What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2021-11-05 compared with 2021-08-06 · 239 added, 370 removed, 472 unchanged (56% of the section changed)

4 unchanged sentences

(in thousands, except share and per share data)

September 30,

Current assets:

64 unchanged sentences

23,394,046 and 23,391,438 shares issued;

5,726,243 and 5,727,895 shares outstanding at June 30, 2021 and December 31, 2020, respectively

11,167,261 and 11,455,790 shares outstanding at September 30, 2021 and December 31, 2020, respectively

Additional paid-in capital

2 unchanged sentences

Treasury stock, at cost;

5,970,780 and 5,967,824 shares at June 30, 2021 and December 31, 2020, respectively

12,226,785 and 11,935,648 shares at September 30, 2021 and December 31, 2020, respectively

( 169,946 )  

14 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

OPERATING REVENUES:

Revenue, before fuel surcharge

$ 145,175  

$ 85,765  

$ 280,316  

$ 197,587  

Fuel surcharge

16,088  

29,806  

24,547  

Total operating revenues

161,263  

92,979  

310,122  

222,134  

OPERATING EXPENSES AND COSTS:

Salaries, wages and benefits

33,841  

27,576  

67,237  

60,374  

Operating supplies and expenses

25,107  

18,276  

48,663  

41,991  

Rent and purchased transportation

61,676  

30,360  

119,689  

73,287  

14,334  

14,237  

28,686  

28,532  

Insurance and claims

(Gain) Loss on sale or disposition of equipment

( 602 )  

( 686 )  

Gain on disposition of equipment

Total operating expenses and costs

140,244  

94,986  

275,450  

214,655  

OPERATING INCOME (LOSS)

21,019  

( 2,007 )  

34,672  

OPERATING INCOME

NON-OPERATING INCOME (EXPENSE)

INTEREST EXPENSE

( 2,193 )  

( 2,179 )  

( 4,472 )  

INCOME (LOSS) BEFORE INCOME TAXES

20,943  

( 1,225 )  

37,016  

FEDERAL AND STATE INCOME TAX EXPENSE (BENEFIT):

( 402 )  

Total federal and state income tax expense (benefit)

( 402 )  

NET INCOME (LOSS)

$ 15,317  

$ ( 823 )  

$ 27,266  

INCOME (LOSS) PER COMMON SHARE:

$ 2.67  

$ ( 0.14 )  

$ 4.76  

$ 2.66  

$ ( 0.14 )  

$ 4.74  

INCOME BEFORE INCOME TAXES

FEDERAL AND STATE INCOME TAX EXPENSE:

Total federal and state income tax expense

INCOME PER COMMON SHARE:

AVERAGE COMMON SHARES OUTSTANDING:

4 unchanged sentences

(in thousands)

Six Months Ended

Nine Months Ended

September 30,

OPERATING ACTIVITIES:

Net income (loss)

$ 27,266  

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

28,686  

28,532  

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

Bad debt expense

Stock compensation-net of excess tax benefits

Provision for deferred income taxes (benefit)

Provision for deferred income taxes

Recognized (gain) / loss on marketable equity securities

( 5,838 )  

(Gain) loss on sale or disposition of equipment

( 686 )  

(Gain) on sale or disposition of equipment

Changes in operating assets and liabilities:

Accounts receivable

( 12,695 )  

Prepaid expenses, deposits, inventories, and other assets

1 unchanged sentence

Trade accounts payable

( 1,216 )  

Accrued expenses and other liabilities

Net cash provided by operating activities

51,308  

43,962  

INVESTING ACTIVITIES:

Purchases of property and equipment

( 4,453 )  

Proceeds from disposition of equipment

25,197  

Sales of marketable equity securities

Purchases of marketable equity securities, net of return of capital

( 660 )  

Net cash provided by (used in) investing activities

21,508  

FINANCING ACTIVITIES:

Borrowings under line of credit

276,626  

225,926  

Repayments under line of credit

( 294,872 )  

Borrowings of long-term debt

Repayments of long-term debt

( 30,334 )  

Borrowings under margin account

Repayments under margin account

( 2,110 )  

Repurchases of common stock

( 144 )  

Net cash used in financing activities

( 50,121 )  

NET INCREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH

22,695  

CASH, CASH EQUIVALENTS AND RESTRICTED CASH -Beginning of period

CASH, CASH EQUIVALENTS AND RESTRICTED CASH -End of period

$ 23,032  

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:

Cash paid during the period for:

$ 4,514  

$ 3,778  

NONCASH INVESTING AND FINANCING ACTIVITIES:

Purchases of property and equipment included in accounts payable

$ 7,672  

See notes to condensed consolidated financial statements.

6 unchanged sentences

Balance at January 1, 2021

$ 84,148  

$ ( 159,118 )  

$ 224,834  

$ 149,981  

11,949  

Exercise of stock awards-shares issued including tax benefits

Treasury stock repurchases

( 144 )  

Stock based compensation

Balance at March 31, 2021

$ 84,227  

$ ( 159,262 )  

$ 236,783  

$ 161,865  

15,317  

Exercise of stock awards-shares issued including tax benefits

Treasury stock repurchases

Stock awards-shares issued including tax benefits

Stock based compensation

Balance at June 30, 2021

$ 84,401  

$ ( 159,262 )  

$ 252,100  

$ 177,356  

Treasury stock repurchases

Stock based compensation

Balance at September 30, 2021

See notes to condensed consolidated financial statements.

TRANSPORTATION SERVICES, INC.

AND SUBSIDIARIES

Condensed Consolidated Statements of Stockholders ’

(in thousands)

Shares / Amount

1 unchanged sentence

Balance at January 1, 2020

$ 83,688  

$ ( 156,837 )  

$ 207,007  

$ 133,975  

( 1,304 )  

Exercise of stock awards-shares issued including tax benefits

Stock awards-shares issued including tax benefits

Treasury stock repurchases

( 321 )  

Stock based compensation

Balance at March 31, 2020

$ 83,993  

$ ( 157,158 )  

$ 205,703  

$ 132,655  

( 823 )  

Exercise of stock awards-shares issued including tax benefits

Stock awards-shares issued including tax benefits

Treasury stock repurchases

1 unchanged sentence

Balance at June 30, 2020

$ 84,014  

$ ( 157,158 )  

$ 204,880  

$ 131,853  

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.

2 unchanged sentences

Notes to Condensed Consolidated Financial Statements (unaudited)

June 30, 2021

September 30, 2021

BASIS OF PRESENTATION

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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 six -month period ended June 30, 2021 are not necessarily indicative of the results that may be expected for the year ending December 31, 2021.

Operating results for the three and nine -month periods ended September 30, 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.

On July 13, 2021, our Board of Directors authorized a 2 -for- 1 forward stock split of the shares of our common stock, which was effected in the form of a 100% stock dividend.

The stock split entitled each shareholder of record at the close of business on July 30, 2021 to receive one additional share of common stock for each share of common stock owned as of that date and was paid on August 16, 2021.

Upon the completion of the stock split, our outstanding shares increased from approximately 5.7 million shares to approximately 11.4 million shares.

All share and per share amounts in this quarterly report on Form 10 -Q give effect to the stock split and have been adjusted retroactively, where applicable, for all periods presented.

RECENT ACCOUNTING PRONOUNCEMENTS

In March 2020, the FASB (Financial Accounting Standards Board) issued Accounting Standards Update No.

In March 2020, the FASB issued Accounting Standards Update No.

2020 - 04, (“ASU 2020 - 04”

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

The London Interbank Offered Rate “LIBOR”

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

The London Interbank Offered Rate (“LIBOR”) was the basis for interest charges on outstanding borrowings our line of credit and investment margin account as of September 30, 2021.

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

32 unchanged sentences

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

The following table sets forth market value, cost, and unrealized gains on equity securities as of June 30, 2021 and December 31, 2020.

June 30, 2021

The following table sets forth market value, cost, and unrealized gains on equity securities as of September 30, 2021 and December 31, 2020.

September 30, 2021

December 31, 2020

1 unchanged sentence

Fair market value

$ 33,016  

$ 27,941  

25,961  

25,860  

Unrealized gain

$ 7,055  

$ 2,081  

The following table sets forth the gross unrealized gains and losses on the Company’s marketable securities as of June 30, 2021 and December 31, 2020.

June 30, 2021

The following table sets forth the gross unrealized gains and losses on the Company’s marketable securities as of September 30, 2021 and December 31, 2020.

September 30, 2021

December 31, 2020

1 unchanged sentence

Gross unrealized gains

$ 10,312  

$ 7,048  

Gross unrealized losses

Net unrealized gain

$ 7,055  

$ 2,081  

The following table shows the Company’s net realized gains and losses during the three and six months ending on June 30 of 2021 and 2020, respectively, on certain marketable equity securities.

The following table shows the Company’s net realized gains during the three and nine months ending on September 30, 2021 and 2020, respectively, on certain marketable equity securities.

Three Months Ended

Six Months Ended

(in thousands, except per share data)

Nine Months Ended

September 30,

(in thousands)

Sales proceeds

$ 1,421  

Cost of securities sold

Realized gain / (loss)

$ ( 71 )  

For the quarter ended June 30, 2021, the Company recognized dividends received of approximately $ 309,000 in non-operating income in its condensed consolidated statements of operations.

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

For the six months ended June 30, 2021, the Company recognized dividends received of approximately $ 660,000 in non-operating income in its condensed consolidated statements of operations.

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

For the quarter ended September 30, 2021, the Company recognized dividends received of approximately $ 335,000 in non-operating income in its condensed consolidated statements of operations.

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

For the nine months ended September 30, 2021, the Company recognized dividends received of approximately $ 995,000 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.

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

As of June 30, 2021, and December 31, 2020, the Company had outstanding borrowings of approximately $ 9,855,000 and $ 9,986,000 , respectively, under its margin account.

As of September 30, 2021, and December 31, 2020, the Company had outstanding borrowings of approximately $ 13,102,000 and $ 12,705,000 , respectively, under its margin account.

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

Our marketable equity securities portfolio had a net unrealized pre-tax gain in market value of approximately $ 1,632,000 during the second quarter of 2021, and a net unrealized pre-tax gain in market value of approximately $ 2,482,000 during the second quarter of 2020, which were reported as non-operating income for the respective periods.

Our marketable equity securities portfolio had a net unrealized pre-tax loss in market value of approximately $ 456,000 during the third quarter of 2021, and a net unrealized pre-tax loss in market value of approximately $ 498,000 during the third 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.

During the first six months of 2021, the Company granted 2,500 shares of common stock to certain key employees.

During the first nine months of 2021, the Company granted 5,000 shares of common stock to certain key employees.

These stock awards have grant date fair values of $ 30.17 per share, based on the closing price of the Company’s stock on the date of grant, and vest in 25 % increments over four years, beginning one year from the anniversary date of the grant.

During the first six months of 2021, the Company granted 1,304 shares of common stock to non-employee directors.

During the first nine months of 2021, the Company granted 2,608 shares of common stock to non-employee directors.

These stock awards have a grant date fair value of $ 30.85 per share, based on the closing price of the Company’s stock on the date of grant, and vested immediately.

The total grant date fair value of stock vested during the first six months of 2021 was approximately $ 80,000 .

The total pre-tax stock-based compensation expense, recognized in salaries, wages and benefits during the first six months of 2021, was approximately $ 253,000 and includes approximately $ 80,000 recognized as a result of the grant of 163 shares to each non-employee director.

The recognition of stock-based compensation expense decreased both diluted and basic earnings per common share by approximately $ 0.03 during the first six months of 2021.

As of June 30, 2021, the Company had stock-based compensation plans with total unvested stock-based compensation expense of approximately $ 2,035,000 , which is being amortized on a straight-line basis over the remaining vesting period.

The total grant date fair value of stock vested during the first nine months of 2021 was approximately $ 80,000 .

The total pre-tax stock-based compensation expense, recognized in salaries, wages and benefits during the first nine months of 2021, was approximately $ 347,000 and includes approximately $ 80,000 recognized as a result of the grant of 326 shares to each non-employee director.

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

As of September 30, 2021, the Company had stock-based compensation plans with total unvested stock-based compensation expense of approximately $ 1,941,000 , which is being amortized on a straight-line basis over the remaining vesting period.

As a result, the Company expects to recognize approximately $ 94,000 in additional compensation expense related to unvested stock awards during the remainder of 2021 and to recognize approximately $ 408,000 , $ 343,000 , $ 334,000 , $ 363,000 , $ 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 six months of 2020 was approximately $ 636,000 .

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

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

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

A summary of the status of the Company’s non-vested restricted stock as of June 30, 2021 and changes during the six months ended June 30, 2021, is as follows:

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 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, 2021 and changes during the nine months ended September 30, 2021, is as follows:

Restricted Stock

7 unchanged sentences

( 2,608 )  

Non-vested at June 30, 2021

Non-vested at September 30, 2021

126,356  

5 unchanged sentences

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

Three Months Ended June 30,

Six Months Ended June 30,

(in thousands, except percentage data)

Three Months Ended September 30,

Nine Months Ended September 30,

(in thousands)

Truckload Services revenue

$ 98,040  

$ 69,958  

$ 188,398  

$ 161,268  

Brokerage and Logistics Services revenue

47,135  

15,807  

91,918  

36,319  

Total revenues

$ 145,175  

$ 85,765  

$ 280,316  

$ 197,587  

TREASURY STOCK

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

During the six months ended June 30, 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, and as of June 30, 2021, 5,970,780 shares were held in the treasury at an aggregate cost of approximately $ 159,262,000 .

During the nine months ended September 30, 2021, the Company repurchased 18,732 shares of its common stock at an aggregate cost of approximately $ 647,000 under this program.

On July 27, 2021, the Company commenced a tender offer to repurchase up to 200,000 shares of the Company’s outstanding common stock at a price of not greater than $ 37.00 nor less than $ 32.00 per share.

Following the expiration of the tender offer on August 31, 2021, the Company accepted 272,405 shares, including 72,405 oversubscribed shares tendered, of its common stock for purchase at $ 37.00 per share, at an aggregate purchase price of approximately $ 10.1 million, excluding fees and expenses related to the offer.

The Company funded the purchase of the accepted shares tendered with available cash and accounted for the repurchase of these shares as treasury stock on the Company’s condensed consolidated balance sheet as of September 30, 2021.

The Company accounts for Treasury stock using the cost method.

As of September 30, 2021, 12,226,785 shares were held in the treasury at an aggregate cost of approximately $ 169,946,000 .

EARNINGS PER SHARE

2 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

(in thousands, except per share data)

Net income (loss)

$ 15,317  

$ ( 823 )  

$ 27,266  

Basic weighted average common shares outstanding

1 unchanged sentence

Diluted weighted average common shares outstanding

Basic earnings (loss) per share

$ 2.67  

$ ( 0.14 )  

$ 4.76  

Diluted earnings (loss) per share

$ 2.66  

$ ( 0.14 )  

$ 4.74  

Basic earnings per share

Diluted earnings per share

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 the Company operates 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 major tax jurisdictions in which the Company operates generally provide for a deficiency assessment statute of limitations period of three years, and as a result, the Company’s tax years 2017 and forward remain open to examination in those jurisdictions.

In determining whether a tax asset valuation allowance is necessary, management, in accordance with the provisions of ASC 740 - 10 - 30, Accounting for Income Taxes , 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 June 30, 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.

As of September 30, 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 June 30, 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.

As of September 30, 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 six months ended June 30, 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 26.3 % and 29.7 % for the six months ended June 30, 2021 and 2020, respectively.

Our effective tax rate for the six months ended June 30, 2021 differs from amounts computed by applying the United States federal statutory rates to pre-tax income primarily due to state income taxes, the tax benefits related to stock compensation and non-deductible expenses.

During the nine months ended September 30, 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 26.30 % and 18.33 % for the nine months ended September 30, 2021 and 2020, respectively.

Our effective tax rate for the nine months ended September 30, 2021 differs from amounts computed by applying the United States federal statutory rates to pre-tax income primarily due to state income taxes and the tax benefits related to stock compensation.

FAIR VALUE OF FINANCIAL INSTRUMENTS

10 unchanged sentences

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

At June 30, 2021, the following items are measured at fair value on a recurring basis:

At September 30, 2021, the following items are measured at fair value on a recurring basis:

(in thousands)

Marketable equity securities

$ 33,016  

The Company’s investments in marketable securities are recorded at fair value based on quoted market prices.

2 unchanged sentences

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

The carrying value and estimated fair value of this other long-term debt at June 30, 2021 was as follows:

The carrying value and estimated fair value of this other long-term debt at September 30, 2021 was as follows:

(in thousands)

Long-term debt

$ 250,906  

$ 253,651  

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

NOTES PAYABLE

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

During the first nine months of 2021, the Company’s subsidiaries entered into installment obligations totaling approximately $ 26.6 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 are for 84 months.

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

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.

Adoption of ASU 2016 - 02, Leases

The Company currently leases shop, office and parking spaces in various locations in the United States and Mexico.

6 unchanged sentences

Based on historical experience, the Company does not always extend these leases, sometimes exercises the option to cancel leases early and sometimes lessors choose to cancel leases or not extend.

The Company adopted ASU 2016 - 02 and related amendments on January 1, 2019 utilizing the modified retrospective approach and elected to apply the practical expedients outlined above.

This election allowed the Company to continue to recognize lease expense for operating leases for which the initial term was twelve months or less, or for which it is reasonably likely that early cancellation provisions will be exercised, on a straight-line basis over the remaining term of the leases.

The company will continue to recognize lease expense for operating leases for which the initial term was twelve months or less, or for which it is reasonably likely that early cancellation provisions will be exercised, on a straight-line basis over the remaining term of the leases.

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

We also lease dock and yard space to related parties at our Laredo, Texas terminal.

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 ASC Topic 842.

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

Right-of-Use Leases

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 $ 1.3 million as of June 30, 2021.

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

1 unchanged sentence

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

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

Therefore, potential lease payments that might occur under this extension period are not included in amounts recorded in our condensed consolidated balance sheets as of June 30, 2021.

Scheduled amounts and timing of cash flows arising from future right-of-use operating lease payments at June 30, 2021, are:

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

Therefore, potential lease payments that might occur under this extension period are not included in amounts recorded in our condensed consolidated balance sheets as of September 30, 2021.

Scheduled amounts and timing of cash flows arising from future right-of-use operating lease payments at September 30, 2021, are:

Maturity of Lease Liabilities

14 unchanged sentences

Other Information

Weighted-average remaining lease term for operating leases (years)

Weighted-average remaining lease term for operating leases (in years)

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 or six months ended June 30, 2021.

Cash paid for amounts included in the present value of operating lease liabilities was $ 0.1 million during the three months ended June 30, 2021 and is included in operating cash flows.

Cash paid for amounts included in the present value of operating lease liabilities was $ 0.3 million during the six months ended June 30, 2021 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 and nine months ended September 30, 2021.

Cash paid for amounts included in the present value of operating lease liabilities was $ 0.1 million during the three months ended September 30, 2021 and is included in operating cash flows, within the condensed consolidated statement of 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, 2021 and is included in operating cash flows, within the condensed consolidated statement of cash flows.

Operating Lease Costs

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

(in thousands)

1 unchanged sentence

$ 2,083  

Lessor Disclosures under ASC Topic 842

The Company leases trucks to owner-operators under operating leases, which generally have a term of up to five years and include options to purchase the truck at the end of the lease.

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

As of June 

30, 2021, the gross carrying value of trucks underlying these leases was $ 55.2 million and accumulated depreciation was $ 27.1 million.

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

In most 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.

During the quarter ended June 30, 2021, the Company incurred $ 1.7 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.

The dock space and the warehouse and office space leased are depreciated in conjunction with the structures and improvements for the entire Laredo terminals on a straight-line basis over the estimated useful life of the assets.

Lease income is recorded as a component of non-operating income in our Condensed Consolidated Statements of Operations.

Lease Revenue

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Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

(in thousands)

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$ 5,706  

The Company leases trucks to owner-operators under operating leases, which generally have a term of up to five years and include options to purchase the truck at the end of the lease.

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, 2021, the gross carrying value of trucks underlying these leases was $ 55.8 million and accumulated depreciation was $ 28.6 million.

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

In most 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.

During the quarter ended September 30, 2021, the Company incurred $ 1.7 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.

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

Lease Receivables

Future minimum operating lease payments receivable at June 30, 2021:

Future minimum operating lease payments receivable at September 30, 2021:

(in thousands)

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Any future delays or interruptions of automotive production and other consumer activity affecting our customers that could result from the ongoing outbreak of the Delta variant or 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.

In addition, the implementation of measures to protect the health and safety of our employees, customers, vendors and the general public, such as the recently announced federal directive to mandate full vaccination or weekly testing of employees for employers with 100 or more employees, 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 $ 13.4 million in equipment purchases during the first six months of 2021 utilizing noncash financing.

SUBSEQUENT EVENTS

On July 13, 2021, the Company’s Board of Directors declared a 2 -for- 1 forward stock split of its common stock in the form of a 100% stock dividend, payable on August 16, 2021, to stockholders of record on July 30, 2021.

Under the terms of the stock split, the Company’s stockholders will receive a dividend of one share for every share held on the record date. The dividend will be paid in authorized but unissued shares of common stock of the Company. The additional shares will be distributed by the Company’s transfer agent, Computershare, and the per share price of the Company’s common stock will adjust accordingly on The Nasdaq Stock Market.

On July 27, 2021, the Company announced the commencement of a modified “Dutch auction”

tender offer to purchase up to 200,000 shares (as adjusted for the Company’s previously announced 2 -for- 1 forward split of its common stock in the form of a 100% stock dividend), or about 1.7 %, of its outstanding common stock at a price of not less than $ 32.00 and not more than $ 37.00 per share (as adjusted for the Stock Split).

The tender offer will expire at 5:00 p.m., Eastern Time, on August 26, 2021, unless extended or withdrawn.

The Company financed approximately $ 20.0 million in equipment purchases during the first nine months of 2021 utilizing noncash financing.

Management ’

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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.

Such forward-looking statements are subject to risks, uncertainties and other factors which could cause actual results to differ materially from future results expressed or implied by such forward-looking statements.

Potential risks and uncertainties include, but are not limited to, ongoing and potential future economic, business and operational disruptions and uncertainties due to the COVID-19 pandemic, including from the current spread of the Delta variant and any future spikes or outbreaks of the virus, or other public health crises, including from the implementation of vaccine mandates and other government actions taken in response to the pandemic;

excess capacity in the trucking industry;

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the impact of pending or future litigation;

a determination that independent contractors are employees;

general risks associated with doing business in Mexico, including, without limitation, potential increased costs and adverse impacts resulting from recent Mexican labor outsourcing law reforms, exchange rate fluctuations, inflation, import duties, tariffs, quotas, political and economic instability and terrorism;

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

the potential impact of new laws, regulations or policy, including, without limitation, tariffs, import/export, trade and immigration regulations or policies;

15 unchanged sentences

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

Truckload services revenues, excluding fuel surcharges, represented 67.5% and 81.6% of total revenues, excluding fuel surcharges, for the three months ended June 30, 2021 and 2020, respectively.

Truckload services revenues, excluding fuel surcharges, represented 67.2% and 81.6% of total revenues, excluding fuel surcharges, for the six months ended June 30, 2021 and 2020, respectively.

Truckload services revenues, excluding fuel surcharges, represented 66.4% and 75.5% of total revenues, excluding fuel surcharges, for the three months ended September 30, 2021 and 2020, respectively.

Truckload services revenues, excluding fuel surcharges, represented 66.9% and 79.4% of total revenues, excluding fuel surcharges, for the nine months ended September 30, 2021 and 2020, respectively.

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

2 unchanged sentences

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

During the three months ended June 30, 2021 and 2020, approximately $16.1 million and $7.2 million, respectively, of the Company’s total revenue was generated from fuel surcharges.

During the six months ended June 30, 2021 and 2020, approximately $29.8 million and $24.5 million, respectively, of the Company’s total revenue was generated from fuel surcharges.

During the three months ended September 30, 2021 and 2020, approximately $16.8 million and $12.1 million, respectively, of the Company’s total revenue was generated from fuel surcharges.

During the nine months ended September 30, 2021 and 2020, approximately $46.6 million and $36.6 million, respectively, of the Company’s total revenue was generated from fuel surcharges.

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

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

On July 13, 2021, the Company’s Board of Directors declared a 2-for-1 forward stock split of its common stock in the form of a 100% stock dividend, payable on August 16, 2021, to stockholders of record on July 30, 2021.

All share and per share amounts in this quarterly report on Form 10-Q give effect to the stock split and have been adjusted retroactively, where applicable, for all periods presented.

See Note A to the condensed consolidated financial statements for additional information on the stock split.

IMPACT OF COVID-19

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

While we and most of our customers have returned to normal operations and economic activity continued to increase during the first six months 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.

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

Any future waves or outbreaks of alternative strains of the virus, including the current spread of the Delta variant, could adversely impact our future operations and financial results.

On September 9, 2021, President Biden announced that he has directed the Occupational Safety and Health Administration (OSHA) to develop an Emergency Temporary Standard (ETS) mandating either the full vaccination or weekly testing of employees for employers with 100 or more employees.

OSHA has not yet issued the ETS nor provided any additional information on its contents or requirements.

We will continue to monitor these requirements and their implementation for any potential impacts to our operations.

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.

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

Six Months Ended

Nine Months Ended

September 30,

(percentages)

7 unchanged sentences

Total operating expenses

Operating income (loss)

Operating income

Non-operating income (expense)

Interest expense

Income (loss) before income taxes

THREE MONTHS ENDED JUNE 30, 2021 VS.

THREE MONTHS ENDED JUNE 30, 2020

During the second quarter of 2021, truckload services revenue, before fuel surcharges, increased 40.1% to $98.0 million as compared to $70.0 million during the second quarter of 2020.

The increase in revenue was primarily the result of favorable market conditions and improved rates for freight experienced during the second quarter of 2021 compared to the second quarter of 2020.

Salaries, wages and benefits decreased from 38.1% of revenues, before fuel surcharges, in the second quarter of 2020 to 32.3% of revenues, before fuel surcharges, during the second quarter of 2021.

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

On a dollar basis, salaries, wages and benefits increased from $26.6 million during the second quarter 2020 to $31.7 million during the second quarter of 2021 due to an increase in both our non-driver and driver employee counts as well as an increase in the number of miles generated by company drivers.

Operating supplies and expenses decreased from 15.7% of revenues, before fuel surcharges, during the second quarter of 2020 to 9.1% of revenues, before fuel surcharges, during the second quarter of 2021.

Income before income taxes

THREE MONTHS ENDED SEPTEMBER 30, 2021 VS.

THREE MONTHS ENDED SEPTEMBER 30, 2020

During the third quarter of 2021, truckload services revenue, before fuel surcharges, increased 33.1% to $110.4 million as compared to $82.9 million during the third quarter of 2020.

The increase in revenue was primarily the result of increases in the average rate per mile charged to our customers and in the average number of trucks in our fleet during the third quarter of 2021 compared to the third quarter of 2020.

These increases were partially offset by a decrease in the total number of miles driven per truck for the third quarter of 2021 compared to the third quarter of 2020.

Salaries, wages and benefits decreased from 35.4% of revenues, before fuel surcharges, in the third quarter of 2020 to 29.2% of revenues, before fuel surcharges, during the third quarter of 2021.

This percentage-based decrease 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 an increase in revenues for the periods compared.

Operating supplies and expenses decreased from 10.5% of revenues, before fuel surcharges, during the third quarter of 2020 to 8.0% of revenues, before fuel surcharges, during the third quarter of 2021.

The decrease relates primarily to a decrease in the average surcharge-adjusted fuel price paid per gallon of diesel fuel, which was a result of increased 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.

Depreciation decreased from 20.2% of revenues, before fuel surcharges, during the second quarter of 2020 to 14.5% of revenues, before fuel surcharges, during the second quarter of 2021.

This decrease is primarily the result of favorable market conditions and improved rates for freight experienced during the second quarter of 2021 compared to the second quarter of 2020, as well as a moderate decrease in the average number of trucks within our fleet for the second quarter of 2021 compared to the second quarter of 2020.

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

Non-operating income decreased from 3.8% of revenues, before fuel surcharges, during the second quarter of 2020 to 1.8% of revenues, before fuel surcharges, during the second quarter of 2021.

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

The Company recorded a $1.6 million increase in the market values of our marketable equity securities in non-operating income during the second quarter of 2021, compared to a $2.5 million increase in the market value of our marketable equity securities during the second quarter of 2020.

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 103.9% for the second quarter of 2020 to 84.0% for the second quarter of 2021.

SIX MONTHS ENDED JUNE 30, 2021 VS.

SIX MONTHS ENDED JUNE 30, 2020

For the six months ended June 30, 2021, truckload services revenue, before fuel surcharges, increased 16.8% to $188.4 million as compared to $161.3 million for the six months ended June 30, 2020.

The increase in revenue was primarily the result of favorable market conditions and improved rates for freight experienced during the six months ended June 30, 2021 compared to the six months ended June 30, 2020.

Salaries, wages and benefits decreased from 36.2% of revenues, before fuel surcharges, in the first six months of 2020 to 33.5% of revenues, before fuel surcharges, during the first six months of 2021.

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

On a dollar basis, salaries, wages and benefits increased from $58.3 million during the first six months of 2020 to $63.1 million during the first six months of 2021 due to an increase in both our non-driver and driver employee counts as well as an increase in the number of miles generated by company drivers.

Rent and purchased transportation decreased from 25.5% of revenues, before fuel surcharges, during the first six months of 2020 to 22.9% of revenues, before fuel surcharges, during the first six months of 2021.

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

Depreciation decreased from 17.6% of revenues, before fuel surcharges, during the first six months of 2020 to 15.1% of revenues, before fuel surcharges, during the first six months of 2021.

This decrease is primarily the result of favorable market conditions and improved rates for freight experienced during first six months of 2021 compared to the first six months of 2020, as well as a moderate decrease in the average number of trucks within our fleet for the first six months of 2021 compared to the first six months of 2020.

Insurance and claims expense increased from 1.6% of revenues, before fuel surcharges, during the first six months of 2020 to 3.4% of revenues before fuel surcharges, during the first six months of 2021.

This increase is largely due to the settlement, during the first six months of 2020, of a lawsuit brought against the Company by individuals who asserted they were misclassified as owner-operators.

The amount of the settlement was less than the amount previously reserved for the suit, which resulted in a credit to expense during the first six months of 2020.

Non-operating income (expense) increased from an expense of (3.4%) of revenues, before fuel surcharges, during the first six months of 2020 income of 2.9% of revenues, before fuel surcharges, during the first six months of 2021.

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.

These categorizations have the effect of reducing our net operating supplies and expenses while increasing the Rent and purchased transportation category, as discussed below.

Rent and purchased transportation increased from 21.3% of revenues, before fuel surcharges, during the third quarter of 2020 to 24.3% of revenues, before fuel surcharges, during the third quarter of 2021.

The increase was primarily due to an increase in the rates charged by third-party carriers during the third quarter of 2021 compared to the third quarter of 2020.

Also contributing to the increase was an increase in the average number of owner-operators under contract from 358 during the third quarter of 2020 to 382 during the third quarter of 2021, as well as an increase in the average rate per mile, including fuel surcharges, paid to owner-operators during the respective periods.

Depreciation decreased from 16.1% of revenues, before fuel surcharges, during the third quarter of 2020 to 11.2% of revenues, before fuel surcharges, during the third quarter of 2021.

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

Due to the fixed-cost nature of depreciation, an increase in operating revenues, before fuel surcharge, without a corresponding proportional increase in depreciation, decreases depreciation expense as a percentage of operating revenues.

Insurance and claims decreased from 3.8% of revenues, before fuel surcharges, during the third quarter 2020 to 3.1% of revenues, before fuel surcharges, during the third quarter 2021.

This decrease as a percentage of revenue, before fuel surcharges, is attributable to the interaction of the increase in revenue with the decrease in total miles driven for the periods compared.

Miles driven generally serve as the premium basis for most of our insurance coverages.

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 89.7% for the third quarter of 2020 to 77.9% for the third quarter of 2021.

NINE MONTHS ENDED SEPTEMBER 30, 2021 VS.

NINE MONTHS ENDED SEPTEMBER 30, 2020

For the nine months ended September 30, 2021, truckload services revenue, before fuel surcharges, increased 22.4% to $298.8 million as compared to $244.2 million for the nine months ended September 30, 2020.

The increase in revenue was primarily the result of an increase in the average rate per mile charged to our customers during the first nine months of 2021 compared to first nine months of 2020.

The increase in rates was partially offset by a decrease in average miles driven per truck for the first nine months of 2021 compared to the first nine months of 2020.

Salaries, wages and benefits decreased from 35.9% of revenues, before fuel surcharges, in the first nine months of 2020 to 31.9% of revenues, before fuel surcharges, during the first nine months of 2021.

The percentage-based decrease 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 an increase in revenues for the periods compared.

Operating supplies and expenses decreased from 10.7% of revenues, before fuel surcharges, during the first nine months of 2020 to 9.2% of revenues, before fuel surcharges, during the first nine months of 2021.

The percentage-based decrease relates primarily to a decrease in the average surcharge-adjusted fuel price paid per gallon of diesel fuel, which decreased as a result of increased fuel surcharge collections from customers.

These categorizations have the effect of reducing our net operating supplies and expenses while increasing the rent and purchased transportation category, as discussed below.

Rent and purchased transportation decreased from 24.1% of revenues, before fuel surcharges, during the first nine months of 2020 to 23.4% of revenues, before fuel surcharges, during the first nine months of 2021.

The decrease was primarily due to a decrease in the average number of owner-operators under contract from 455 during the first nine months of 2020 to 373 during the first nine months of 2021.

The decrease was partially offset by an increase in the average rate per mile, including fuel surcharges, paid to owner operators during the respective periods.

Depreciation decreased from 17.1% of revenues, before fuel surcharges, during the first nine months of 2020 to 13.7% of revenues, before fuel surcharges, during the first nine months of 2021.

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

Insurance and claims expense increased from 2.3% of revenues, before fuel surcharges, during the first nine months of 2020 to 3.3% of revenues before fuel surcharges, during the first nine months of 2021.

This increase resulted from an increase in auto liability insurance premiums paid for the periods compared.

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 94.0% for the first nine months of 2020 to 83.6% for the first nine months of 2021.

Non-operating income (expense) increased from expense of 2.2% of revenues, before fuel surcharges, during the first nine months of 2020 to income of 1.9% of revenues, before fuel surcharges, during the first nine months of 2021.

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

The Company recorded a $5.8 million increase in the market value of our marketable equity securities in non-operating income (expense) during the first six months of 2021, compared to a $6.3 million decrease in the market value of our marketable equity securities during the first six months of 2020.

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 96.1% for the first six months of 2020 to 86.9% for the first six months of 2021.

The Company recorded a $5.4 million increase in the market value of our marketable equity securities in non-operating income (expense) during the first nine months of 2021, compared to a $7.4 million decrease in the market value of our marketable equity securities during the first nine months of 2020.

RESULTS OF OPERATIONS –

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Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

(percentages)

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Operating income

Non-operating income (expense)

Non-operating (expense) income

Interest expense

Income before income taxes

THREE MONTHS ENDED JUNE 30, 2021 VS.

THREE MONTHS ENDED JUNE 30, 2020

During the second quarter of 2021, logistics and brokerage services revenue, before fuel surcharges, increased 198.2% to $47.1 million as compared to $15.8 million during the second quarter of 2020.

The increase is due to the onboarding of new business and to increases in average rates charged to customers during the second quarter of 2021 as compared to the second quarter of 2020.

Salaries, wages and benefits decreased from 6.0% of revenues, before fuel surcharges, in the second quarter of 2020 to 4.6% of revenues, before fuel surcharges, during the second quarter of 2021.

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

Rents and purchased transportation decreased from 87.0% of revenues, before fuel surcharges, during the second quarter of 2020 to 82.7% of revenues, before fuel surcharges, during the second quarter of 2021.

THREE MONTHS ENDED SEPTEMBER 30, 2021 VS.

THREE MONTHS ENDED SEPTEMBER 30, 2020

During the third quarter of 2021, logistics and brokerage services revenue, before fuel surcharges, increased 107.8% to $55.9 million as compared to $26.9 million during the third 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 third quarter of 2021 as compared to the third quarter of 2020.

Rents and purchased transportation decreased from 88.8% of revenues, before fuel surcharges, during the third quarter of 2020 to 83.0% of revenues, before fuel surcharges, during the third quarter of 2021.

The decrease resulted from paying third-party carriers a smaller 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 95.2% for the second quarter of 2020 to 88.7% for the second quarter of 2021.

SIX MONTHS ENDED JUNE 30, 2021 VS.

SIX MONTHS ENDED JUNE 30, 2020

During the first six months of 2021, logistics and brokerage services revenue, before fuel surcharges, increased 153.1% to $91.9 million as compared to $36.3 million during the first six months of 2020.

The increase is due to the onboarding of new business and to increases in average rates charged during the first six months of 2021 as compared to the first six months of 2020.

Salaries, wages and benefits decreased from 5.7% of revenues, before fuel surcharges, in the first six months of 2020 to 4.5% of revenues, before fuel surcharges, during the first six months of 2021.

Rents and purchased transportation decreased from 88.3% of revenues, before fuel surcharges, during the first six months of 2020 to 83.2% of revenues, before fuel surcharges, during the first six months of 2021.

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 94.3% for the third quarter of 2020 to 88.6% for the third quarter of 2021.

NINE MONTHS ENDED SEPTEMBER 30, 2021 VS.

NINE MONTHS ENDED SEPTEMBER 30, 2020

During the first nine months of 2021, logistics and brokerage services revenue, before fuel surcharges, increased 133.8% to $147.8 million as compared to $63.2 million during the first nine months of 2020.

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

Salaries, wages and benefits decreased from 5.3% of revenues, before fuel surcharges, in the first nine months of 2020 to 4.6% of revenues, before fuel surcharges, during the first nine months of 2021.

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

On a dollar basis, salaries, wages and benefits increased from $3.3 million in the first nine months of 2020 to $6.8 million, during the first nine months of 2021.

Rents and purchased transportation decreased from 89.0% of revenues, before fuel surcharges, during the first nine months of 2020 to 83.5% of revenues, before fuel surcharges, during the first nine months of 2021.

The decrease resulted from paying third-party carriers a smaller 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 96.5% for the first six months of 2020 to 89.1% for the first six months of 2021.

Non-operating income (expense) increased from an expense of (2.0%) of revenues, before fuel surcharges, during the first six months of 2020 to income of 1.4% of revenues, before fuel surcharges, during the first six months of 2021.

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

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 95.6% for the first nine months of 2020 to 88.9% for the first nine months of 2021.

Non-operating income (expense) increased from expense of 1.2% of revenues, before fuel surcharges, during the first nine months of 2020 to income of 0.8% of revenues, before fuel surcharges, during the first nine months of 2021.

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

RESULTS OF OPERATIONS –

COMBINED SERVICES

THREE MONTHS ENDED JUNE 30, 2021 VS.

THREE MONTHS ENDED JUNE 30, 2020

Net income for all divisions was approximately $15.3 million, or 10.6% of revenues, before fuel surcharges for the second quarter of 2021 as compared to a net loss of $0.8 million, or 1.0% of revenues, before fuel surcharges for the second quarter of 2020.

The increase in net income resulted in diluted earnings per share of $2.66 for the second quarter of 2021 as compared to a diluted loss per share of $0.14 for the second quarter of 2020.

SIX MONTHS ENDED JUNE 30, 2021 VS.

SIX MONTHS ENDED JUNE 30, 2020

Net income for all divisions was approximately $27.3 million, or 9.7% of revenues, before fuel surcharges for the first six months of 2021 as compared to a net loss of $2.1 million, or 1.1% of revenues, before fuel surcharges for the first six months of 2020.

The increase in net income resulted in diluted earnings per share of $4.74 for the first six months of 2021 as compared to a diluted loss per share of $0.37 for the first six months of 2020.

THREE MONTHS ENDED SEPTEMBER 30, 2021 VS.

THREE MONTHS ENDED SEPTMEBER 30, 2020

Net income for all divisions was approximately $21.4 million, or 12.8% of revenues, before fuel surcharges for the third quarter of 2021 as compared to net income of $6.0 million, or 5.5% of revenues, before fuel surcharges for the third quarter of 2020.

The increase in net income resulted in diluted earnings per share of $1.87 for the third quarter of 2021 as compared to diluted earnings per share of $0.52 for the third quarter of 2020.

NINE MONTHS ENDED SEPTEMBER 30, 2021 VS.

NINE MONTHS ENDED SEPTEMBER 30, 2020

Net income for all divisions was approximately $48.6 million, or 10.9% of revenues, before fuel surcharges for the first nine months of 2021 as compared to net income of $3.9 million, or 1.3% of revenues, before fuel surcharges for the first nine months of 2020.

The increase in net income resulted in a diluted earnings per share of $4.24 for the first nine months of 2021 as compared to diluted earnings per share of $0.34 for the first nine months of 2020.

LIQUIDITY AND CAPITAL RESOURCES

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

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

During the first six months of 2021, we generated $51.3 million in cash from operating activities.

Investing activities generated $21.5 million in cash in the first six months of 2021.

Financing activities used $50.1 million in cash in the first six months of 2021.

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 2021, we generated $74.0 million in cash from operating activities.

Investing activities generated $9.9 million in cash in the first nine months of 2021.

Financing activities used $62.7 million in cash in the first nine 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 six 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 $13.4 million.

During the first nine 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 $35.3 million.

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

During the first six months of 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.

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

Transport, Inc., entered into installment obligations totaling approximately $26.6 million for the purpose of purchasing revenue equipment and other assets.

These obligations are payable in monthly installments.

During the remainder of 2021, we expect to purchase approximately 215 new trucks while continuing to sell or trade older equipment, which we expect to result in net capital expenditures of approximately $20.1 million.

Additionally, on July 27, 2021, we commenced a tender offer to purchase up to 200,000 shares of our common stock at a price not greater than $37.00 per share nor less than $32.00 per share, for a total purchase price of up to approximately $7.4 million.

The number of shares subject to the tender offer and the per share price range of the offer have been adjusted to reflect our previously announced 2-for-1 forward split of our common stock in the form of a 100% stock dividend payable on August 16, 2021, to stockholders of record on July 30, 2021.

Subject to certain limitations and legal requirements, the terms of the tender offer permit us to accept for payment up to an additional 2% of our outstanding shares (or approximately 229,050 additional shares, as adjusted for the stock split).

Assuming that an additional amount of shares above the maximum of 200,000 shares are tendered in the offer and we accept an additional number of shares up to 2% of our outstanding shares, the aggregate purchase price will be up to approximately $15.9 million.

We anticipate that we will pay for the shares tendered in the offer, as well as paying related fees and expenses, from our cash and cash equivalents, but we may utilize funds borrowed under our existing line of credit.

Management believes we will be able to finance our near-term needs for working capital over the next twelve months, the purchase of our shares in the tender offer, 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.

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 recent operating results, current cash position, 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.

On July 27, 2021, we commenced a tender offer to repurchase up to 200,000 shares of the Company’s outstanding common stock at a price of not greater than $37.00 nor less than $32.00 per share.

Following the expiration of the tender offer on August 31, 2021, we accepted 272,405 shares, including 72,405 oversubscribed shares tendered, of our common stock for purchase at $37.00 per share, at an aggregate purchase price of approximately $10.1 million, excluding fees and expenses related to the offer.

The Company funded the purchase of the accepted shares tendered with available cash.

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

During the first six months of 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% (1.35% at June 30, 2021), are secured by our trade accounts receivable and mature on July 1, 2022.

During the first nine 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% (1.34% at September 30, 2021), are secured by our trade accounts receivable and mature on July 1, 2022.

An “unused fee”

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

At June 30, 2021 outstanding advances on the line of credit were approximately $0.40 million, including approximately $0.40 million in letters of credit, with availability to borrow $59.6 million.

Trade accounts receivable increased from $77.7 million at December 31, 2020 to $88.2 million at June 30, 2021.

The increase resulted from an increase in freight revenues, which flow through accounts receivable, during the second 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 $7.8 million at June 30, 2021.

At September 30, 2021 outstanding advances on the line of credit were approximately $0.4 million, including approximately $0.4 million in letters of credit, with availability to borrow $59.6 million.

Trade accounts receivable increased from $77.7 million at December 31, 2020 to $103.5 million at September 30, 2021.

The increase resulted from an increase in freight revenues, which flow through accounts receivable, during the third 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 $8.4 million at September 30, 2021.

The decrease relates to the normal amortization of items prepaid as of December 31, 2020.

Marketable equity securities increased from $27.9 million at December 31, 2020 to $33.0 million at June 30, 2021.

The $5.1 million increase was due to the increase in the market value of held marketable equity securities of $5.8 million, the purchase of marketable equity securities with a combined market value of approximately $0.7 million and the sale of marketable equity securities with a combined market value of $1.4 million during the first six months of 2020.

Accounts payable decreased from $46.1 million at December 31, 2020 to $35.8 million at June 30, 2021.

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

As of December 31, 2020, equipment was received and payment accrued, which was financed under notes during the first six months of 2021.

Marketable equity securities increased from $27.9 million at December 31, 2020 to $36.1 million at September 30, 2021.

The $8.2 million increase was due to an increase in the market value of held marketable equity securities of $5.4 million, the purchase of marketable equity securities with a combined purchase cost of approximately $4.3 million and the sale of marketable equity securities with combined proceeds of $1.5 million during the first nine months of 2021.

Accounts payable decreased from $46.1 million at December 31, 2020 to $41.3 million at September 30, 2021.

This decrease was primarily attributable to less being accrued for fixed asset purchases as of September 30, 2021.

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

Long-term debt and current maturities of long-term debt, on an aggregate basis, decreased from $286.1 million at December 31, 2020 to $250.9 million at June 30, 2021.

The decrease was primarily related to note payments made during the first six months of 2021, partially offset by the addition of $13.4 million in equipment installment notes entered into during the first six months of the year.

Long-term debt and current maturities of long-term debt, on an aggregate basis, decreased from $286.1 million at December 31, 2020 to $230.6 million at September 30, 2021.

The decrease was primarily related to the relative decline in financing of additional revenue equipment during the first nine months of 2021, compared to the first nine months of 2020.

Additional financing during the first nine months of 2021 was outpaced by note payments made during the first nine months of 2021.

NEW ACCOUNTING PRONOUNCEMENTS

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Item 1. Financial Statements