What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2022-05-06 compared with 2021-11-05 · 310 added, 254 removed, 457 unchanged (55% of the section changed)

4 unchanged sentences

(in thousands, except share and per share data)

September 30,

March 31, 2022

December 31, 2021

Current assets:

1 unchanged sentence

$ 77,903  

$ 18,509  

Accounts receivable-net:

4 unchanged sentences

10,490  

10,962  

Marketable equity securities

35 unchanged sentences

14,114  

Income taxes payable

Current maturities of long-term debt

14 unchanged sentences

371,271  

COMMITMENTS AND CONTINGENCIES (Note L)

STOCKHOLDERS' EQUITY

2 unchanged sentences

22,264,802 and 34,574,807 shares issued;

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

22,264,802 and 22,348,022 shares outstanding at March 31, 2022 and December 31, 2021, respectively

Additional paid-in capital

2 unchanged sentences

Treasury stock, at cost;

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

( 169,946 )  

0 and 12,226,785 shares at March 31, 2022 and December 31, 2021, respectively

Retained earnings

8 unchanged sentences

See notes to condensed consolidated financial statements.

All prior period share and per share data has been retroactively adjusted to reflect the stock split effective March 29,2022.

TRANSPORTATION SERVICES, INC.

2 unchanged sentences

(in thousands, except per share data)

Three Months Ended

Nine Months Ended

September 30,

Three Months Ended March 31,

OPERATING REVENUES:

Revenue, before fuel surcharge

$ 196,089  

$ 135,141  

Fuel surcharge

23,359  

13,717  

Total operating revenues

219,448  

148,858  

OPERATING EXPENSES AND COSTS:

Salaries, wages and benefits

39,275  

33,395  

Operating supplies and expenses

31,647  

23,555  

Rent and purchased transportation

91,376  

58,013  

14,877  

14,352  

Insurance and claims

Gain on disposition of equipment

Gain on sale or disposition of equipment

( 147 )  

Total operating expenses and costs

188,104  

135,204  

OPERATING INCOME

NON-OPERATING INCOME (EXPENSE)

31,344  

13,654  

NON-OPERATING INCOME

INTEREST EXPENSE

( 1,667 )  

INCOME BEFORE INCOME TAXES

31,606  

16,074  

FEDERAL AND STATE INCOME TAX EXPENSE:

Total federal and state income tax expense

$ 23,942  

$ 11,949  

INCOME PER COMMON SHARE:

$ 1.07  

$ 0.52  

$ 1.06  

$ 0.52  

AVERAGE COMMON SHARES OUTSTANDING:

22,292  

22,901  

22,483  

23,004  

See notes to condensed consolidated financial statements.

All prior period share and per share data has been retroactively adjusted to reflect the stock split effective March 29,2022.

TRANSPORTATION SERVICES, INC.

2 unchanged sentences

(in thousands)

Nine Months Ended

September 30,

Three Months Ended March 31,

OPERATING ACTIVITIES:

$ 23,942  

$ 11,949  

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

14,877  

14,352  

Bad debt expense

1 unchanged sentence

Provision for deferred income taxes

Recognized (gain) / loss on marketable equity securities

Gain on marketable equity securities

( 1,397 )  

Gain on sale or disposition of equipment

( 147 )  

Changes in operating assets and liabilities:

Accounts receivable

( 14,568 )  

Prepaid expenses, deposits, inventories, and other assets

( 26 )  

Income taxes payable

2 unchanged sentences

Net cash provided by operating activities

41,093  

23,926  

INVESTING ACTIVITIES:

Purchases of property and equipment

( 10,016 )  

Proceeds from disposition of equipment

1 unchanged sentence

Purchases of marketable equity securities, net of return of capital

Net cash provided by (used in) investing activities

Net cash (used in) / provided by investing activities

( 8,974 )  

FINANCING ACTIVITIES:

Borrowings under line of credit

184,177  

135,396  

Repayments under line of credit

( 184,177 )  

Borrowings of long-term debt

42,058  

Repayments of long-term debt

( 11,434 )  

Borrowings under margin account

Repayments under margin account

( 360 )  

Repurchases of common stock

Net cash used in financing activities

NET INCREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH

( 3,000 )  

Net cash provided by / (used in) financing activities

27,275  

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

59,394  

CASH, CASH EQUIVALENTS AND RESTRICTED CASH -Beginning of period

18,509  

CASH, CASH EQUIVALENTS AND RESTRICTED CASH -End of period

$ 77,903  

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:

Cash paid during the period for:

$ 1,527  

$ 2,282  

NONCASH INVESTING AND FINANCING ACTIVITIES:

Purchases of property and equipment included in accounts payable

$ 6,593  

$ 1,657  

See notes to condensed consolidated financial statements.

4 unchanged sentences

Shares / Amount

Paid-In Capital

Additional Paid-In Capital

Treasury Stock

Retained Earnings

Balance at January 1, 2022

22,348  

$ 84,472  

$ ( 169,946 )  

$ 301,350  

$ 216,110  

23,942  

( 111 )  

Treasury stock repurchases

( 83 )  

( 3,000 )  

Retirement of Treasury Shares

( 122 )  

( 44,289 )  

172,946  

( 128,535 )  

Stock based compensation

Balance at March 31, 2022

Stock awards-shares issued including tax benefits

Stock based compensation

Balance at June 30, 2021

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)

22,265  

$ 40,209  

$ 196,757  

$ 237,189  

Shares / Amount

Paid-In Capital

Additional Paid-In Capital

Treasury Stock

Retained Earnings

Balance at January 1, 2021

Stock awards-shares issued including tax benefits

22,912  

$ 84,148  

$ ( 159,118 )  

$ 224,834  

$ 149,981  

11,949  

Treasury stock repurchases

( 12 )  

( 144 )  

Stock based compensation

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

22,900  

$ 117 (1)  

$ 84,227 (1)  

$ ( 159,262 )  

$ 236,783  

$ 161,865  

See notes to condensed consolidated financial statements.

All prior period share and per share data has been retroactively adjusted to reflect the stock split effective March 29,2022.

(1) Common stock par value and additional paid-in capital dollar values are not retroactively adjusted for the stock split effective March 29,2022.

TRANSPORTATION SERVICES, INC.

1 unchanged sentence

Notes to Condensed Consolidated Financial Statements (unaudited)

September 30, 2021

March 31, 2022

BASIS OF PRESENTATION

10 unchanged sentences

The consolidated balance sheet at December 31, 2021 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 periods ended September 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 -month period ended March 31, 2022, are not necessarily indicative of the results that may be expected for the year ending December 31, 2022.

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, 2021.

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.

On March 8, 2022, 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 March 18, 2022, to receive one additional share of common stock for each share of common stock owned as of that date and was paid on March 29, 2022.

Upon the completion of the stock split, our outstanding shares increased from approximately 11.1 million shares to approximately 22.2 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.

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

RECENT ACCOUNTING PRONOUNCEMENTS

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

2020 - 04, (“ASU 2020 - 04”

In March 2020 ,  the FASB issued Accounting Standards Update 

2020 - 04 ,  (“ASU 

2020 - 04”

), Reference Rate Reform (Topic 848 ):

Facilitation of the Effects of Reference Rate Reform on Financial Reporting.

ASU 2020 - 04 was issued to provide optional guidance for a limited period of time to ease the potential burden in accounting for reference rate reform on financial reporting.

ASU 2020 - 04 is effective as of March 12, 2020 through December 31, 2022.

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”) 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.

2020 - 04  was issued to provide optional guidance for a limited period of time to ease the potential burden in accounting for reference rate reform on financial reporting.

2020 - 04  is effective as of 

March 12, 2020, 

through 

December 31, 2022 .

 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 our line of credit.

During the year 2021, the index for interest charges on the Company’s investment margin accounts was transitioned to the Secured Overnight Financing Rate (“SOFR”).

The new index rate did not vary materially from LIBOR at the time of transition.

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 for our line of credit.

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.

31 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, 2021 and December 31, 2020.

September 30, 2021

The following table sets forth market value, cost, and unrealized gains on equity securities as of March 31, 2022 and December 31, 2021.

March 31, 2022

December 31, 2021

1 unchanged sentence

Fair market value

$ 40,821  

$ 39,424  

29,038  

29,385  

Unrealized gain

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

$ 11,783  

$ 10,039  

The following table sets forth the gross unrealized gains and losses on the Company’s marketable securities as of March 31, 2022 and December 31, 2021.

March 31, 2022

December 31, 2021

1 unchanged sentence

Gross unrealized gains

$ 13,642  

$ 12,458  

Gross unrealized losses

Net unrealized gain

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.

$ 11,783  

$ 10,039  

The following table shows the Company’s net realized gains during the three months ending on March 31, 2022 and 2021, respectively, on certain marketable equity securities.

Three Months Ended

Nine Months Ended

September 30,

(in thousands)

1 unchanged sentence

Cost of securities sold

Realized gain / (loss)

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.

Realized gain

For the quarter ended March 31, 2022, the Company recognized dividends received of approximately $ 309,000 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.

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

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.

As of March 31, 2022, and December 31, 2021, the Company had outstanding borrowings of approximately $ 866,000 and $ 1,214,000 , 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 $ 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.

Our marketable equity securities portfolio had a net unrealized pre-tax gain in market value of approximately $ 1,397,000 during the first quarter of 2022, and a net unrealized pre-tax gain in market value of approximately $ 4,205,000 during the first quarter of 2021, 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 nine months of 2021, the Company granted 5,000 shares of common stock to certain key employees.

During the first three months of 2022, the Company granted 29,120 shares of common stock to certain key employees.

These stock awards have grant date fair values of $ 38.80 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 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 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.

There were no stock awards that vested during the first three months of 2022.

The total pre-tax stock-based compensation expense, recognized in salaries, wages and benefits during the first three months of 2022, was approximately $ 137,000 .

The recognition of stock-based compensation expense decreased both diluted and basic earnings per common share by approximately $ 0.01 during the first three months of 2022.

As of March 31, 2022, the Company had stock-based compensation plans with total unvested stock-based compensation expense of approximately $ 2,840,000 , which is being amortized on a straight-line basis over the remaining vesting period.

As a result, the Company expects to recognize approximately $ 510,000 in additional compensation expense related to unvested stock awards during the remainder of 2022 and to recognize approximately $ 625,000 , $ 617,000 , $ 646,000 , $ 331,000 , and $ 111,000 in additional compensation expense related to unvested stock awards during the years 2023, 2024, 2025, 2026, and 2027, respectively.

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:

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 included approximately $ 80,000 recognized as a result of the accrual of 326 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 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, 2022 and changes during the three months ended March 31, 2022, is as follows:

Restricted Stock

4 unchanged sentences

$ 9.25  

Canceled/forfeited/expired

29,120  

( 2,608 )  

Non-vested at September 30, 2021

Canceled/forfeited/expired

Non-vested at March 31, 2022

268,332  

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,

(in thousands)

Three Months Ended March 31,

(in thousands, except percentage data)

Truckload Services revenue

$ 124,978  

$ 90,359  

Brokerage and Logistics Services revenue

71,111  

44,782  

Total revenues

$ 196,089  

$ 135,141  

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, 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’s stock repurchase program has been extended and expanded several times, most recently in November 2021, when the Board of Directors reauthorized 500,000 shares of common stock for repurchase under the initial September 2011 authorization.

During the three months ended March 31, 2022, the Company repurchased 83,220 stock-split adjusted shares ( 41,610 shares, prior to the stock-split), of its common stock at an aggregate cost of approximately $ 3,000,000 under this program.

As of March 31, 2022, there remain 458,390 shares of common stock authorized for repurchase under this plan.

During the first quarter of 2022, prior to the stock split, we retired 12,268,395 shares of our treasury stock.

Upon retirement of the treasury shares, we allocated the excess of the repurchase price over the par value of shares acquired to both retained earnings and paid-in capital.

The portion allocated to paid-in capital was determined by applying the average paid-in capital per share, and the remaining portion was recorded to retained earnings.

There was no effect on the Company’s overall equity position due to the retirement of treasury shares.

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 .

As of March 31, 2022, there were no shares held in the treasury.

EARNINGS PER SHARE

2 unchanged sentences

Three Months Ended

Nine Months Ended

September 30,

(in thousands, except per share data)

$ 23,942  

$ 11,949  

Basic weighted average common shares outstanding

22,292  

22,901  

Dilutive effect of common stock equivalents

Diluted weighted average common shares outstanding

22,483  

23,004  

Basic earnings per share

$ 1.07  

$ 0.52  

Diluted earnings per share

$ 1.06  

$ 0.52  

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

3 unchanged sentences

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

As of 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.

As of March 31, 2022, 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, 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 March 31, 2022, 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, 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.

During the three months ended March 31, 2022 and 2021, 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 24.3 % and 25.7 % for the three months ended March 31, 2022 and 2021, respectively.

Our effective tax rate for the three months ended March 31, 2022 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 September 30, 2021, the following items are measured at fair value on a recurring basis:

At March 31, 2022, the following items are measured at fair value on a recurring basis:

(in thousands)

Marketable equity securities

$ 40,821  

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 September 30, 2021 was as follows:

The carrying value and estimated fair value of this other long-term debt at March 31, 2022 was as follows:

(in thousands)

Long-term debt

$ 259,494  

$ 258,953  

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

NOTES PAYABLE

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.

During the first three months of 2022, the Company’s subsidiaries entered into installment obligations totaling approximately $ 48.7 million for the purpose of purchasing revenue equipment and financing existing owned real estate.

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.

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.

The terms of these obligations vary from 36 months for trucks to 120 months for real estate.

COMMITMENTS AND CONTINGENCIES

We are involved in certain claims and pending litigation arising from the ordinary conduct of business.

We also provide accruals for claims within our self-insured retention amounts.

On September 1, 2019, we elected to become self-insured for certain layers of auto liability claims in excess of $ 1.0 million for which we previously maintained auto liability insurance coverage.

On September 1, 2020, we elected to become self-insured for certain layers of auto liability claims in excess of $ 2.0 million.

We currently specifically reserve for claims that are expected to exceed $ 2.0 million when fully developed, based on the facts and circumstances of those claims.

Based on our knowledge of the facts, and in certain cases, opinions of outside counsel, we believe the resolution of such claims and pending litigation will not have a material effect on our financial position, results of operations or cash flows.

However, if we experience claims that are not covered by our insurance or that exceed our estimated claim reserve, it could increase the volatility of our earnings and have a materially adverse effect on our financial condition, results of operations or cash flows.

We are a defendant in a lawsuit which was filed on August 6, 2021, in the United States District Court for the Western District of Arkansas.

The plaintiff is a former driver and is seeking class certification.

The complaint alleges failure to pay minimum wage under the Fair Labor Standards Act and the Arkansas Minimum Wage Act, violations of the Electronic Funds Transfer Act (EFTA), violations of the Arkansas Wage Payment Law (discharge pay and unlawful, usurious advance fees), violations of the Arkansas Common Law, and violations of the Racketeer Influenced and Corrupt Organizations Act (RICO). 

Should this lawsuit be certified as a class action, to include similarly situated drivers as the plaintiff, the class will seek actual and liquated damages to include court costs and legal fees associated with the lawsuit.

The class, if certified, will include any company driver employed from January 1, 2020 through the present and ongoing.

A mediation was held on January 14, 2022 in an attempt to resolve the case but was unsuccessful.

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

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 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 space to a related party 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 new standard.

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 $ 1.1 million as of September 30, 2021.

The Company is party to 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 

$ 0.8 million as of March 31, 2022.

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.

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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:

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, 2022.

Scheduled amounts and timing of cash flows arising from future right-of-use operating lease payments at March 31, 2022, are:

Maturity of Lease Liabilities

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2022 (remaining)

2025 and thereafter

Total undiscounted operating lease payments

$ 1,156  

Imputed interest

Present value of operating lease liabilities

$ 1,113  

Balance Sheet Classification

Right-of-use assets (recorded in other non-current assets)

$ 1,113  

Current lease liabilities (recorded in other current liabilities)

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Total operating lease liabilities

$ 1,113  

Other Information

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

Weighted-average remaining lease term for operating leases

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 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.

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, 2022.

Cash paid for amounts included in the present value of operating lease liabilities was $ 0.2 million during the three months ended March 31, 2022, and is included in operating cash flows, within the condensed consolidated statement of cash flows.

Operating Lease Costs

Three Months Ended

Nine Months Ended

September 30,

Three Months Ended March 31,

(in thousands)

$ 2,073  

$ 2,083  

Lease Revenue

The Company's operating lease revenue is disclosed in the table below.

Three Months Ended

Nine Months Ended

September 30,

Three Months Ended March 31,

(in thousands)

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$ 1,570  

$ 5,444  

$ 5,302  

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

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

Total lease revenue

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$ 1,739  

$ 5,950  

$ 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.

As of March 31, 2022, the gross carrying value of trucks underlying these leases was $ 56.7 million and accumulated depreciation was $ 33.3 million.

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

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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.

During the quarter ended March 31, 2022, the Company incurred $ 1.9 million of depreciation expense for these assets.

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

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Lease Receivables

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

Future minimum operating lease payments receivable at March 31, 2022:

(in thousands)

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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 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, 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.

Our automotive customers resumed operations during the second quarter of 2020 and have not been materially disrupted during 2021 or the first three months of 2022.

Any future delays or interruptions of automotive production and other consumer activity affecting our customers that could result from 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, or any state of federal vaccination mandates, 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 $ 20.0 million in equipment purchases during the first nine months of 2021 utilizing noncash financing.

The Company financed approximately $ 6.6 million in equipment purchases during the first three months of 2022 utilizing noncash financing.

Management ’

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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;

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

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.

Truckload services revenues, excluding fuel surcharges, represented 63.7% and 66.9% of total revenues, excluding fuel surcharges, for the three months ended March 31, 2022 and 2021, 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, 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.

During the three months ended March 31, 2022 and 2021, approximately $23.4 million and $13.7 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.

On March 8, 2022, 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 March 29, 2022, to stockholders of record on March 18, 2022.

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.

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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.

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.

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 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 we and most of our customers have returned to normal operations and economic activity continued to increase during the periods presented, 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.

On September 9, 2021, President Biden announced that he 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.

On January 13, 2022, the Supreme Court ruled that the mandate could not be enforced.

We continue to monitor new regulations 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, further government regulations imposed in response to the pandemic and the pandemic’s continued effect on the economy and transportation demand.

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.

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Fuel costs are reported net of fuel surcharges.

Three Months Ended

Nine Months Ended

September 30,

Three Months Ended March 31,

(percentages)

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Insurance and claims

(Gain) loss on sale or disposal of property

Gain on sale or disposal of property

Total operating expenses

Operating income

Non-operating income (expense)

Non-operating income

Interest expense

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.

THREE MONTHS ENDED MARCH 31, 2022 VS.

THREE MONTHS ENDED MARCH 31, 2021

During the first quarter of 2022, truckload services revenue, before fuel surcharges, increased 38.3% to $125.0 million as compared to $90.4 million during the first quarter of 2021.

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 first quarter of 2022 compared to the first quarter of 2021.

These increases were partially offset by a decrease in the total number of miles driven per truck for the first quarter of 2022 compared to the first quarter of 2021.

Salaries, wages and benefits decreased from 34.7% of revenues, before fuel surcharges, in the first quarter of 2021 to 28.8% of revenues, before fuel surcharges, during the first quarter of 2022.

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.

Operating supplies and expenses decreased from 10.8% of revenues, before fuel surcharges, during the first quarter of 2021 to 6.5% of revenues, before fuel surcharges, during the first quarter of 2022.

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.

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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.

Rent and purchased transportation increased from 22.7% of revenues, before fuel surcharges, during the first quarter of 2021 to 26.3% of revenues, before fuel surcharges, during the first quarter of 2022.

The increase was primarily due to an increase in the rates charged by third-party carriers during the first quarter of 2022 compared to the first quarter of 2021.

Also contributing to the increase was an increase in the average number of units in our owner-operator division from 368 during the first quarter of 2021 to 388 during the first quarter of 2022, 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 15.8% of revenues, before fuel surcharges, during the first quarter of 2021 to 11.5% of revenues, before fuel surcharges, during the first quarter of 2022.

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.

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.

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 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.

Insurance and claims increased from 3.6% of revenues, before fuel surcharges, during the first quarter 2021 to 5.5% of revenues, before fuel surcharges, during the first quarter 2022.

This increase related primarily to an increase in accident and legal reserves recognized in the first quarter of 2022, as compared to the first quarter of 2021.

Non-operating income decreased from 4.2% of revenues, before fuel surcharges, during the first quarter of 2021 to 1.2% of revenues, before fuel surcharges, during the first quarter of 2022.

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

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.

The Company recorded a $4.2 million increase in the market values of our marketable equity securities in non-operating income during the first quarter of 2021, compared to a $1.4 million increase in the market value of our marketable equity securities during the first quarter of 2022.

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 90.1% for the first quarter of 2021 to 81.4% for the first quarter of 2022.

RESULTS OF OPERATIONS –

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however, brokerage operations occur throughout the Company in similar operations having substantially similar economic characteristics.

Three Months Ended

Nine Months Ended

September 30,

Three Months Ended March 31,

(percentages)

5 unchanged sentences

Operating income

Non-operating (expense) income

Non-operating income

Interest expense

Income before income taxes

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 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.

THREE MONTHS ENDED MARCH 31, 2022 VS.

THREE MONTHS ENDED MARCH 31, 2021

During the first quarter of 2022, logistics and brokerage services revenue, before fuel surcharges, increased 58.8% to $71.1 million as compared to $44.8 million during the first quarter of 2021.

The increase relates to a 55% increase in the number of loads serviced and to an increase in the average rates charged to customers during the first quarter of 2022 as compared to the first quarter of 2021.

Rents and purchased transportation decreased from 83.7% of revenues, before fuel surcharges, during the first quarter of 2021 to 82.2% of revenues, before fuel surcharges, during the first quarter of 2022.

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 95.6% 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.

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 89.5% for the first quarter of 2021 to 88.6% for the first quarter of 2022.

RESULTS OF OPERATIONS –

COMBINED SERVICES

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.

THREE MONTHS ENDED MARCH 31, 2022 VS.

THREE MONTHS ENDED MARCH 31, 2021

Net income for all divisions was approximately $23.9 million, or 12.2% of revenues, before fuel surcharges for the first quarter of 2022 as compared to net income of $11.9 million, or 8.8% of revenues, before fuel surcharges for the first quarter of 2021.

The increase in net income resulted in diluted earnings per share of $1.06 for the first quarter of 2022 as compared to diluted earnings per share of $0.52 for the first quarter of 2021.

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 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.

During the first three months of 2022, we generated $41.1 million in cash from operating activities.

Investing activities used $9.0 million in cash in the first three months of 2022.

Financing activities provided $27.3 million in cash in the first three months of 2022.

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 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.

During the first three months of 2022, we utilized cash on hand, installment notes, and our line of credit to finance purchases of revenue equipment and other assets of approximately $16.6 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 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.

During the first three months of 2022, the Company’s subsidiary, P.A.M.

Transport, Inc., entered into installment obligations totaling approximately $13.2 million for the purpose of purchasing revenue equipment and entered into an installment obligation in the amount of $35.5 million to finance existing owned real estate.

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.

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.

During the remainder of 2022, we expect to purchase approximately 450 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 $87.3 million.

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 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.

During the first three months of 2022, 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 and assuming a floor of 0.50%) plus 1.25% (1.75% at March 31, 2022), are secured by our trade accounts receivable and mature on July 1, 2024.

An “unused fee”

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

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.

At March 31, 2022 outstanding advances on the line of credit were approximately $0.4 million, including approximately $0.3 million in letters of credit and a credit reserve of $0.1 million, with availability to borrow $59.6 million.

In February 2022, we borrowed $35.5 million under a term loan secured by our real estate.

This term loan bears interest at a fixed rate of 3.62%, with principal and interest payable monthly, and matures on March 1, 2032.

The loan is secured by mortgages and assignments of rents on the Company’s principal office and four terminal locations.

Cash increased from $18.5 million at December 31, 2021 to $77.9 million at March 31, 2022.

The increase relates primarily to the $41.1 million in cash provided by operating activities in the first three months of 2022 and is supplemented by $35.5 million in cash obtained by financing existing owned real estate during the first three months of 2022.

Refer to the condensed consolidated statements of cash flows for additional information for more information regarding the increase in cash.

Trade accounts receivable increased from $121.9 million at December 31, 2021 to $137.9 million at March 31, 2022.

The increase resulted from an increase in freight revenues, which flow through accounts receivable, during the first quarter of 2022 as compared to the fourth quarter of 2021.

Prepaid expenses and deposits decreased from $11.0 million at December 31, 2021 to $10.5 million at March 31, 2022.

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

Marketable equity securities increased from $39.4 million at December 31, 2021 to $40.8 million at March 31, 2022.

The $1.4 million increase was due to an increase in the market value of held marketable equity securities of $1.4 million during the first three months of 2022.

Accounts payable increased from $43.4 million at December 31, 2021 to $48.6 million at March 31, 2022.

This increase was primarily attributable to an increase in the amount accrued for fixed asset purchases and an increase in the amount due to third-party carriers as of March 31, 2022.

Accrued expenses and other liabilities increased from $14.1 million at December 31, 2021 to $19.7 million at March 31, 2022.

This increase is due to increases in legal reserves and the effect of timing for accrued pay for employees and owner-operators.

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 $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.

Long-term debt and current maturities of long-term debt, on an aggregate basis, increased from $222.3 million at December 31, 2021 to $259.5 million at March 31, 2022.

The increase was primarily related to the financing of certain real estate holdings to generate $35.5 million in available cash during the first three months of 2022.

NEW ACCOUNTING PRONOUNCEMENTS

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What changed 10-Q

Item 1. Financial Statements