of 2020 compared to the first nine months of 2019.

Also contributing to the increase was an increase in the proportion of total miles driven by company drivers during the first quarter of 2021 compared to the first quarter of 2020.

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 4.3% 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 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 $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.

Rent and purchased transportation decreased from 26.9% of revenues, before fuel surcharges, during the first quarter of 2020 to 22.7% of revenues, before fuel surcharges, during the first quarter of 2021.

The decrease was primarily due to a decrease in the number of loads transported by third-party carriers during the first quarter of 2021 compared to the first quarter of 2020.

Insurance and claims expense increased from 0.0% of revenues, before fuel surcharges, during the first quarter of 2020 to 3.6% of revenues, before fuel surcharges, during the first quarter of 2021.

The first quarter of 2020 included the reversal of a lawsuit reserve which resulted in a credit to claims expense in the amount of approximately $3.1 million.

There were no similar reversals during the first quarter of 2021.

Other expense decreased from 6.0% of revenues, before fuel surcharges, during the first quarter of 2020 to 2.6% of revenues, before fuel surcharges, during the first quarter of 2021.

This decrease is primarily attributable to a decrease in legal fees associated with our defense against certain litigation.

Non-operating income / (expense) increased from an expense of 8.7% of revenues, before fuel surcharges, during the first quarter of 2020 to income of 4.2% of revenues, before fuel surcharges, during the first quarter of 2021.

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

The Company recorded a $8.8 million decrease in the market values of our marketable equity securities in non-operating income / (expense) during the first quarter of 2020, compared to a $4.7 million increase in the market value of our marketable equity securities during the first quarter of 2021.

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 90.2% for the first quarter of 2020 to 90.1% for the first quarter of 2021.

RESULTS OF OPERATIONS –

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Three Months Ended

Nine Months Ended

September 30,

(percentages)

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Interest expense

Income before income taxes

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.

Income/(Loss) before income taxes

THREE MONTHS ENDED MARCH 31, 2021 VS.

THREE MONTHS ENDED MARCH 31, 2020

During the first quarter of 2021, logistics and brokerage services revenue, before fuel surcharges, increased 118.3% to $44.8 million as compared to $20.5 million during the first quarter of 2020.

The increase relates to an increase in the number of loads serviced and to an increase in the average rates charged to customers during the first quarter of 2021 as compared to the first quarter of 2020.

Salaries, wages and benefits decreased from 5.4% of revenues, before fuel surcharges, in the first quarter of 2020 to 4.5% of revenues, before fuel surcharges, during the first quarter of 2021.

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.

Rents and purchased transportation decreased from 89.4% of revenues, before fuel surcharges, during the first quarter of 2020 to 83.7% of revenues, before fuel surcharges, during the first quarter of 2021.

The increase results from paying third party carriers a lower 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 97.5% for the first quarter of 2020 to 89.5% for the first quarter of 2021.

Non-operating income / (expense) increased from an expense of 5.2% of revenues, before fuel surcharges, during the first quarter of 2020 to income of 2.0% of revenues, before fuel surcharges, during the first quarter of 2021.

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

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 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.

The Company recorded a $8.8 million decrease in the market values of our marketable equity securities in non-operating expense during the first quarter of 2020, compared to a $4.7 million increase in the market value of our marketable equity securities during the first quarter of 2021.

RESULTS OF OPERATIONS –

COMBINED SERVICES

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.

THREE MONTHS ENDED MARCH 31, 2021 VS.

THREE MONTHS ENDED MARCH 31, 2020

Net income for all divisions was approximately $11.9 million, or 8.8% of revenues, before fuel surcharges for the first quarter of 2021 as compared to net loss of $1.3 million, or 1.1% of revenues, before fuel surcharges for the first quarter of 2020.

The increase in net income resulted in diluted earnings per share of $2.08 for the first quarter of 2021 as compared to a diluted loss per share of $0.23 for the first quarter of 2020.

LIQUIDITY AND CAPITAL RESOURCES

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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.

During the first three months of 2021, we generated $23.9 million in cash from operating activities.

Investing activities generated $6.5 million in cash in the first three months of 2021.

Financing activities used $30.5 million in cash in the first three months of 2021.

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 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.

During the first three months of 2021, we utilized cash on hand, installment notes, and our line of credit to finance purchases of revenue equipment and other assets of approximately $15.0 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 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.

During the first three months of 2021, the Company’s subsidiary, P.A.M.

Transport, Inc., entered into installment obligations totaling approximately $13.4 million for the purpose of purchasing revenue equipment.

These obligations are payable in monthly installments.

During the remainder of 2020, we expect to purchase approximately 300 new trucks and 500 new trailers while continuing to sell or trade older equipment, which we expect to result in net capital expenditures of approximately $38.0 million.

During the remainder of 2021, we expect to purchase approximately 165 new trucks while continuing to sell or trade older equipment, which we expect to result in net proceeds of approximately $3.5 million.

Management 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.

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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 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.

During the first three months of 2021, 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% and 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 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.

At March 31, 2021 outstanding advances on the line of credit were approximately $4.2 million, including approximately $0.3 million in letters of credit, with availability to borrow $55.8 million.

Trade accounts receivable increased from $77.7 million at December 31, 2020 to $85.0 million at March 31, 2021.

The increase resulted from an increase in freight revenues, which flow through accounts receivable, during the first quarter of 2021 as compared to the fourth quarter of 2020.

Prepaid expenses and deposits decreased from $10.2 million at December 31, 2020 to $8.8 million at March 31, 2021.

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

Marketable equity securities increased from $27.9 million at December 31, 2020 to $31.9 million at March 31, 2021.

The $4.0 million increase was due to an increase in the market value of held marketable equity securities of $4.2 million, the purchase of marketable equity securities with a combined purchase cost of approximately $0.4 million and the sale of marketable equity securities with a combined market value of $0.6 million during the first three months of 2021.

Accounts payable decreased from $46.1 million at December 31, 2020 to $39.8 million at March 31, 2021.

This decrease was primarily attributable to a decrease in the amount accrued for revenue equipment.

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, 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.

Long-term debt and current maturities of long-term debt, on an aggregate basis, decreased from $286.1 million at December 31, 2020 to $269.7 million at March 31, 2021.

The decrease was primarily due to installment note payments made during the first three months of 2021.

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