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Item 1. Financial Statements

2024-05-07 compared with 2023-10-31 · 264 added, 412 removed, 331 unchanged (67% of the section changed)

4 unchanged sentences

(in thousands, except share and per share data)

September 30,

Current assets:

Cash and cash equivalents

$ 102,299  

$ 74,087  

$ 79,966 $ 100,614

Accounts receivable-net:

Trade, less current estimated credit loss of $ 5,835 and $ 7,717 , respectively

96,456  

134,739  

92,318 80,604

Prepaid expenses and deposits

10,932  

15,729  

10,820 13,213

Marketable equity securities

41,250  

41,728  

45,789 43,203

Income taxes refundable

Total current assets

269,599  

280,766  

241,858 251,041

Property and equipment:

23,078  

19,718  

36,460 23,078

Structures and improvements

42,318  

35,534  

44,567 43,552

Revenue equipment

634,200  

637,510  

675,490 689,173

Office furniture and equipment

15,077  

13,157  

15,439 15,328

Total property and equipment

714,673  

705,919  

771,956 771,131

Accumulated depreciation

( 257,753 )  

( 270,631 ) ( 266,412 )

Net property and equipment

456,920  

463,595  

$ 731,721  

$ 749,162  

LIABILITIES AND STOCKHOLDERS ’

501,325 504,719

$ 746,426 $ 760,457

LIABILITIES AND STOCKHOLDERS ’ EQUITY

Current liabilities:

Accounts payable

$ 57,653  

$ 48,917  

$ 38,703 $ 62,652

Accrued expenses and other liabilities

22,054  

34,233  

16,695 16,799

Current maturities of long-term debt

56,149  

58,815  

52,692 57,645

Total current liabilities

135,856  

141,965  

108,090 137,096

Long-term debt - less current portion

171,418  

205,466  

218,870 204,064

Deferred income taxes

107,415  

101,445  

104,323 104,331

Other long-term liabilities

Total liabilities

415,439  

448,979  

431,783 446,241

COMMITMENTS AND CONTINGENCIES (Note L)

3 unchanged sentences

22,331,092 and 22,317,671 shares issued;

22,021,341 and 22,166,450 shares outstanding at September 30, 2023 and December 31, 2022, respectively

22,034,762 and 22,021,341 shares outstanding at March 31, 2024 and December 31, 2023, respectively

Additional paid-in capital

40,660  

40,472  

40,971 40,825

Treasury stock, at cost;

296,330 and 127,237 shares at September 30, 2023 and December 31, 2022, respectively

( 8,736 )  

296,330 and 296,330 shares at March 31, 2024 and December 31, 2023, respectively

( 8,736 ) ( 8,736 )

Retained earnings

284,135  

263,488  

Total stockholders’

316,282  

300,183  

282,185 281,904

Total stockholders’ equity

314,643 314,216

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY

$ 731,721  

$ 749,162  

$ 746,426 $ 760,457

See notes to condensed consolidated financial statements.

4 unchanged sentences

Three Months Ended

Nine Months Ended

September 30,

OPERATING REVENUES:

Revenue, before fuel surcharge

$ 160,969 $ 193,454

Fuel surcharge

21,623 28,270

Total operating revenues

182,592 221,724

OPERATING EXPENSES AND COSTS:

Salaries, wages and benefits

44,063 48,278

Operating supplies and expenses

34,712 41,073

Rent and purchased transportation

73,279 87,096

18,935 16,497

Insurance and claims

Gain on disposition of equipment

Loss (Gain) on sale or disposition of equipment

Total operating expenses and costs

183,269 213,225

OPERATING INCOME

NON-OPERATING INCOME/(EXPENSE)

( 677 ) 8,499

NON-OPERATING INCOME

INTEREST EXPENSE

( 2,883 ) ( 2,356 )

INCOME BEFORE INCOME TAXES

FEDERAL AND STATE INCOME TAX EXPENSE:

FEDERAL AND STATE INCOME TAX EXPENSE (BENEFIT):

( 8 ) ( 560 )

Total federal and state income tax expense

$ 281 $ 5,231

INCOME PER COMMON SHARE:

$ 0.01 $ 0.24

$ 0.01 $ 0.23

AVERAGE COMMON SHARES OUTSTANDING:

22,031 22,148

22,127 22,317

See notes to condensed consolidated financial statements.

3 unchanged sentences

(in thousands)

Nine Months Ended

September 30,

Three Months Ended

OPERATING ACTIVITIES:

$ 281 $ 5,231

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

18,935 16,497

Bad debt expense

Stock compensation-net of excess tax benefits

Provision for deferred income taxes

Loss on marketable equity securities

Gain on sale or disposition of equipment

Gain on sale of marketable equity securities

(Benefit) / Provision for deferred income taxes

( 8 ) ( 560 )

(Gain) / Loss on marketable equity securities

( 2,586 ) 288

Loss / (Gain) on sale or disposition of equipment

Changes in operating assets and liabilities:

Accounts receivable

( 13,253 ) 1,826

Prepaid expenses, deposits, inventories, and other assets

1 unchanged sentence

Trade accounts payable

355 ( 2,783 )

Accrued expenses and other liabilities

( 315 ) 9,474

Net cash provided by operating activities

1 unchanged sentence

Purchases of property and equipment

Acquisition of business, net of cash acquired

( 21,824 ) ( 6,108 )

Proceeds from disposition of equipment

Sales of marketable equity securities

Purchases of marketable equity securities, net of return of capital

Net cash used in investing activities

Net cash (used in) / provided by investing activities

( 9,802 ) 1,084

FINANCING ACTIVITIES:

Borrowings under line of credit

207,854 282,515

Repayments under line of credit

Borrowings of long-term debt

( 207,854 ) ( 282,515 )

Repayments of long-term debt

( 20,431 ) ( 13,024 )

Borrowings under margin account

1 unchanged sentence

Repurchases of common stock

Net cash used in financing activities

NET INCREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH

Net cash used in by financing activities

( 20,431 ) ( 16,905 )

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

( 20,648 ) 18,386

CASH, CASH EQUIVALENTS AND RESTRICTED CASH -Beginning of period

100,614 74,087

CASH, CASH EQUIVALENTS AND RESTRICTED CASH -End of period

$ 79,966 $ 92,473

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:

Cash paid during the period for:

$ 2,933 $ 2,353

NONCASH INVESTING AND FINANCING ACTIVITIES:

Purchases of property and equipment included in accounts payable

See notes to condensed consolidated financial statements.        

TRANSPORTATION SERVICES, INC.

AND SUBSIDIARIES

Condensed Consolidated Statements of Stockholders ’

Condensed Consolidated Statements of Stockholders ’ Equity

(in thousands)

Shares / Amount

Additional Paid-In Capital

Paid-In Capital

Balance at January 1, 2024

Treasury stock repurchases

22,021 $ 223 $ 40,825 $ ( 8,736 ) $ 281,904 $ 314,216

- - - - 281 281

Restricted stock issued

14 - ( 46 ) - - ( 46 )

Stock based compensation

- - 192 - - 192

Balance at March 31, 2024

Treasury stock repurchases

Restricted stock issued

Stock based compensation

Balance at June 30, 2023

Treasury stock repurchases

Restricted stock issued

Restricted stock net settlement

Stock based compensation

Balance at September 30, 2023

22,035 $ 223 $ 40,971 $ ( 8,736 ) $ 282,185 $ 314,643

Shares / Amount

Additional Paid-In Capital

Paid-In Capital

Balance at January 1, 2023

22,166 $ 223 $ 40,472 $ ( 4,000 ) $ 263,488 $ 300,183

- - - - 5,231 5,231

Treasury stock repurchases

Retirement of treasury shares

Stock based compensation

Balance at March 31, 2022

Exercise of stock awards-shares issued including tax benefits

Stock based compensation

Balance at June 30, 2022

( 123 ) - - ( 3,516 ) - ( 3,516 )

Restricted stock issued

Restricted stock net settlement

Stock based compensation

Treasury stock repurchases

Balance at September 30, 2022

- - 208 - - 208

Balance at March 31, 2023

22,050 $ 223 $ 40,680 $ ( 7,516 ) $ 268,719 $ 302,106

See notes to condensed consolidated financial statements.

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

TRANSPORTATION SERVICES, INC.

1 unchanged sentence

Notes to Condensed Consolidated Financial Statements (unaudited)

September 30, 2023

March 31, 2024

BASIS OF PRESENTATION

In accordance with generally accepted accounting principles (“GAAP”) and applicable rules of the Securities and Exchange Commission, the information reported in this Quarterly Report on Form 10 -Q for P.A.M.

Transportation Services, Inc.

and its legally distinct subsidiaries, unless otherwise indicated, is presented on a consolidated basis.

Unless the context otherwise requires, all references in this Quarterly Report on Form 10 -Q to “P.A.M.,”

the “Company,”

“we,”

“our,”

or “us”

Unless the context otherwise requires, all references in this Quarterly Report on Form 10 -Q to “P.A.M.,” the “Company,” “we,” “our,” or “us” mean P.A.M.

Transportation Services, Inc.

and its consolidated subsidiaries.

The consolidated financial results for the three and nine months ended 

September 30, 2023, include the results of our recently formed subsidiaries, Met Express, Inc.

and Costar Equipment, Inc., from June 14, 2022, the date of the acquisition of substantially all of the assets and certain liabilities of Metropolitan Trucking, Inc.

and its related entities, through 

September 30, 2023.

All material intercompany items and transactions have been eliminated in consolidation.

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with GAAP for interim financial information and with the instructions to Form 10 -Q and Article 10 of Regulation S- X.

Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements.

In management’s opinion, all adjustments (consisting of normal recurring adjustments) necessary for a fair presentation have been included.

The condensed consolidated balance sheet at December 31, 2022 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 nine -month period ended September 30, 2023 are not necessarily indicative of the results that may be expected for the year ending December 31, 2023.

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, 2022.

On March 8, 2022, our Board of Directors declared 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.

The stock split was paid on March 29, 2022.

Upon the completion of the March 2022 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 this stock splits and have been adjusted retrospectively, where applicable, for all periods presented.

In management’s opinion, all adjustments (consisting of normal recurring adjustments) necessary for a fair presentation have been included.

The consolidated balance sheet at December 31, 2023 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 -month period ended March 31, 2024 are not necessarily indicative of the results that may be expected for the year ending December 31, 2024.

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, 2023.

RECENT ACCOUNTING PRONOUNCEMENTS

The Company considered the applicability and impact of all accounting standard updates ("ASU") issued by the Financial Accounting Standards Board ("FASB") to the Accounting Standards Codification ("ASC") and has determined there are no ASUs that have not already been adopted which require significant consideration for disclosure as of September 30, 2023.

Additionally, the Company did not adopt any new ASUs during the quarter ended September 30, 2023.

In December 2023, the Financial Accounting Standards Board (the "FASB") issued Accounting Standards Update, (“ASU”) No.

2023 - 09, (“ASU 2023 - 09” ), Improvements to Income Tax Disclosures.

ASU 2023 - 09 was issued to enhance the transparency and decision usefulness of income tax disclosures primarily related to the rate reconciliation and income taxes paid information.

The guidance is effective for annual reporting periods beginning after December 15, 2024, with early adoption permitted.

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.

The Company considered the applicability and impact of ASU 2023 - 09 and all other accounting standard updates issued by the Financial Accounting Standards Board to the Accounting Standards Codification ("ASC") and determined there are not any ASUs that have not already been adopted which require significant consideration for disclosure as of March 31, 2024.

Additionally, the Company did not adopt any new ASUs during the quarter ended March 31, 2024.

REVENUE RECOGNITION

The Company has a single performance obligation, which is to transport our customer’s freight from a specified origin to a specified destination.

The Company has the discretion to choose to self-transport or to arrange for alternate transportation to fulfill the performance obligation.

7 unchanged sentences

The Company also has other revenue categories that are not discussed in this note or broken out in our condensed consolidated statements of operations due to their immaterial amounts.

In fulfilling the Company’s obligation to transport freight from a specified origin to a specified destination, control of freight is transferred to us at the point it has been loaded into the driver’s trailer, the doors are sealed and the driver has signed a bill of lading, which is the basic transportation agreement that establishes the nature, quantity and condition of the freight loaded, the responsibility for invoice payment and the pickup and delivery locations.

Our revenue is generated, and our customers receive benefit, as the freight progresses towards delivery locations.

Our revenue is generated, and our customer receives benefit, as the freight progresses towards delivery locations.

In the event our customer cancels the shipment at some point prior to the final delivery location and re-consigns the shipment to an alternate delivery location, we are entitled to receive payment for services performed for the partial shipment.

2 unchanged sentences

Our revenue is categorized as either Freight Revenue or Fuel Surcharge Revenue, and both are earned by performing the same freight transportation services, as discussed further below.

Freight Revenue –

revenue generated by the performance of the freight transportation service, including any accessorial service, provided to customers.

Fuel Surcharge Revenue –

revenue designed to adjust freight revenue rates to an agreed-upon base cost for diesel fuel.

Freight Revenue – revenue generated by the performance of the freight transportation service, including any accessorial service, provided to customers.

Fuel Surcharge Revenue – revenue designed to adjust freight revenue rates to an agreed-upon base cost for diesel fuel.

Diesel fuel prices can fluctuate widely during the term of a contract with a customer.

5 unchanged sentences

MARKETABLE EQUITY SECURITIES

The Company’s investments in marketable securities consist of equity securities with readily determinable fair values.

The cost of securities sold is based on the specific identification method, and interest and dividends on securities are included in non-operating income.

The Company’s investments in marketable securities consist of equity securities with readily determinable fair values.

The cost of securities sold is based on the specific identification method, and interest and dividends on securities are included in non-operating income (expense).

Marketable equity securities are carried at fair value, with gains and losses in fair market value included in the determination of net income.

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, 2023 and December 31, 2022.

September 30, 2023

The following table sets forth market value, cost, and unrealized gains on equity securities as of March 31, 2024 and December 31, 2023.

March 31, 2024

December 31, 2023

1 unchanged sentence

Fair market value

$ 41,250  

$ 41,728  

30,294  

30,350  

$ 45,789 $ 43,203

30,294 30,294

Unrealized gain

$ 10,956  

$ 11,378  

The following table sets forth the gross unrealized gains and losses on the Company’s marketable securities as of September 30, 2023 and December 31, 2022.

September 30, 2023

$ 15,495 $ 12,909

The following table sets forth the gross unrealized gains and losses on the Company’s marketable securities as of March 31, 2024 and December 31, 2023.

March 31, 2024

December 31, 2023

1 unchanged sentence

Gross unrealized gains

$ 13,803  

$ 13,478  

$ 18,098 $ 15,539

Gross unrealized losses

Net unrealized gain

$ 10,956  

$ 11,378  

The following table shows the Company’s net realized gains during the three and nine months ending on September 30, 2023 and 2022, respectively, on certain marketable equity securities.

Three Months Ended

Nine Months Ended

September 30,

(in thousands)

Sales proceeds

Cost of securities sold

Realized gain

For the quarter ended September 30, 2023, the Company recognized dividend income of approximately $ 419,000 in non-operating income in its condensed consolidated statements of operations.

For the nine months ended September 30, 2023, the Company recognized dividend income of approximately $ 1,158,000 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, 2023, and December 31, 2022, the Company had outstanding borrowings of approximately $ 0 and $ 914,000 , 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 condensed consolidated balance sheets.

Our marketable equity securities portfolio had a net unrealized pre-tax gain in market value of approximately $ 119,000 during the third quarter of 2023, and a net unrealized pre-tax loss in market value of approximately $ 2,387,000 during the third quarter of 2022, which were reported as non-operating income in its condensed consolidated statements of operations for the respective periods.

$ 15,495 $ 12,909

The Company did not sell any marketable equity securities and had no realized gains or losses during the quarter ending on March 31, 2024 or 2023, respectively.

For the quarter ended March 31, 2024, the Company recognized dividends received of approximately $ 349,000 in non-operating income in its condensed consolidated statements of operations.

For the quarter ended March 31, 2023, the Company recognized dividends received of approximately $ 377,000 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 March 31, 2024, the Company had no outstanding borrowings under its margin account, which is no change from December 31, 2023, when the Company had no outstanding borrowings under the same account.

Margin account borrowings, when utilized, 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 condensed consolidated balance sheets.

Our marketable equity securities portfolio had a net unrealized pre-tax gain in market value of approximately $ 2,586,000 during the first quarter of 2024, and a net unrealized pre-tax loss in market value of approximately $ 288,000 during the first quarter of 2023, which were reported as non-operating income in its condensed consolidated statements of operations for the respective periods.

STOCK-BASED COMPENSATION

The Company maintains a stock incentive plan (the “Plan”) under which incentive and nonqualified stock options and other stock awards may be granted.

Under the Plan, 3,000,000 shares are reserved for the issuance of stock awards to directors, officers, key employees, and others.

The stock option exercise price and the restricted stock value under the Plan shall not be less than 85 % of the fair market value of the Company’s common stock on the date the award is granted.

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 May 2023, the Company granted 2,295 shares of common stock to non-employee directors.

This stock award had a grant date fair value of $ 23.95 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 2023 was approximately $ 576,000 .

The total pre-tax stock-based compensation expense, recognized in salaries, wages and benefits during the first nine months of 2023, was approximately $ 387,000 and includes approximately $ 55,000 recognized as a result of the grant of shares to certain non-employee directors.

The recognition of stock-based compensation expense decreased both diluted and basic earnings per common share by approximately $ 0.01 during the first nine months of 2023.

As of September 30, 2023, the Company had stock-based compensation plans with total unvested stock-based compensation expense of approximately $ 2,687,000 , which is being amortized on a straight-line basis over the remaining vesting period.

The stock option exercise price and the restricted stock value under the Plan shall not be less than 85 % of the fair market value of the Company’s common stock on the date the award is granted.

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.

The Company did not grant any shares of common stock during the first three months of 2024.

The total grant date fair value of stock vested during the first three months of 2024 was approximately $ 450,000 .

The total pre-tax stock-based compensation expense, recognized in salaries, wages and benefits during the first three months of 2024, was approximately $ 192,000 and includes approximately $ 0 recognized as a result of the grant of shares to certain non-employee directors.

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 2024.

As of March 31, 2024, the Company had stock-based compensation plans with total unvested stock-based compensation expense of approximately $ 1,942,000 , which is being amortized on a straight-line basis over the remaining vesting period.

As a result, the Company expects to recognize approximately $ 536,000 in additional compensation expense related to unvested stock awards during the remainder of 2024 and to recognize approximately $ 777,000 , $ 493,000 , and $ 136,000 in additional compensation expense related to unvested stock awards during the years 2025, 2026, and 2027, respectively.

The total grant date fair value of stock vested during the first nine months of 2022 was approximately $ 269,000 . The total pre-tax stock-based compensation expense, recognized in salaries, wages and benefits during the 

nine  months of 

2022,  was approximately $ 528,000 .

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

nine  months of 

 As of 

September 30, 2022, 

the Company had stock-based compensation plans with total unvested stock-based compensation expense of approximately $ 2,601,000 , 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, 2023, and changes during the nine months ended September 30, 2023, is as follows:

During the first three months of 2023, the Company granted 28,313 shares of common stock to key employees.

Those stock awards had a grant date fair value of $ 28.30 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.

The total grant date fair value of stock vested during the first three months of 2023 was approximately $ 206,000 .

The total pre-tax stock-based compensation expense, recognized in salaries, wages and benefits during the first three months of 2023, was approximately $ 208,000 and includes approximately $ 0 recognized as a result of the grant of shares to certain non-employee directors.

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 2023.

As of March 31, 2023, the Company had stock-based compensation plans with total unvested stock-based compensation expense of approximately $ 2,999,000 , 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 March 31, 2024, and changes during the three months ended March 31, 2024, is as follows:

Restricted Stock

2 unchanged sentences

Non-vested at January 1, 2024

235,832  

$ 13.15  

30,608  

198,859 $ 14.07

Canceled/forfeited/expired

( 34,672 )  

( 32,954 )  

Non-vested at September 30, 2023

198,860  

$ 14.07  

( 15,846 ) 28.40

Non-vested at March 31, 2024

183,013 $ 12.83

SEGMENT INFORMATION

3 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

$ 112,257  

$ 144,982  

$ 357,681  

$ 404,658  

$ 102,200 63.5 $ 125,198 64.7

Brokerage and Logistics Services revenue

62,091  

71,493  

192,204  

210,645  

58,769 36.5 68,256 35.3

Total revenues

$ 174,348  

$ 216,475  

$ 549,885  

$ 615,303  

$ 160,969 100.0 $ 193,454 100.0

TREASURY STOCK

The Company’s stock repurchase program has been extended and expanded several times, most recently in July 2023, when the Board of Directors reauthorized 500,000 shares of common stock for repurchase under the initial September 2011 authorization.

As of September 30, 2023, there remain 475,066 shares of common stock authorized for repurchase under this plan.

As of March 31, 2024, there remain 475,066 shares of common stock authorized for repurchase under this plan.

The Company accounts for treasury stock using the cost method.

As of September 30, 2023, 296,330 shares were held in the treasury at an aggregate cost of approximately $ 8,736,000 .

As of March 31, 2024, 296,330 shares were held in the treasury at an aggregate cost of approximately $ 8,736,000 .

EARNINGS PER SHARE

Basic earnings per share is computed based on the weighted average number of shares of common stock outstanding during the period. Diluted earnings per share is computed by adjusting the weighted average number of shares of common stock outstanding by common stock equivalents attributable to dilutive restricted stock. The computation of diluted earnings per share does not assume conversion, exercise, or contingent issuance of securities that would have an anti-dilutive effect on earnings per share.

Basic earnings per share is computed based on the weighted average number of shares of common stock outstanding during the period.

Diluted earnings per share is computed by adjusting the weighted average number of shares of common stock outstanding by common stock equivalents attributable to dilutive restricted stock.

The computation of diluted earnings per share does not assume conversion, exercise, or contingent issuance of securities that would have an anti-dilutive effect on earnings per share.

The computations of basic and diluted earnings per share were as follows:

Three Months Ended

Nine Months Ended

September 30,

(in thousands, except per share data)

$ 281 $ 5,231

Basic weighted average common shares outstanding

22,031 22,148

Dilutive effect of common stock equivalents

Diluted weighted average common shares outstanding

22,127 22,317

Basic earnings per share

$ 0.01 $ 0.24

Diluted earnings per share

$ 0.01 $ 0.23

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 limitations period of three years, and as a result, the Company’s tax years 2019 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 2020 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 September 30, 2023, 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, 2024, 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, 2023, 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, 2024, 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, 2023 and 2022, 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 27.0 % and 23.6 % for the nine months ended September 30, 2023 and 2022, respectively.

Our effective tax rate for the nine months ended September 30, 2023 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 treatment of non-deductible expenses, including but not limited to driver meals and per diem expenses.

During the three months ended March 31, 2024 and 2023, the Company has not recognized or accrued any interest or penalties related to uncertain income tax positions.

The Company’s effective income tax rates were 25.7 % and 25.7 % for the three months ended March 31, 2024 and 2023, respectively.

Our effective tax rate for the three months ended March 31, 2024 differs from amounts computed by applying the United States federal statutory rates to pre-tax income primarily due to state income taxes.

FAIR VALUE OF FINANCIAL INSTRUMENTS

The Company’s financial instruments consist of cash and cash equivalents, marketable equity securities, accounts receivable, trade accounts payable, and borrowings.

The Company follows the guidance for financial assets and liabilities measured on a recurring basis.

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

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

At September 30, 2023, the following items are measured at fair value on a recurring basis:

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 March 31, 2024, the following items are measured at fair value on a recurring basis:

(in thousands)

Marketable equity securities

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

$ 45,789 $ 45,789 - -

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

The carrying value of other financial instruments, including cash, accounts receivable, accounts payable, and accrued liabilities approximate fair value due to their short maturities.

The carrying amount for the line of credit approximates fair value because the line of credit interest rate is adjusted frequently.

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, 2023 was as follows:

The carrying value and estimated fair value of this other long-term debt at March 31, 2024 was as follows:

(in thousands)

Long-term debt

$ 271,562 $ 259,185

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

NOTES PAYABLE

During the first nine months of 2023, the Company’s subsidiaries entered into installment obligations totaling approximately $ 12.3 million for the purpose of purchasing revenue equipment and other assets.

During the first three months of 2024, the Company’s subsidiaries entered into installment obligations totaling approximately $ 30.3 million for the purpose of purchasing revenue equipment and other assets.

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 60 months.

The terms of these obligations range from 60 to 84 months.

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

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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 were named a defendant in a putative class action lawsuit filed on August 6, 2021, in the United States District Court for the Western District of Arkansas.

The complaint alleged failure to pay over-the-road drivers 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). 

We denied liability on all claims. 

On August 5, 2022, the parties filed a Joint Motion for Preliminary Approval of a Collective and Class Action Settlement. 

On October 7, 2022, the parties submitted to the court an executed Settlement Agreement and Release, to resolve and release all claims asserted in the litigation from January 1, 2020, through July 31, 2022, for $ 4,750,000 . We did not admit liability for any claim. The District Court granted preliminary approval of the settlement on November 14, 2022. 

Notice of the settlement has been sent to class and collective action members. A final settlement approval hearing was held, and the settlement was approved, on October 11, 2023.

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.

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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 $ 0.2 million as of September 30, 2023.

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.

The right-of-use assets are recorded in other assets, and the lease liability is recorded in accrued expenses and other liabilities and in other long-term liabilities on our condensed consolidated balance sheets.

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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, 2023.

Scheduled amounts and timing of cash flows arising from future right-of-use operating lease payments at September 30, 2023, 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, 2024.

Scheduled amounts and timing of cash flows arising from future right-of-use operating lease payments at March 31, 2024, are:

Maturity of Lease Liabilities

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Other Information

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

Weighted-average remaining lease term for operating leases (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 nine months ended September 30, 2023.

Cash paid for amounts included in the present value of operating lease liabilities was $ 0.1 million during the nine months ended September 30, 2023, 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, 2024.

Cash paid for amounts included in the present value of operating lease liabilities was $ 0.1 million during the three months ended March 31, 2024, 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,

(in thousands)

$ 2,573  

$ 2,167  

Lease Revenue

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Three Months Ended

Nine Months Ended

September 30,

(in thousands)

Leased truck revenue (recorded in revenue, before fuel surcharge)

$ 1,952  

$ 2,228  

$ 6,070  

$ 6,519  

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

$ 1,991 $ 2,049

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

Total lease revenue

$ 2,051  

$ 2,327  

$ 6,366  

$ 6,945  

$ 2,119 $ 2,148

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, 2023, the gross carrying value of trucks underlying these leases was $ 54.8 million and accumulated depreciation was $ 25.1 million.

As of March 31, 2024, the gross carrying value of trucks underlying these leases was $ 58.6 million and accumulated depreciation was $ 24.4 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, 2023, the Company incurred $ 0.6 million of depreciation expense for these assets.

During the quarter ended March 31, 2024, the Company incurred $ 2.0 million of depreciation expense for these assets.

The Company leases dock space to a related party at our Laredo, Texas, terminal.

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Lease Receivables

Future minimum operating lease payments receivable at September 30, 2023:

Future minimum operating lease payments receivable at March 31, 2024:

(in thousands)

2024 (remaining)

$ 1,871  

2028 and thereafter

Total future minimum lease payments receivable

$ 13,957  

NONCASH INVESTING AND FINANCING ACTIVITIES

The Company financed approximately $ 12.3 million in equipment purchases during the first nine months of 2023 utilizing noncash financing.

ACQUISITION OF METROPOLITAN TRUCKING

On June 14, 2022, subsidiaries of the Company, Met Express, Inc.

and Costar Equipment, Inc.

(collectively, the “Buyer”), entered into an Asset Purchase Agreement with Metropolitan Trucking, Inc.

and related subsidiaries.

Metropolitan Trucking, Inc.

was a truckload carrier headquartered in Saddle Brook, New Jersey, providing asset-based dry van truckload transportation services, including local, regional and dedicated services.

The acquisition has been determined to be a business combination.

Pursuant to the Asset Purchase Agreement, the Buyer acquired substantially all the assets and assumed certain specified liabilities of Metropolitan Trucking, Inc., and its related entities (the “Transaction”).

The Buyer paid $ 79.9 million of total consideration, including cash and certain assumed indebtedness of Metropolitan Trucking, Inc., and its related entities.

The Transaction closed on June 14, 2022.

Total cash paid of $ 64.3 million was funded out of the Company’s available cash.

The Transaction included the assumption of $ 12.6 million of indebtedness and $ 2.9 million of other current liabilities.

The Asset Purchase Agreement contains customary representations, warranties, covenants, escrow and indemnification provisions.

The results of the acquired business have been included in the condensed consolidated financial statements since the date of acquisition and represented 12.4 % of consolidated total assets as of September 30, 2023 and 9.3 % of revenues excluding fuel surcharge for the quarter ended September 30, 2023.

The allocation of the purchase price is detailed in the tables below.

The assets and liabilities associated with the acquisition were recorded at their fair values as of the acquisition date and the amounts are as follows:

(in thousands)

Trade and other accounts receivable

$ 10,821  

Other current assets

Property and equipment

68,722  

79,859  

Accounts payable

Long-term debt

Total cash paid

$ 64,317  

Management ’

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

The Company financed approximately $ 30.3 million in equipment purchases during the first three months of 2024 utilizing noncash financing.

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

FORWARD-LOOKING INFORMATION

Certain information included in this Quarterly Report on Form 10-Q constitutes “forward-looking statements”

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

Certain information included in this Quarterly Report on Form 10-Q constitutes “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995.

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

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increases or rapid fluctuations in fuel prices, inflation, interest rates, fuel taxes, tolls, and license and registration fees;

potential economic, business or operational disruptions or uncertainties that may result from any future outbreaks of the COVID-19 pandemic or other public health crises;

the resale value of the Company's used equipment and the price of new equipment;

potential economic, business or operational disruptions or uncertainties due to public health crises;

the resale value of the Company's used equipment;

the price and availability of new equipment consistent with anticipated acquisition and replacement plans;

increases in compensation for and difficulty in attracting and retaining qualified drivers and owner-operators;

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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;

the potential impact of new laws, regulations or policy, including, without limitation, laws and regulations governing the classification of independent contractors as employees, tariffs, import/export, trade and immigration regulations or policies;

a significant reduction in or termination of the Company's trucking service by a key customer;

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CRITICAL ACCOUNTING ESTIMATES

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

s Discussion and Analysis of Financial Condition and Results of Operations, included in our Form 10-K for the fiscal year ended December 31, 2022.

There have been no material changes to our critical accounting policies and estimates from the information provided in Item 7, Management ’ s Discussion and Analysis of Financial Condition and Results of Operations, included in our Form 10-K for the fiscal year ended December 31, 2023.

BUSINESS OVERVIEW

The Company is a holding company that owns subsidiaries engaged in providing truckload dry van carrier services transporting general commodities throughout the continental United States, as well as in the Canadian provinces of Ontario and Quebec.

The Company’s consolidated operating subsidiaries also provide transportation services in Mexico through its gateways in Laredo and El Paso, Texas under agreements with Mexican carriers.

Unless the context otherwise requires, this report presents information regarding the Company and its subsidiaries on a consolidated basis.

The Company’s administrative headquarters are in Tontitown, Arkansas.

From this location we manage operations conducted through our wholly-owned subsidiaries based in various locations around the United States and in Mexico and Canada.

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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 64.4% and 67.0% of total revenues, excluding fuel surcharges, for the quarters ended September 30, 2023, and 2022, respectively.

Truckload services revenues, excluding fuel surcharges, represented 63.5% and 64.7% of total revenues, excluding fuel surcharges, for the quarters ended March 31, 2024, and 2023, 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, 2023 and 2022, approximately $27.2 million and $36.2 million, respectively, of the Company’s total revenue was generated from fuel surcharges.

During the nine months ended September 30, 2023 and 2022, approximately $80.8 million and $93.9 million, respectively, of the Company’s total revenue was generated from fuel surcharges.

During the three months ended March 31, 2024 and 2023, approximately $21.6 million and $28.3 million, respectively, of the Company’s total revenue was generated from fuel surcharges.

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

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 June 14, 2022, newly formed subsidiaries of the Company completed the acquisition of substantially all the assets and certain liabilities of Metropolitan Trucking, Inc.

and related entities (“Metropolitan”).

Metropolitan was a 320-truck dry van truckload carrier, with the East Coast serving as its primary operating territory.

The purchase price paid at closing included approximately $15.5 million in assumed debt and $64.3 million paid using available cash balances.

The Company is currently operating these assets through its newly formed subsidiary, Met Express, Inc.

See Note O to the condensed consolidated financial statements for more information regarding this acquisition.

RESULTS OF OPERATIONS –

TRUCKLOAD SERVICES

RESULTS OF OPERATIONS – TRUCKLOAD SERVICES

The following table sets forth, for truckload services, the percentage relationship of expense items to operating revenues, before fuel surcharges, for the periods indicated.

1 unchanged sentence

Three Months Ended

Nine Months Ended

September 30,

(percentages)

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Insurance and claims

Gain on sale or disposal of property

Loss (gain) on sale or disposal of property

Total operating expenses

Operating income

Non-operating income / (expense)

Operating (Loss) / Income

Non-operating income

Interest expense

Income before income taxes

THREE MONTHS ENDED SEPTEMBER 30, 2023 VS.

THREE MONTHS ENDED SEPTEMBER 30, 2022

During the third quarter of 2023, truckload services revenue, before fuel surcharges, decreased 22.6% to $112.3 million as compared to $145.0 million during the third quarter of 2022.

The decrease in revenue was primarily the result of a market driven decrease in the average rate per mile charged to our customers during the third quarter of 2023 compared to third quarter 2022.

Also contributing to the revenue reduction was a 150 truck decrease in the average number of trucks operated by the Company during the third quarter 2023 compared to the third quarter 2022 as the company aligned fleet size to decreased demand from customers.

To a lesser extent, revenue was negatively impacted by the United Auto Workers strike that began in mid-September of 2023 against a group of our automotive customers.

Salaries, wages and benefits increased from 32.8% of revenues, before fuel surcharges, in the third quarter of 2022 to 38.2% of revenues, before fuel surcharges, during the third quarter of 2023.

This percentage-based increase is primarily a result of a decrease in the average rate per mile charged to our customers, coupled with an increase in proportion of total miles driven by drivers employed by the Company, as opposed to transportation purchased from third parties, in the third quarter of 2023 compared to the third quarter of 2022, as well as the result of the interaction of expenses with fixed-cost characteristics, such as general and administrative wages, maintenance wages, and operations wages with a decrease in revenues for the periods compared.

Operating supplies and expenses increased from 8.1% of revenues, before fuel surcharges, during the third quarter of 2022 to 13.3% of revenues, before fuel surcharges, during the third quarter of 2023.

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

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

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 increasing our net operating supplies and expenses while decreasing the rent and purchased transportation category.

Rent and purchased transportation decreased from 25.2% of revenues, before fuel surcharges, during the third quarter of 2022 to 22.6% of revenues, before fuel surcharges, during the third quarter of 2023.

The decrease was primarily due to a decrease in the rates charged by third-party carriers during the third quarter of 2023 compared to the third quarter of 2022.

Also contributing to the decrease was a decrease in the average number of owner-operators under contract during the third quarter of 2023, compared to the third quarter of 2022, as well as a decrease in the average rate per mile, including fuel surcharges, paid to owner-operators during the respective periods.

Depreciation increased from 11.0% of revenues, before fuel surcharges, during the third quarter of 2022 to 13.6% of revenues, before fuel surcharges, during the third quarter of 2023.

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

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

The truckload services division operating ratio, which measures the ratio of operating expenses, net of fuel surcharges, to operating revenues, before fuel surcharges, increased from 82.6% for the third quarter of 2022 to 95.8% for the third quarter of 2023.

Non-operating income (expense) improved from a loss of 0.9% of revenues, before fuel surcharges, during the third quarter of 2022 to income of 1.0% of revenues, before fuel surcharges, during the third quarter of 2023.

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

The Company recorded a $0.1 million increase in the market value of our marketable equity securities in non-operating income (expense) during the third quarter of 2023, compared to a $2.4 million decrease in the market value of our marketable equity securities during the third quarter of 2022.

NINE MONTHS ENDED SEPTEMBER 30, 2023 VS.

NINE MONTHS ENDED SEPTEMBER 30, 2022

For the nine months ended September 30, 2023, truckload services revenue, before fuel surcharges, decreased 11.6% to $357.7 million as compared to $404.7 million for the nine months ended September 30, 2022.

The decrease in revenue was primarily the result of a decrease in the average rate per mile charged to our customers during the first nine months of 2023 compared to the first nine months of 2022.

The decrease in revenue during the first nine months of 2023, as compared to the first nine months of 2022, was intensified by the United Auto Workers strike that began in September of 2023.

To a lesser extent, revenue was negatively impacted by the United Auto Workers strike that began in mid-September of 2023 against a group of our automotive customers.

Salaries, wages and benefits increased from 30.5% of revenues, before fuel surcharges, in the first nine months of 2022 to 37.2% of revenues, before fuel surcharges, during the first nine months of 2023.

This percentage-based increase is primarily a result of a decrease in the average rate per mile charged to our customers, coupled with an increase in total miles and related driver pay in the first nine months of 2023 compared to the first nine months of 2022, as well as the result of the interaction of expenses with fixed-cost characteristics, such as general and administrative wages, maintenance wages, and operations wages with a decrease in revenues for the periods compared.

Operating supplies and expenses increased from 7.1% of revenues, before fuel surcharges, during the first nine months of 2022 to 11.7% of revenues, before fuel surcharges, during the first nine months of 2023.

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

These categorizations have the effect of increasing our net operating supplies and expenses while decreasing the rent and purchased transportation category.

Rent and purchased transportation decreased from 25.7% of revenues, before fuel surcharges, during the first nine months of 2022 to 23.0% of revenues, before fuel surcharges, during the first nine months of 2023.

The decrease was primarily due to a decrease in the rates charged by third-party carriers during the first nine months of 2023 compared to the first nine months of 2022.

Also contributing to the decrease was a decrease in the average number of owner-operators under contract during the first nine months of 2023, compared to the first nine months of 2022, as well as a decrease in the average rate per mile, including fuel surcharges, paid to owner-operators during the respective periods.

Depreciation increased from 11.2% of revenues, before fuel surcharges, during the first nine months of 2022 to 13.1% of revenues, before fuel surcharges, during the first nine months of 2023.

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

Insurance and claims expense increased from 4.8% of revenues, before fuel surcharges, during the first nine months of 2022 to 7.0% of revenues before fuel surcharges, during the first nine months of 2023.

This increase relates primarily to an increase in accident reserves recognized in the first quarter of 2023.

During the quarter ended March 31, 2023, the Company recorded a $10.0 million liability for claims expected to settle in excess of insurance limits, specific to an accident in February 2022.

The truckload services division operating ratio, which measures the ratio of operating expenses, net of fuel surcharges, to operating revenues, before fuel surcharges, increased from 81.3% for the first nine months of 2022 to 96.0% for the first nine months of 2023.

RESULTS OF OPERATIONS –

LOGISTICS AND BROKERAGE SERVICES

(Loss) / Income before income taxes

THREE MONTHS ENDED MARCH 31, 2024 VS.

THREE MONTHS ENDED MARCH 31, 2023

During the first quarter of 2024, truckload services revenue, before fuel surcharges, decreased by 18.4% to $102.2 million as compared to $125.2 million during the first quarter of 2023.

The decrease relates primarily to a 14.0% decrease in loaded miles travelled from 48.9 million for the first quarter of 2023 to 42.1 million for the first quarter of 2024 and to a 5.2% decrease in our rate per loaded mile, from $2.56 for the first quarter of 2023 to $2.43 for the first quarter of 2024.

The reduction in loaded miles was primarily driven by a 7.5% reduction in the average number of trucks operated combined with a 4.3% reduction in average miles driven by each truck for the first quarter of 2024 compared to the first quarter of 2023.

The reduction in truck count and miles resulted from a less favorable freight market year over year, characterized by an oversupply of available trucks in the market compared to available freight.

Salaries, wages and benefits increased from 36.2% of revenues, before fuel surcharges, in the first quarter of 2023 to 40.5% of revenues, before fuel surcharges, during the first quarter of 2024.

This percentage-based increase relates primarily to an increase in the percentage of miles driven by company-employed drivers, as opposed to third-party owner-operators during the first quarter of 2024 compared to the first quarter of 2023.

In addition, the interaction of salaries and wages with fixed-cost characteristics combined with the year to year reduction in first quarter revenue, resulted in an increase in this category when measured as a percentage of revenue.

Operating supplies and expenses increased from 10.0% of revenues, before fuel surcharges, during the first quarter of 2023 to 12.4% of revenues, before fuel surcharges, during the first quarter of 2024.

The increase relates primarily to the interaction of expenses with fixed-cost characteristics, such as rents, driver training schools and operating taxes and licenses with a decrease in revenue.

The increase also relates to an increase in the average surcharge-adjusted fuel price paid per gallon of diesel fuel, due to decreased fuel surcharge collections from customers for the quarter ended March 31, 2024 compared to March 31, 2023.

Rent and purchased transportation decreased from 24.6% of revenues, before fuel surcharges, during the first quarter of 2023 to 22.2% of revenues, before fuel surcharges, during the first quarter of 2024.

The decrease was primarily due to a decrease in the percentage of miles driven by third-party owner-operators as opposed to company-employed drivers, as well as a decrease in the rates paid to third-party owner-operators for the quarter-ended March 31, 2024 compared to March 31, 2023.

Depreciation increased from 12.9% of revenues, before fuel surcharges, during the first quarter of 2023 to 18.3% of revenues, before fuel surcharges, during the first quarter of 2024.

The increase relates primarily to an increase in cost for replacement revenue equipment compared to the cost of retired equipment and to the interaction of a decrease in operating revenues with the fixed-cost nature of depreciation expense.

Insurance and claims decreased from 12.3% of revenues, before fuel surcharges, during the first quarter 2023 to 4.7% of revenues, before fuel surcharges, during the first quarter 2024.

This decrease relates primarily to specific auto liability claims being settled in the latter half of 2023, and a reduction of the auto liability claims reserved in the first quarter of 2024, as compared to the first quarter of 2023.

While our claims reserve did decrease quarter over quarter, we still saw an increase in the rate per mile paid for auto liability insurance in the first quarter of 2024 compared to the first quarter of 2023.

Non-operating income increased from 0.6% of revenues, before fuel surcharges, during the first quarter of 2023 to 3.7% of revenues, before fuel surcharges, during the first quarter of 2024.

This increase resulted primarily from an increase in interest income recognized, combined with a larger increase in the market value of our marketable equity securities portfolio as of March 31, 2024 as compared to March 31, 2023.

The truckload services division operating ratio, which measures the ratio of operating expenses, net of fuel surcharges, to operating revenues, before fuel surcharges, increased from 99.3% for the first quarter of 2023 to 104.2% for the first quarter of 2024.

RESULTS OF OPERATIONS – LOGISTICS AND BROKERAGE SERVICES

The following table sets forth, for logistics and brokerage services, the percentage relationship of expense items to operating revenues, before fuel surcharges, for the periods indicated.

2 unchanged sentences

Three Months Ended

Nine Months Ended

September 30,

(percentages)

5 unchanged sentences

Operating income

Non-operating income / (expense)

Non-operating income

Interest expense

Income before income taxes

THREE MONTHS ENDED SEPTEMBER 30, 2023 VS.

THREE MONTHS ENDED SEPTEMBER 30, 2022

During the third quarter of 2023, logistics and brokerage services revenue, before fuel surcharges, decreased 13.2% to $62.1 million as compared to $71.5 million during the third quarter of 2022.

The decrease relates to a decrease in the average rates charged to customers, offset by an increase in the number of loads serviced during the third quarter of 2023 as compared to the third quarter of 2022.

Rents and purchased transportation increased from 80.4% of revenues, before fuel surcharges, during the third quarter of 2022 to 86.8% of revenues, before fuel surcharges, during the third quarter of 2023.

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

The logistics and brokerage services division operating ratio, which measures the ratio of operating expenses, net of fuel surcharges, to operating revenues, before fuel surcharges, increased from 85.7% for the third quarter of 2022 to 93.3% for the third quarter of 2023.

NINE MONTHS ENDED SEPTEMBER 30, 2023 VS.

NINE MONTHS ENDED SEPTEMBER 30, 2022

During the first nine months of 2023, logistics and brokerage services revenue, before fuel surcharges, decreased 8.8% to $192.2 million as compared to $210.6 million during the first nine months of 2022.

The decrease relates to a decrease in the average rates charged to customers, offset by an increase in the number of loads serviced during the first nine months of 2023 as compared to the first nine months of 2022.

Rents and purchased transportation increased from 81.5% of revenues, before fuel surcharges, during the first nine months of 2022 to 85.1% of revenues, before fuel surcharges, during the first nine months of 2023.

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

The logistics and brokerage services division operating ratio, which measures the ratio of operating expenses, net of fuel surcharges, to operating revenues, before fuel surcharges, increased from 86.9% for the first nine months of 2022 to 91.2% for the first nine months of 2023.

RESULTS OF OPERATIONS –

COMBINED SERVICES

THREE MONTHS ENDED SEPTEMBER 30, 2023 VS.

THREE MONTHS ENDED SEPTEMBER 30, 2022

Net income for all divisions was approximately $6.1 million, or 3.5% of revenues, before fuel surcharges for the third quarter of 2023 as compared to net income of $24.6 million, or 11.3% of revenues, before fuel surcharges for the third quarter of 2022.

The decrease in net income resulted in diluted earnings per share of $0.28 for the third quarter of 2023 as compared to diluted earnings per share of $1.09 for the third quarter of 2022.

NINE MONTHS ENDED SEPTEMBER 30, 2023 VS.

NINE MONTHS ENDED SEPTEMBER 30, 2022

Net income for all divisions was approximately $20.6 million, or 3.8% of revenues, before fuel surcharges for the first nine months of 2023 as compared to net income of $72.7 million, or 11.8% of revenues, before fuel surcharges for the first nine months of 2022.

The decrease in net income resulted in a diluted earnings per share of $0.93 for the first nine months of 2023 as compared to diluted earnings per share of $3.24 for the first nine months of 2022.

THREE MONTHS ENDED MARCH 31, 2024 VS.

THREE MONTHS ENDED MARCH 31, 2023

During the first quarter of 2024, logistics and brokerage services revenue, before fuel surcharges, decreased 13.9% to $58.8 million as compared to $68.3 million during the first quarter of 2023.

The decrease was primarily related to a 23.4% decrease in revenue per load, partially offset by a 12.4% increase in the number of loads during the first quarter 2024 as compared to 2023.

The decrease in revenue per load was due to a reduction in rates paid for brokered loads, as spot market rates were negatively impacted by downward rate pressure driven by the challenging truckload freight rate environment across our industry year to year.

Rents and purchased transportation increased from 82.4% of revenues, before fuel surcharges, during the first quarter of 2023 to 86.1% of revenues, before fuel surcharges, during the first quarter of 2024.

The increase results from paying third-party carriers a larger percentage of customer revenue, coupled with the interaction of a decrease in operating revenues with the need for purchased transportation.

The logistics and brokerage services division operating ratio, which measures the ratio of operating expenses, net of fuel surcharges, to operating revenues, before fuel surcharges, increased from 88.8% for the first quarter of 2023 to 93.9% for the first quarter of 2024.

RESULTS OF OPERATIONS – COMBINED SERVICES

THREE MONTHS ENDED MARCH 31, 2024 VS.

THREE MONTHS ENDED MARCH 31, 2023

Net income for all divisions was approximately $0.3 million, or 0.2% of revenues, before fuel surcharges, for the first quarter of 2024 as compared to net income of $5.2 million, or 2.7% of revenues, before fuel surcharges, for the first quarter of 2023.

The decrease in net income resulted in diluted earnings per share of $0.01 for the first quarter of 2024 as compared to diluted earnings per share of $0.23 for the first quarter of 2023.

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 2023, we generated $93.8 million in cash from operating activities.

Investing activities used $10.9 million in cash in the first nine months of 2023.

Financing activities used $54.7 million in cash in the first nine months of 2023.

During the first three months of 2024, we generated $9.6 million in cash from operating activities.

Investing activities used $9.8 million in cash in the first three months of 2024.

Financing activities used $20.4 million in cash in the first three months of 2024.

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

We typically use installment notes with fixed interest rates and terms ranging from 36 to 84 months, 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 2023, we utilized cash on hand, installment notes, and our line of credit to finance purchases of revenue equipment and other assets of approximately $26.8 million.

During the remainder of 2023, we expect to purchase approximately 330 trucks and 1,130 trailers while continuing to sell or trade older equipment, which we expect to result in net capital expenditures of approximately $90.8 million.

During the first three months of 2024, we utilized cash on hand, installment notes, and our line of credit to finance purchases of revenue equipment and other assets of approximately $21.8 million.

During the remainder of 2024, we expect to purchase approximately 519 new trucks and 1,196 new trailers while continuing to sell or trade older equipment, which we expect to result in net capital expenditures of approximately $82.5 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 2023, we maintained a revolving line of credit.

Amounts outstanding under the line bear interest at Term SOFR plus 1.35% (6.65% at September 30, 2023), 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, 2023 borrowings against the line of credit were $0, but there were letters of credit of approximately $0.4 million which reduced the availability to borrow against the line of credit to $59.6 million.

Trade accounts receivable decreased from $134.7 million at December 31, 2022 to $96.5 million at September 30, 2023.

The decrease resulted from a decrease in freight revenues, which flow through accounts receivable, during the third quarter of 2023 as compared to the fourth quarter of 2022.

Prepaid expenses and deposits decreased from $15.7 million at December 31, 2022 to $10.9 million at September 30, 2023.

During the first three months of 2024, we maintained a revolving line of credit.

Amounts outstanding under the line bear interest at Term SOFR plus 1.35% (6.68% at March 31, 2024), are secured by our trade accounts receivable and mature on July 1, 2026.

An “unused fee” of 0.25% is charged if average borrowings are less than $18.0 million.

At March 31, 2024 outstanding advances on the line of credit were approximately $0.1 million, consisting of letters of credit, with availability to borrow $59.9 million.

Trade accounts receivable increased from $80.6 million at December 31, 2023 to $92.3 million at March 31, 2024.

The increase resulted from an increase in freight revenues, which flow through accounts receivable, coupled with the reduction of receivables held in suspense during the first quarter of 2024 as compared to the fourth quarter of 2023.

Prepaid expenses and deposits decreased from $13.2 million at December 31, 2023 to $10.8 million at March 31, 2024.

The decrease relates to the normal amortization of items prepaid as of December 31, 2023.

Revenue equipment decreased from $637.5 million at December 31, 2022 to $634.2 million at September 30, 2023.

The decrease is primarily due to the disposition of aging trucks and trailers during the first nine months of 2023.

Accounts payable increased from $48.9 million at December 31, 2022 to $57.7 million at September 30, 2023.

This increase was primarily attributable to accruals for fixed asset purchases during the first nine months of 2023.

Accrued expenses and other liabilities decreased from $34.2 million at December 31, 2022 to $22.1 million at September 30, 2023.

The decrease is primarily due to the payment of claims reserves that were accrued at December 31, 2022.

Revenue equipment decreased from $689.2 million at December 31, 2023 to $675.5 million at March 31, 2024.

The decrease is primarily due to the disposition of aging trucks and trailers during the first quarter of 2024, partially offset by purchases of new trucks and trailers during the first quarter of 2024.

Land increased from $23.1 million at December 31, 2023 to $36.5 million at March 31, 2024.

The increase is primarily due to the purchase of 16.23 acres in El Paso, TX that will serve as an additional terminal for our truckload operations.

Accounts payable decreased from $62.7 million at December 31, 2023 to $38.7 million at March 31, 2024.

This decrease was primarily attributable to payments made in the first quarter of 2024 on contracts for revenue equipment placed in service, but not yet paid for at December 31,2023.

There are no outstanding invoices for revenue equipment at March 31, 2024.

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 $264.3 million at December 31, 2022 to $227.6 million at September 30, 2023.

The decrease was primarily related to a decrease in the financing of additional revenue equipment during the first nine months of 2023.

Long-term debt and current maturities of long-term debt, on an aggregate basis, increased from $261.7 million at December 31, 2023 to $271.6 million at March 31, 2024.

The increase was primarily related to the financing of additional revenue equipment during the first quarter of 2024.

NEW ACCOUNTING PRONOUNCEMENTS

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements