UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.20549

FORM 10-Q

☒Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

~~QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934~~

For the quarterly period ended June 30, ~~2019~~2020

☐ Transition Report Pursuant to the Section 13 or 15(d) of the Securities Exchange Act of 1934

~~TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934~~

For the transition period from __________to__________

~~Commission File Number: 0-15057~~

P.A.M. TRANSPORTATION SERVICES, INC.

(Exact name of registrant as specified in its charter)

Delaware

0-1507

71-0633135

(State or other jurisdiction of

incorporation or organization)

(Commission File

Number)

(I.R.S. Employer Identification no.)

297 West Henri De Tonti, Tontitown, Arkansas 72770

(Address of principal executive offices) (Zip Code)

Registrant’s telephone number, including area code: (479) 361-9111

N/A

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)		Name of each exchange on which registered
~~(Former name, former address and former fiscal year, if changed since last report)~~Common Stock, $.01 par value	PTSI		NASDAQ Global Market

~~Securities registered pursuant to Section 12(b)~~ Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to the filing requirements for the past 90 days. Yes ☑ No ☐

~~Title of each class~~	~~Trading Symbol(s)~~	~~Name of each exchange on which registered~~
~~Common Stock, $.01 par value~~	~~PTSI~~	~~NASDAQ Global Market~~

~~Indicate by check mark whether the registrant (1) has filed all reports~~

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files.)

~~the filing requirements for the past 90 days.~~

Yes ☑ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to
~~submit such files).~~				~~Yes ☑ No ☐~~

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☐		Accelerated filer ☑
Non-accelerated filer ☐	Smaller reporting company ☑
	Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ☐ No ☑

~~Yes ☐ No ☑~~

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:

Class		Outstanding at July 25, ~~2019~~2020
Common Stock, $.01 Par Value		~~5,757,318~~5,775,906

Table of Contents

P.A.M. TRANSPORTATION SERVICES, INC.

Form 10-Q

For ~~The~~the Quarter Ended June 30, ~~2019~~2020

Table of Contents

Part I. Financial Information

Item 1.	Financial Statements (unaudited).	3

	Condensed Consolidated Balance Sheets as of June 30, ~~2019~~2020 and December 31, ~~2018~~2019	3

	Condensed Consolidated Statements of Operations for the Three and Six Months Ended June 30, ~~2019~~2020 and ~~2018~~2019	4

	Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, ~~2019~~2020 and ~~2018~~2019	5

	Condensed Consolidated Statement of Stockholders’ Equity for the ~~Three and~~ Six Months Ended June 30, ~~2019~~2020 and ~~2018~~2019	6

	Notes to Condensed Consolidated Financial Statements as of June 30, ~~2019~~2020	7

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations.	16

Item 3.	Quantitative and Qualitative Disclosures about Market Risk.	22

Item 4.	Controls and Procedures.	23


Part II. Other Information

Item 1.	Legal Proceedings.	24

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds.	25

Item 6.	~~Exhibits.~~Exhibits.	26

Signatures		27

Table of Contents

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements.

P.A.M. TRANSPORTATION SERVICES, INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

(in thousands, except share and per share data)

~~P.A.M. TRANSPORTATION SERVICES, INC. AND SUBSIDIARIES~~

~~Condensed Consolidated Balance Sheets~~

~~(in thousands, except share and per share data)~~

	June 30,			December 31,			June 30,			December 31,
	2019			2018			2020			2019
	(unaudited)			(audited)			(unaudited)			(audited)
ASSETS
Current assets:
Cash and cash equivalents	$	296		$	282		$	327		$	318
Accounts receivable-net:
Trade, less allowance of $2,440 and $2,224, respectively		62,692			63,350
Trade, less current estimated credit loss of $3,309 and $2,952, respectively								56,362			61,784
Other		3,137			3,814			4,995			3,769
Inventories		1,301			1,461			1,194			1,327
Prepaid expenses and deposits		7,842			10,393			7,285			8,669
Marketable equity securities		29,454			27,549			25,654			29,521
Income taxes refundable		1,974			1,876			940			504
Total current assets		106,696			108,725			96,757			105,892

Property and equipment:
Land		5,596			5,596			16,086			7,246
Structures and improvements		19,937			19,547			31,228			20,204
Revenue equipment		482,478			457,142			536,510			524,527
Office furniture and equipment		10,294			10,040			11,476			11,185
Total property and equipment		518,305			492,325			595,300			563,162
Accumulated depreciation		(156,061	)		(137,738	)		(195,142	)		(175,887	)
Net property and equipment		362,244			354,587			400,158			387,275

Other assets		4,077			2,754			4,519			4,842

TOTAL ASSETS	$	473,017		$	466,066		$	501,434		$	498,009

LIABILITIES AND STOCKHOLDERS’ EQUITY
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	20,356		$	20,002		$	29,467		$	16,597
Accrued expenses and other liabilities		24,204			23,497			43,215			40,610
Current maturities of long-term debt		58,738			63,908			64,581			67,637
Total current liabilities		103,298			107,407			137,263			124,844

Long-term debt-less current portion		158,397			157,315			168,492			174,187
Deferred income taxes		66,820			61,897			62,621			63,522
Other long-term liabilities		1,015			-			1,205			1,481
Total liabilities		329,530			326,619			369,581			364,034

STOCKHOLDERS' EQUITY
Preferred stock, $.01 par value, 10,000,000 shares authorized; none issued		-			-
Common stock, $.01 par value, 40,000,000 shares authorized; 11,648,785 and 11,612,144 shares issued; 5,757,318 and 5,956,558 shares outstanding at June 30, 2019 and December 31, 2018, respectively		116			116
STOCKHOLDERS' EQUITY
Preferred stock, $.01 par value, 10,000,000 shares authorized; none issued								-			-
Common stock, $.01 par value, 40,000,000 shares authorized; 11,692,344 and 11,656,160 shares issued; 5,775,906 and 5,748,897 shares outstanding at June 30, 2020 and December 31, 2019, respectively								117			117
Additional paid-in capital		83,302			82,776			84,014			83,688
Treasury stock, at cost; 5,891,467 and 5,655,586 shares at June 30, 2019 and December 31, 2018, respectively		(155,993	)		(142,552	)
Treasury stock, at cost; 5,916,438 and 5,907,263 shares at June 30, 2020 and December 31, 2019, respectively								(157,158	)		(156,837	)
Retained earnings		216,062			199,107			204,880			207,007
Total stockholders’ equity		143,487			139,447			131,853			133,975

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	473,017		$	466,066		$	501,434		$	498,009

See notes to condensed consolidated financial statements.

Table of Contents

P.A.M. TRANSPORTATION SERVICES, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Operations

(unaudited)

(in thousands, except per share data)

	Three Months Ended						Six Months Ended						Three Months Ended						Six Months Ended
	June 30,						June 30,						June 30,						June 30,
	2019			2018			2019			2018			2020			2019			2020			2019
OPERATING REVENUES:
Revenue, before fuel surcharge	$	112,352		$	112,881		$	222,696		$	211,985		$	85,765		$	112,352		$	197,587		$	222,696
Fuel surcharge		20,648			22,421			38,990			42,776			7,214			20,648			24,547			38,990
Total operating revenues		133,000			135,302			261,686			254,761			92,979			133,000			222,134			261,686

OPERATING EXPENSES AND COSTS:
Salaries, wages and benefits		30,603			29,971			61,667			58,610			27,576			30,603			60,374			61,667
Operating supplies and expenses		24,520			23,506			48,032			46,176			18,276			24,520			41,991			48,032
Rent and purchased transportation		43,353			52,075			87,907			97,992			30,360			43,353			73,287			87,907
Depreciation		13,614			12,734			26,801			24,358			14,237			13,614			28,532			26,801
Insurance and claims		4,061			4,451			8,175			8,719			2,515			4,061			2,557			8,175
Other		3,539			3,067			6,533			5,648			1,967			3,539			7,811			6,533
Loss (gain) on sale or disposition of equipment		99			(519	)		(327	)		(515	)		55			99			103			(327	)
Total operating expenses and costs		119,789			125,285			238,788			240,988			94,986			119,789			214,655			238,788

OPERATING INCOME		13,211			10,017			22,898			13,773
OPERATING (LOSS) INCOME														(2,007	)		13,211			7,479			22,898

NON-OPERATING (EXPENSE)/INCOME		(197	)		632			3,275			(247	)
NON-OPERATING INCOME (EXPENSE)														2,961			(197	)		(6,115	)		3,275
INTEREST EXPENSE		(2,059	)		(1,355	)		(4,099	)		(2,515	)		(2,179	)		(2,059	)		(4,391	)		(4,099	)

INCOME BEFORE INCOME TAXES		10,955			9,294			22,074			11,011
(LOSS) INCOME BEFORE INCOME TAXES														(1,225	)		10,955			(3,027	)		22,074

FEDERAL AND STATE INCOME TAX EXPENSE:
FEDERAL AND STATE INCOME TAX (BENEFIT) EXPENSE:
Current		107			142			196			177			-			107			-			196
Deferred		2,194			1,863			4,923			2,158			(402	)		2,194			(900	)		4,923
Total federal and state income tax expense		2,301			2,005			5,119			2,335
Total federal and state income tax (benefit) expense														(402	)		2,301			(900	)		5,119

NET INCOME	$	8,654		$	7,289		$	16,955		$	8,676
NET (LOSS) INCOME													$	(823	)	$	8,654		$	(2,127	)	$	16,955

INCOME PER COMMON SHARE:
(LOSS) INCOME PER COMMON SHARE:
Basic	$	1.47		$	1.18		$	2.87		$	1.41		$	(0.14	)	$	1.47		$	(0.37	)	$	2.87
Diluted	$	1.45		$	1.17		$	2.84		$	1.39		$	(0.14	)	$	1.45		$	(0.37	)	$	2.84

AVERAGE COMMON SHARES OUTSTANDING:
Basic		5,901			6,159			5,911			6,163			5,766			5,901			5,756			5,911
Diluted		5,949			6,229			5,962			6,257			5,766			5,949			5,756			5,962

See notes to condensed consolidated financial statements.

Table of Contents

P.A.M. TRANSPORTATION SERVICES, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

(unaudited)

(in thousands)

	Six Months Ended						Six Months Ended
	June 30,						June 30,
	2019			2018			2020			2019
OPERATING ACTIVITIES:
Net income	$	16,955		$	8,676
Adjustments to reconcile net income to net cash provided by operating activities:
Net (loss) / income							$	(2,127	)	$	16,955
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Depreciation		26,801			24,358			28,532			26,801
Bad debt expense		216			389			357			216
Stock compensation-net of excess tax benefits		526			395			326			526
Provision for deferred income taxes		4,923			2,158
Recognized (gain) loss on marketable equity securities		(2,593	)		810
Gain on sale or disposition of equipment		(327	)		(515	)
Provision for deferred income (benefit) /taxes								(900	)		4,923
Recognized loss / (gain) on marketable equity securities								6,988			(2,593	)
Loss / (gain) on sale or disposition of equipment								103			(327	)
Changes in operating assets and liabilities:
Accounts receivable		1,119			(17,258	)		3,840			1,119
Prepaid expenses, deposits, inventories, and other assets		2,690			3,314			1,266			2,690
Income taxes (payable) refundable		(98	)		124
Income taxes payable								(132	)		(98	)
Trade accounts payable		1,385			5,361			5,623			1,385
Accrued expenses and other liabilities		1,602			1,712			86			1,602
Net cash provided by operating activities		53,199			29,524			43,962			53,199

INVESTING ACTIVITIES:
Purchases of property and equipment		(26,912	)		(39,768	)		(22,968	)		(26,912	)
Proceeds from disposition of equipment		7,760			4,450			7,066			7,760
Sales of marketable equity securities		762			-			861			762
Purchases of marketable equity securities, net of return of capital		(72	)		(2,006	)		(3,982	)		(72	)
Net cash used in investing activities		(18,462	)		(37,324	)		(19,023	)		(18,462	)

FINANCING ACTIVITIES:
Borrowings under line of credit		283,704			299,959			225,926			283,704
Repayments under line of credit		(283,187	)		(274,702	)		(230,497	)		(283,187	)
Borrowings of long-term debt		16,386			25,046			-			16,386
Repayments of long-term debt		(37,006	)		(37,002	)		(22,550	)		(37,006	)
Borrowings under margin account		252			2,166			4,004			252
Repayments under margin account		(1,431	)		(565	)		(1,492	)		(1,431	)
Repurchases of common stock		(13,441	)		(7,531	)		(321	)		(13,441	)
Exercise of stock options		-			468
Net cash (used in) provided by financing activities		(34,723	)		7,839
Net cash used in financing activities								(24,930	)		(34,723	)

NET INCREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH		14			39			9			14

CASH, CASH EQUIVALENTS AND RESTRICTED CASH -Beginning of period		282			224			318			282

CASH, CASH EQUIVALENTS AND RESTRICTED CASH -End of period	$	296		$	263		$	327		$	296

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION-
Cash paid during the period for:
Interest	$	4,102		$	2,452		$	3,778		$	4,102
Income taxes	$	292		$	53		$	133		$	292

NONCASH INVESTING AND FINANCING ACTIVITIES-
Purchases of property and equipment included in accounts payable	$	566		$	9,888		$	7,672		$	566

See notes to condensed consolidated financial statements.

Table of Contents

~~P.A.M. TRANSPORTATION SERVICES, INC. AND SUBSIDIARIES~~

~~Condensed~~ ~~Consolidated Statement~~s ~~of S~~~~tockholder~~s’

P.A.M. TRANSPORTATION SERVICES, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Stockholders’ Equity

(unaudited)

(in thousands)

Common Stock
Shares / Amount

Additional
Paid-In Capital

Treasury
Stock

Retained
Earnings

Total

Balance at January 1, 2019
5,957 $ 116 $ 82,776 $ (142,552 ) $ 199,107 $ 139,447

Net Income
8,301 8,301

Stock awards-shares issued including tax benefits
1 -

Treasury stock repurchases
(40 ) (1,618 ) (1,618 )

Stock based compensation (1)
216 216

Balance at March 31, 2019
5,918 $ 116 $ 82,992 $ (144,170 ) $ 207,408 $ 146,346

Net Income
8,654 8,654

Stock awards-shares issued including tax benefits
35 - -

Treasury stock repurchases
(196 ) (11,823 ) (11,823 )

Stock based compensation
310 310

Balance at June 30, 2019
5,757 $ 116 $ 83,302 $ (155,993 ) $ 216,062 $ 143,487

	Common Stock Shares / Amount					Additional Paid-In Capital		Treasury Stock			Retained Earnings			Total

Balance at January 1, 2020		5,749		$	117	$	83,688	$	(156,837	)	$	207,007		$	133,975

Net Loss												(1,304	)		(1,304	)

Exercise of stock awards-shares issued including tax benefits		2													-

Treasury stock repurchases		(9	)						(321	)					(321	)

Stock based compensation							305								305

Balance at March 31, 2020		5,742		$	117	$	83,993	$	(157,158	)	$	205,703		$	132,655

Net Loss												(823	)		(823	)

Exercise of stock awards-shares issued including tax benefits		34													-

Treasury stock repurchases															-

Stock based compensation							21								21

Balance at June 30, 2020		5,776		$	117	$	84,014	$	(157,158	)	$	204,880		$	131,853

	Common Stock Shares / Amount					Additional Paid-In Capital		Treasury Stock			Retained Earnings		Total

Balance at January 1, 2019		5,957		$	116	$	82,776	$	(142,552	)	$	199,107	$	139,447

Net Income												8,301		8,301

Exercise of stock awards-shares issued including tax benefits		1												-

Treasury stock repurchases		(40	)						(1,618	)				(1,618	)

Stock based compensation (1)							216							216

Balance at March 31, 2019		5,918		$	116	$	82,992	$	(144,170	)	$	207,408	$	146,346

Net Income												8,654		8,654

Exercise of stock awards-shares issued including tax benefits		35												-

Treasury stock repurchases		(196	)						(11,823	)				(11,823	)

Stock based compensation							310							310

Balance at June 30, 2019		5,757		$	116	$	83,302	$	(155,993	)	$	216,062	$	143,487

(1)	Approximately $90,000 was accrued as ~~Share-based~~share-based compensation at March 31, 2019 ~~for restricted stock earned by non-employee directors but for which shares were not issued until April 2019.~~

Common Stock
Shares / Amount

Additional
Paid-In Capital

Accumulated
Other
Comprehensive
Income

Treasury
Stock

Retained
Earnings

Total

Balance at January 1, 2018
6,161 $ 115 $ 81,559 $ 7,444 $ (129,183 ) $ 167,669 $ 127,604

Net Income
1,387 1,387

Exercise of stock options and vesting of stock awards-shares issued including tax benefits
17 168 168

Treasury stock repurchases
(1 ) (36 ) (36 )

Stock based compensation (1)
162 162

Cumulative effect adjustment – ASU 2016-01
(7,444 ) 7,444 -

Balance at March 31, 2018
6,177 $ 115 $ 81,889 - $ (129,219 ) $ 176,500 $ 129,285

Net Income
7,289 7,289

Exercise of stock options and vesting of stock awards-shares issued including tax benefits
63 1 299 300

Treasury stock repurchases
(186 ) (7,495 ) (7,495 )

Stock based compensation (1)
233 233

Balance at June 30, 2018
6,054 $ 116 $ 82,421 - $ (136,714 ) $ 183,789 $ 129,612

~~(1)~~

~~Approximately $70,000 was accrued as Share-based compensation at March 31, 2018~~ for restricted stock earned by non-employee directors but for which shares were not issued until April ~~2018.~~2019.

~~See notes to condensed consolidated financial statements.~~

See notes to Condensed Consolidated Financial Statements.

Table of Contents

P.A.M. TRANSPORTATION SERVICES, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (unaudited)

June 30, ~~2019~~2020

NOTE A:A: BASIS OF PRESENTATION

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

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles (“GAAP”) for interim financial information and with the instructions to Form ~~10-Q~~10-Q and Article 10 of Regulation ~~S-X.~~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 consolidated balance sheet at December 31, ~~2018~~ 2019 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 ~~six-month~~three and six-month period ended June 30, ~~2019~~ 2020 are not necessarily indicative of the results that may be expected for the year ending December 31, ~~2019.~~ 2020. For further information, refer to the consolidated financial statements and the footnotes thereto included in the Company’s annual report on Form ~~10-K~~10-K for the year ended December 31, ~~2018.~~2019.

NOTE B: RECENT ACCOUNTING PRONOUNCEMENTS

In ~~July 2018,~~ March 2020, the ~~Financial Accounting Standards Board, (“FASB”)~~FASB issued Accounting Standards Update ~~(“ASU”)~~ No. ~~2018-09,~~2020-04, (“ASU ~~2018-09”~~2020-04”), ~~Codification Improvements.~~Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. ASU ~~2018-09~~2020-04 was issued to ~~update codification~~provide optional guidance for a limited period of time to ease the potential burden in accounting for reference rate reform on ~~multiple topics, and includes updates for technical corrections, clarifications and other minor improvements.~~financial reporting. ASU ~~2018-09~~2020-04 is effective ~~for fiscal years, and interim periods within those years, beginning after~~ as of March 12, 2020 through December ~~15, 2018, with early adoption permitted.~~ 31, 2022. The ~~adoption~~Company has evaluated the provisions of this standard and determined that it is applicable to our line of credit and investment margin account. The London Interbank Offered Rate “LIBOR” is the basis for interest charges on outstanding borrowings for both our line of credit and investment margin account. The 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. The Company has evaluated the new guidance ~~on January 1, 2019 did~~ and does not expect it to have a material impact on ~~the Company’s~~its financial condition, results of operations, or cash flows.

In ~~July 2018,~~ June 2016, the FASB issued ASU No. ~~2018-10,~~2016-13, (“ASU 2018-10”), Codification Improvements to Topic 842, Leases. ASU 2018-10 was issued to update codification specific to Topic 842, and includes updates for technical corrections, clarifications and other minor improvements. ASU 2018-10 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2018, with early adoption permitted. The adoption of this guidance on January 1, 2019 did not have a material impact on the Company’s financial condition, results of operations, or cash flows.

~~In June~~ 2016 ~~the FASB issued ASU No. 2016-13, (“ASU 2016-13”~~-13”), Accounting for Credit Losses (Topic ~~326)~~326). ASU ~~2016-13~~2016-13 requires the use of an “expected loss” model on certain types of financial instruments. The standard also amends the impairment model for available-for-sale debt securities and requires estimated credit losses to be recorded as allowances instead of reductions to the amortized cost of the securities. For smaller reporting companies, ASU ~~2016-13~~2016-13 is effective for fiscal years, and interim periods within those years, beginning after December 15, ~~2019,~~ 2022, with early adoption permitted. ~~The Company is evaluating the new guidance, but does not expect it to have a material impact on its financial condition, results of operations, or cash flows.~~

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842). This update seeks to increase the transparency and comparability among public entities by requiring filers to recognize lease assets and lease liabilities on the balance sheet and disclose key information about leasing arrangements. In transition, lessees and lessors are required to recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach. The modified retrospective approach includes a number of optional practical expedients that companies may elect to apply. These practical expedients relate to the identification and classification of leases that commenced before the effective date, initial direct costs for leases that commenced before the effective date, and the ability to use hindsight in evaluating lessee options to extend or terminate a lease or to purchase the underlying asset. The new standard was effective for public companies for annual periods beginning after December 15, 2018, and interim periods within those years, with early adoption permitted.

To satisfy the standard’s objective, a lessee will recognize a right-of-use asset representing its right to use the underlying asset for the lease term and a lease liability for the obligation to make lease payments. Both the right-of-use asset and lease liability will initially be measured at the present value of the lease payments, with subsequent measurement dependent on the classification of the lease as either a finance or an operating lease. For leases with a term of 12 months or less, a lessee is permitted to make an accounting policy election by class of underlying asset to not recognize lease assets and lease liabilities. If a lessee makes this election, it should recognize lease expense for such leases generally on a straight-line basis over the lease term. Accounting by lessors will remain mostly unchanged from current U.S. GAAP.

The adoption of this guidance on January 1, ~~2019~~ 2020 did not have a material impact on the Company’s financial condition, results of operations, or cash flows. ~~See Note M - Leases for additional adoption information and disclosures required by Accounting Standards Codification (“ASC”) Topic 842.~~

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~~In January 2016, the FASB issued ASU 2016-01, (“ASU 2016-01”),~~ ~~Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities~~~~. The updated guidance enhances the reporting model for financial instruments, which includes amendments to address aspects of recognition, measurement, presentation and disclosure.~~

~~The provisions of ASU 2016-01 require, among other things, that the Company:~~

●

~~Categorize securities as equity securities or debt securities~~

●

~~Eliminate the classification of equity securities as trading or available for sale~~

●

~~Determine which securities have readily determinable fair values~~

●

~~Use the exit price notion when measuring the fair value of financial instruments for disclosure purposes~~

●

~~Consider the need for a valuation allowance related to a deferred tax asset on available-for-sale securities in combination with the Company’s other deferred tax assets, and~~

●

~~Recognize changes in the fair market value of equity securities in net income~~

ASU 2016-01 is effective for annual and interim periods beginning after December 15, 2017. With certain exceptions, early adoption was not permitted. The adoption of this guidance on January 1, 2018, did not have a significant impact on the Company’s financial condition or cash flows, but did impact the Company’s results of operations, as the current guidance requires changes in market value related to equity securities to be recognized in net income, rather than being recognized as other comprehensive income. Upon adoption, approximately $7.4 million in accumulated changes in the fair market value of the Company’s equity securities, net of deferred tax, that were presented at December 31, 2017 as Accumulated Other Comprehensive Income were reclassified to Retained Earnings.

With the exception of the new standards discussed above, there have been no recent accounting pronouncements or changes in accounting pronouncements during the six months ended June 30, 2019, as compared to the recent accounting pronouncements described in our Annual Report on Form 10-K for the fiscal year ended December 31, 2018, that are of significance or potential significance to the Company.

NOTE C: REVENUE RECOGNITION

The Company has a single performance obligation, 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. Where the Company decides to self-transport the freight, the Company classifies the service as truckload services, and where the Company arranges for alternate transportation of the freight, the Company classifies the service as brokerage and logistics services. In either case, the Company is paid a rate to transport freight from its origin location to a specified destination. Because the primary factors influencing revenue recognition, including performance obligation, customer base, and timing of revenue recognition, are the same for both of its service categories, the Company utilizes the same revenue recognition method throughout its operations.

Company revenue is generated from freight transportation services performed utilizing heavy truck trailer combinations. While various ownership arrangements may exist for the equipment utilized to perform these services, including Company owned or leased, owner-operator owned, and third ~~party~~-party carriers, revenue is generated from the same base of customers. Contracts with these customers establish rates for services performed, which are predominantly rates that will be paid to pick up, transport and drop off freight at various locations. In addition to transportation, revenue is also awarded for various accessorial services performed in conjunction with the base transportation service. 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.

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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 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. Shipments are generally conducted over a relatively short time span, generally one to three days; however, freight is sometimes stored temporarily in our trailer at one of our drop yard locations or at a location designated by a customer. 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.

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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. At the point that freight revenue rates are negotiated with customers, a sliding scale is agreed upon that approximately adjusts diesel fuel costs to an ~~agreed upon~~agreed-upon base amount. In general, as fuel prices increase, revenue from fuel surcharge increases, so that diesel fuel cost is adjusted to the approximate base amount agreed upon.

Revenue is recognized over time as the freight progresses towards its destination and the transportation service obligation is fulfilled. For loads picked up during the reporting period, but delivered in a subsequent reporting period, revenue is allocated to each period based on the transit time in each period as a percentage of total transit time. There are no assets or liabilities recorded in conjunction with revenue recognized, other than Accounts Receivable and ~~Allowance for doubtful accounts.~~Estimated Credit Losses.

NOTE D: 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 (expense).~~income.

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, below.~~J.

The following table sets forth market value, cost, and unrealized gains on equity securities as of June 30, ~~2019~~ 2020 and December 31, ~~2018.~~2019.

	June 30, 2019		December 31, 2018		June 30, 2020			December 31, 2019
	(in thousands)				(in thousands)
Fair market value	$	29,454	$	27,549	$	25,654		$	29,521
Cost		25,714		25,602		26,569			24,156
Unrealized gain	$	3,740	$	1,947
Unrealized (loss) / gain					$	(915	)	$	5,365

The following table sets forth the gross unrealized gains and losses on the Company’s marketable securities as of June 30, ~~2019~~ 2020 and December 31, ~~2018.~~2019.

	June 30, 2020			December 31, 2019
	(in thousands)
Gross unrealized gains	$	4,683		$	7,808
Gross unrealized losses		5,598			2,443
Net unrealized (loss) / gain	$	(915	)	$	5,365

June 30, 2019

December 31, 2018

(in thousands)

Gross unrealized gains
$ 6,803 $ 5,668
Gross unrealized losses
3,063 3,721
Net unrealized gains
$ 3,740 $ 1,947

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The following table shows the Company’s net realized gains during the ~~first~~ three and six months ~~respectively,~~ ending on June 30 of ~~2019~~2020 and ~~2018~~2019, respectively, on certain marketable equity securities.

Three Months Ended

Six Months Ended

June 30,

June 30,

2019

2018

2019

2018

(in thousands, except per share data)

Sales proceeds
$ 762 $ - $ 762 $ -
Cost of securities sold
248 - 248 -
Realized gain
$ 514 $ - $ 514 $ -

Realized gain, net of taxes
$ 395 $ - $ 395 $ -

	Three Months Ended					Six Months Ended
	June 30,					June 30,
	2020			2019		2020			2019
	(in thousands, except per share data)
Sales proceeds	$	184		$	762	$	861		$	762
Cost of securities sold		255			248		1,466			248
Realized (loss) / gain	$	(71	)	$	514	$	(605	)	$	514

For the quarter ended June 30, 2020, the Company recognized dividends received of approximately $326,000 in non-operating income in its consolidated statements of operations. For the quarter ended June 30, 2019, the Company recognized dividends received of approximately $307,000 in non-operating income in its consolidated statements of operations.

For the ~~quarter~~six months ended June 30, ~~2018,~~ 2020, the Company recognized dividends received of approximately ~~$254,000~~$631,000 in non-operating income in its consolidated statements of operations.

For the six months ended June 30, 2019, the Company recognized dividends received of approximately $586,000 in non-operating income in its ~~statements of operations. For the six months ended June 30, 2018, the Company recognized dividends received of approximately $472,000 in non-operating income in its~~consolidated statements of operations.

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The ~~market value of the~~ Company’s equity securities are periodically used as collateral against any outstanding margin account borrowings. As of June 30, ~~2019~~ 2020, and December 31, ~~2018,~~ 2019, the Company had outstanding borrowings of approximately ~~$10,103,000~~$9,986,000 and ~~$11,281,000,~~$7,474,000, respectively, under its margin account. Margin account borrowings are used for the purchase of marketable equity securities and as a source of short-term liquidity and are included in Accrued expenses and other liabilities on our balance sheets.

Our marketable equity securities portfolio had a net unrealized pre-tax gain in market value of approximately $2,482,000 during the second quarter of 2020, and a net unrealized pre-tax loss in market value of approximately $589,000 during the second quarter of 2019, ~~and a net unrealized pre-tax gain in market value of approximately $333,000 during the second quarter of 2018,~~ which were reported as ~~Non-operating~~non-operating income ~~(expense)~~ for the respective periods.

NOTE E: 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, 750,000 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~~ In January 2020, the ~~first six months of 2019, 2,058~~Company granted 7,000 shares of ~~restricted~~common stock ~~were granted~~ to ~~non-employee directors under the Plan. The~~certain key employees. These stock ~~awarded to non-employee directors had~~awards have a grant date ~~weighted average~~ fair value of ~~$48.75~~$56.45 per share, based on the closing price of the Company’s stock on the date of grant, and vest on the fourth anniversary date in January 2024.

In March 2020, the Company granted 2,608 shares of common stock to non-employee directors. These stock awards have a grant date fair value of $30.75 per share, based on the closing price of the Company’s stock on the date of grant, and vested immediately.

In April 2020, the Company granted 242 shares of common stock to a new non-employee director upon his election to the board of directors. This stock award has a grant date fair value of $41.40 per share, based on the closing price of the Company’s stock on the date of grant, and vested immediately.

The total grant date fair value of stock vested during the firstsix months of ~~2019~~2020 was approximately ~~$685,000.~~$636,000. Total pre-tax ~~stock based~~stock-based compensation expense, recognized in Salaries, wages and benefits during the firstsix months of 2020, was approximately $326,000 and includes approximately $90,000 recognized as a result of the grant of shares to each non-employee director. The recognition of stock-based compensation expense decreased both diluted and basic earnings per common share by approximately $0.04 during the firstsix months of 2020. As of June 30, 2020, the Company had stock-based compensation plans with total unvested stock-based compensation expense of approximately $603,000, which is being amortized on a straight-line basis over the remaining vesting period. As a result, the Company expects to recognize approximately $109,000 in additional compensation expense related to unvested option awards during the remainder of 2020 and to recognize approximately $215,000, $215,000, $59,000 and $5,000 in additional compensation expense related to unvested option awards during the years 2021,2022,2023 and 2024, respectively.

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The total grant date fair value of stock vested during the firstsix months of 2019 was approximately $685,000. Total pre-tax stock-based compensation expense recognized in Salaries, wages and benefits during the firstsix months of 2019 was approximately $526,000 and includes approximately $100,000 recognized as a result of the grant of shares to each non-employee director during the firstsix months of 2019. The recognition of stock-based compensation expense decreased both diluted and basic earnings per common share by approximately $0.07 during the firstsix months of 2019. As of June 30, 2019, the Company had stock based compensation plans with total unvested stock-based compensation expense of approximately $1,438,000 which is being amortized on a straight-line basis over the remaining vesting period. As a result, the Company expects to recognize approximately $420,000 in additional compensation expense related to unvested option awards during the remainder of 2019 and to recognize approximately $430,000, $294,000 and $294,000 in additional compensation expense related to unvested option awards during the years 2020, 2021 and 2022, respectively.

The total grant date fair value of stock vested during the first six months of 2018 was approximately $655,000. Total pre-tax stock-based compensation expense, recognized in Salaries, wages and benefits during the first six months of 2018 was approximately $395,000, and included approximately $70,000 recognized as a result of the grant of 276 shares to each non-employee director during the first six months of 2018. The recognition of stock-based compensation expense decreased both diluted and basic earnings per common share by approximately $0.05 during the first six months 2018. As of June 30, 2018, the Company had stock-based compensation plans with total unvested stock-based compensation expense of approximately ~~$1,008,000~~$1,438,000, which ~~was~~is being amortized on a straight-line basis over the remaining vesting period.

A summary of the status of the Company’s non-vested restricted stock as of June 30, ~~2019~~ 2020 and changes during the six months ended June 30, ~~2019,~~ 2020, is as follows:

Restricted Stock

Number of
Shares

Weighted-
Average Grant
Date Fair Value

Non-vested at January 1, 2019
100,917 $ 23.09
Granted
2,058 48.75
Canceled/forfeited/expired
- -
Vested
(36,641 ) 18.69
Non-vested at June 30, 2019
66,334 $ 26.31

~~__________________________~~

~~Cash received from option exercises totaled approximately $0 and $468,000 during the six months ended June 30, 2019 and June 30, 2018, respectively.~~

	Restricted Stock
	Number of Shares			Weighted- Average Grant Date Fair Value
Non-vested at January 1, 2020		55,459		$	24.35
Granted		9,850			49.28
Canceled/forfeited/expired		(11,714	)		41.01
Vested		(36,184	)		17.58
Non-vested at June 30, 2020		17,411		$	41.30

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NOTE F: SEGMENT INFORMATION

The Company follows the guidance provided by ASC Topic 280, Segment Reporting, in its identification of operating segments. The Company has determined that it has a total of two operating segments whose primary operations can be characterized as either Truckload Services or Brokerage and Logistics Services; however, in accordance with the aggregation criteria provided by FASB ASC Topic 280, the Company has determined that the operations of the two operating segments can be aggregated into a single reporting segment, motor carrier operations. Truckload Services revenues and Brokerage and Logistics Services revenues, each before fuel surcharges, were as follows:

	Three Months Ended June 30,								Six Months Ended June 30,								Three Months Ended June 30,								Six Months Ended June 30,
	2019				2018				2019				2018				2020				2019				2020				2019
	Amount		%		Amount		%		Amount		%		Amount		%		Amount		%		Amount		%		Amount		%		Amount		%
	(in thousands, except percentage data)																(in thousands, except percentage data)

Truckload Services revenue	$	92,867		82.7	$	89,131		79.0	$	182,879		82.1	$	169,655		80.0	$	69,958		81.6	$	92,867		82.7	$	161,268		81.6	$	182,879		82.1
Brokerage and Logistics Services revenue		19,485		17.3		23,750		21.0		39,817		17.9		42,330		20.0		15,807		18.4		19,485		17.3		36,319		18.4		39,817		17.9
Total revenues	$	112,352		100.0	$	112,881		100.0	$	222,696		100.0	$	211,985		100.0	$	85,765		100.0	$	112,352		100.0	$	197,587		100.0	$	222,696		100.0

NOTE G: 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~~June 2011 authorization. During the six months ended June 30, ~~2019,~~ 2020, the Company repurchased ~~43,138~~9,175 shares of its common stock at an aggregate cost of approximately ~~$1,800,000~~$321,000 under this program.

On May 13, 2019, 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 $60.00 nor less than $55.00 per share. Following the expiration of the tender offer on June 11, 2019, the Company accepted 192,743 shares of its common stock for purchase at $60.00 per share, at an aggregate purchase price of approximately $11.6 million, excluding fees and expenses related to the offer. The Company funded the purchase of the accepted shares tendered with available cash, cash equivalents and borrowings available under our existing line of credit and accounted for the repurchase of these shares as treasury stock on the Company’s condensed consolidated balance sheet as of June 30, 2019.

The Company accounts for Treasury stock using the cost method, and as of June 30, ~~2019, 5,891,467~~2020, 5,916,438 shares were held in the treasury at an aggregate cost of approximately ~~$155,993,000.~~$157,158,000.

NOTE H: ~~INCOME~~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					Six Months Ended
	June 30,					June 30,
	2020			2019		2020			2019
	(in thousands, except per share data)

Net (loss) income	$	(823	)	$	8,654	$	(2,127	)	$	16,955

Basic weighted average common shares outstanding		5,766			5,901		5,756			5,911
Dilutive effect of common stock equivalents		-			48		-			51
Diluted weighted average common shares outstanding		5,766			5,949		5,756			5,962

Basic (loss) earnings per share	$	(0.14	)	$	1.47	$	(0.37	)	$	2.87
Diluted (loss) earnings per share	$	(0.14	)	$	1.45	$	(0.37	)	$	2.84

Three Months Ended

Six Months Ended

June 30,

June 30,

2019

2018

2019

2018

(in thousands, except per share data)

Net income
$ 8,654 $ 7,289 $ 16,955 $ 8,676

Basic weighted average common shares outstanding
5,901 6,159 5,911 6,163
Dilutive effect of common stock equivalents
48 70 51 94
Diluted weighted average common shares outstanding
5,949 6,229 5,962 6,257

Basic earnings per share
$ 1.47 $ 1.18 $ 2.87 $ 1.41
Diluted earnings per share
$ 1.45 $ 1.17 $ 2.84 $ 1.39

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NOTE I: INCOME TAXES

The Company and its subsidiaries are subject to U.S. and Canadian federal income tax laws as well as the income tax laws of multiple state jurisdictions. The major tax jurisdictions in which the Company operates generally provide for a deficiency assessment statute of limitation period of three years, and as a result, the Company’s tax years ~~2015~~2016 and forward remain open to examination in those jurisdictions.

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In determining whether a tax asset valuation allowance is necessary, management, in accordance with the provisions of ASC ~~740-10-30,~~740-10-30, weighs all available evidence, both positive and negative, to determine whether, based on the weight of that evidence, a valuation allowance is necessary. If negative conditions exist which indicate a valuation allowance might be necessary, consideration is then given to what effect the future reversals of existing taxable temporary differences and the availability of tax strategies might have on future taxable income to determine the amount, if any, of the required valuation allowance. As of June 30, ~~2019,~~ 2020, management determined that the future reversals of existing taxable temporary differences and available tax strategies would generate sufficient future taxable income to realize its tax assets and therefore a valuation allowance was not necessary.

The Company recognizes a tax benefit from an uncertain tax position only if it is more likely than not that the position will be sustained on examination by taxing authorities, based on the technical merits of the position. As of June 30, ~~2019,~~ 2020, an adjustment to the Company’s condensed consolidated financial statements for uncertain tax positions has not been required as management believes that the Company’s tax positions taken in income tax returns filed or to be filed are supported by clear and unambiguous income tax laws. The Company recognizes interest and penalties related to uncertain income tax positions, if any, in income tax expense. During the six months ended June 30, ~~2019~~ 2020 and ~~2018,~~2019, the Company has not recognized or accrued any interest or penalties related to uncertain income tax positions.

The Company’s effective income tax rates were ~~23.2%~~29.7% and ~~21.2%~~23.2% for the six months ended June 30, ~~2019~~ 2020 and ~~2018,~~2019, respectively. Our effective tax rate for the six months ended June 30, ~~2019~~ 2020 differs from amounts computed by applying the United States federal statutory rates to pre-tax income primarily due to state income taxes and the tax benefits related to stock compensation.

NOTE J: 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. This guidance defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date and also establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs that may be used to measure fair value:

	Level 1:		Quoted market prices in active markets for identical assets or liabilities.

	Level 2:		Inputs other than Level 1 inputs that are either directly or indirectly observable such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; inputs other than quoted prices that are observable; or other inputs not directly observable, but derived principally from, or corroborated by, observable market data.

	Level 3:		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 June 30, ~~2019,~~ 2020, the following items are measured at fair value on a recurring basis:

Total

Level 1

Level 2

Level 3

(in thousands)

Marketable equity securities
$ 29,454 $ 29,454 - -

	Total		Level 1		Level 2		Level 3
	(in thousands)

Marketable equity securities	$	25,654	$	25,654		-		-

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.

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For long-term debt other than the lines of credit, the fair values are estimated using discounted cash flow analyses, based on the Company’s current incremental borrowing rates for similar types of borrowing arrangements. The carrying value and estimated fair value of this other long-term debt at June 30, ~~2019~~ 2020 was as follows:

Carrying
Value

Estimated
Fair Value

(in thousands)

Long-term debt
$ 206,425 $ 207,816

	Carrying Value		Estimated Fair Value
	(in thousands)

Long-term debt	$	220,597	$	222,235

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

NOTE K: NOTES PAYABLE

During the firstsix months of ~~2019,~~2020, the Company’s subsidiaries entered into installment obligations totaling approximately ~~$32.4~~$18.4 million for the purpose of purchasing revenue equipment. These obligations are payable in monthly installments and are recorded in long term debt and current maturities on the ~~consolidated balance sheets.~~Condensed Consolidated Balance Sheets. The ~~term~~terms of these obligations ~~ranges~~range from 36 months for trucks to 6084 months for trailers.

NOTE L: LITIGATION

Other than the lawsuit discussed below, the Company is not a party to any pending legal proceeding which management believes to be material to the financial statements of the Company. The Company maintains liability insurance against risks arising out of the normal course of its business.

We are a defendant in a ~~collective-action~~collective- and class-action lawsuit which was ~~re-filed~~filed on December 9, 2016, in the United States District Court for the Western District of Arkansas. The plaintiffs, who ~~are~~include current and former employee drivers who worked for the Company during the period of December 6,9, 2013, through ~~the date of the filing,~~ December 31, 2019, allege violations under the Fair Labor Standards Act and the Arkansas Minimum Wage ~~Law. The plaintiffs, through their attorneys, have filed causes of action alleging “Failure~~Law including “failure to pay minimum wage during orientation, failure to pay minimum wage to team drivers after initial orientation, failure to pay minimum wage to solo-drivers after initial orientation, failure to pay for compensable travel time, Comdata card fees, unlawful deductions, and breach of contract.” The plaintiffs are seeking actual and liquidated damages to include court costs and legal fees. On February 18, 2020, the United States District Court for the Western District of Arkansas granted preliminary approval of a $16.5 million settlement reached with the plaintiffs. The ~~lawsuit~~settlement is ~~being vigorously defended~~subject to final approval by the court. As of June 30, 2020, the preliminary settlement amount of $16.5 million is reserved in accrued expenses and ~~we cannot reasonably estimate, at this time,~~other liabilities in the ~~possible loss or range of loss, if any, that may arise from this lawsuit.~~Company’s condensed consolidated balance sheets. Management has determined that any losses under this claim will not be covered by existing insurance policies.

On March 31, 2020, the United States District Court for the Western District of Arkansas dismissed the collective- and class-action lawsuit filed against the company on May 29, 2019 by plaintiffs who were independent contractors alleging violations under the Fair Labor Standards Act and the Arkansas Minimum Wage Law. The plaintiffs, through their attorneys, alleged “misclassification as independent contractors, payment on the basis of miles without regard to the number of hours worked, improper deductions, and failure to pay minimum wage.” The dismissal of this lawsuit resulted when the Company and plaintiffs reached a settlement agreement and paid approximately $421,000, plus legal fees. Legal reserve accruals in excess of the amount outlined in the settlement agreement were reversed during the firstsix months of 2020, resulting in a reduction in accrued expenses and other liabilities in the Company’s condensed consolidated balance sheets.

The Company’s participation in the settlements of the above matters does not constitute an admission by the Company of any fault or liability, and the Company does not admit any fault or liability.

NOTE M:M: LEASES

Adoption of ASU ~~2016-02~~2016-02

The Company currently leases shop, office and parking spaces in various locations in the United States and Mexico. The initial term for the majority of these leases is one year or less, with an option for early cancellation and an option to renew for subsequent one- month periods. These leases can be terminated by either party by providing notice to the other party of the intent to cancel or to not extend. Relatively short lease durations for these properties are intended to provide flexibility to the Company as changing operational needs and shifting opportunities often result in cancellation or non-renewal of these leases by the Company or the lessor.

The initial lease term for certain shop and office locations is for periods ranging from one to five years with early cancellation options. The Company prefers that leases include early cancellation provisions to prevent becoming locked into ~~long term~~long-term leases that become operationally unjustified and to allow the flexibility to pursue more ~~cost effective~~cost-effective options for similar properties if they become available. These leases often include the option to extend for additional periods, which may or may not be exercised. 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.

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The Company adopted ASU ~~2016-02~~2016-02 and related amendments on January 1, 2019 utilizing the modified retrospective approach and elected to apply the practical expedients outlined above. This election allowed the Company to continue to recognize lease expense for operating leases for which the initial term was twelve months or less, or for which it is reasonably likely that early cancellation provisions will be exercised, on a ~~straight line~~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~~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.

Because the Company’s historical method of accounting for leases is consistent with the provisions of ASU ~~2016-02,~~2016-02, the adoption of ASU ~~2016-02~~2016-02 on January 1, 2019 did not have a material impact on the Company’s financial condition, results of operations, or cash flows.

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~~2019~~Right-of-Use Leases

~~In May~~Following the Company’s adoption of ASU 2016-02 and related amendments on January 1, 2019, the Company entered into an operating ~~lease for shop~~leases which include initial terms ranging from three to five years and ~~office space for an initial term of five years that does~~ which do not ~~provide~~ include an option for early cancellation. In accordance with the provisions of ASC Topic 842, ~~this lease~~ these leases resulted in the recognition of a right-of-use ~~asset~~assets and corresponding operating lease ~~liability of $1.3~~liabilities, respectively valued at $1.8 million as of June 30, ~~2019.~~ 2020. These assets and liabilities are recognized based on the present value of future minimum lease payments over the lease term at commencement date, using the Company’s incremental borrowing rate as of the respective dates of lease inception, as the rate implicit in each lease is not readily determinable. The right-of-use ~~asset is~~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 ~~consolidated balance sheet at June 30, 2019.~~Condensed Consolidated Balance Sheet. Lease expense is recorded on a straight-line basis over the lease term and is recorded in rent and purchased transportation in our ~~condensed consolidated statements~~Condensed Consolidated Statements of ~~operations. The~~Operations. While the lease ~~agreement contains a provision~~agreements contain provisions to extend after the initial term for an additional five ~~years. The~~ years, the Company is not reasonably certain ~~the~~these extension ~~option~~options will be ~~exercised, and has therefore not included~~exercised. Therefore, potential lease payments that might occur under this extension period are not included in amounts recorded in our ~~balance sheets~~Condensed Consolidated Balance Sheets as of June 30, ~~2019.~~2020.

Scheduled amounts and timing of cash flows arising from future right-of-use operating lease payments at June 30, ~~2019,~~ 2020, are:

Maturity of Lease Liabilities	(In thousands)
2020 (remaining)	$	311
2021		627
2022		544
2023		340
2024		114
Total undiscounted operating lease payments	$	1,936
Less: Imputed interest		(109	)
Present value of operating lease liabilities	$	1,827

Balance Sheet Classification
Right-of-use assets (recorded in other non-current assets)	$	1,827

Current lease liabilities (recorded in other current liabilities)	$	622
Long-term lease liabilities (recorded in other long-term liabilities)		1,205
Total operating lease liabilities	$	1,827

Other Information
Weighted-average remaining lease term for operating leases (years)	3.27
Weighted-average discount rate for operating leases		3.60	%

(In thousands)

Maturity of Lease Liabilities

2019 (remaining)
$ 142
2020
286
2021
292
2022
297
2023
302
Thereafter
101
Total undiscounted operating lease payments
$ 1,420
Less: Imputed interest
(121 )
Present value of operating lease liabilities
$ 1,299

Balance Sheet Classification

Right-of-use assets (recorded in other non-current assets)
$ 1,299

Current lease liabilities (recorded in other current liabilities)
$ 284
Long-term lease liabilities (recorded in other long-term liabilities)
1,015
Total operating lease liabilities
$ 1,299

Other Information

Weighted-average remaining lease term for operating leases (in years)
4.83
Weighted-average discount rate for operating leases
3.8 %

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Cash Flows

ANo new right-of-use ~~asset of $1.3 million was~~assets were recognized as a non-cash asset addition that resulted from new operating lease liabilities during the three months ended June 30, ~~2019.~~ 2020. Cash paid for amounts included in the present value of operating lease liabilities was $0.1 million during the three months ended June 30, ~~2019~~ 2020 and is included in operating cash flows.

Operating Lease Costs

Three Months Ended

Six Months Ended

June 30,

June 30,

2019

2018

2019

2018

(in thousands)

Long term
$ 39 $ - $ 39 $ -
Short term
584 535 1,086 $ 966
Total
$ 623 $ 535 $ 1,125 $ 966

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2020		2019		2020		2019
	(in thousands)

Long-term	$	138	$	39	$	272	$	39
Short-term		564		584		1,144		1,086
Total	$	702	$	623	$	1,416	$	1,125

Lessor Disclosures under ASC Topic 842

The Company leases trucks to owner-operators under operating leases, which generally have a term of up to five years and include options to purchase the truck at the end of the lease. In the event that an independent contractor defaults on their lease, the Company generally leases the truck to another independent contractor.

~~Table of Contents~~

As of June 30, ~~2019,~~2020, the gross carrying value of trucks underlying these leases was ~~$57.4~~$59.7 million and accumulated depreciation was ~~$26.7~~$28.3 million. Depreciation is calculated on a straight-line basis over the estimated useful life of the equipment, down to an estimated salvage value. In most cases, the Company has agreements in place with certain manufacturers whereby salvage values are guaranteed by the manufacturer. In other cases, where salvage values are not guaranteed, estimates of salvage value are based on the expected market values of equipment at the time of disposal. During the quarter ended June 30, ~~2019,~~ 2020, the Company incurred ~~$1.6~~$1.4 million of depreciation expense for these assets.

The Company leases dock space to a related party at our Laredo, Texas terminal and warehouse and office space to an unrelated lessee at a second Laredo, Texas terminal. The dock space and the warehouse and office space leased ~~to the related party is~~are depreciated in conjunction with the structures and improvements for the entire Laredo ~~terminal~~terminals on a straight-line basis over the estimated useful life of the assets. Lease income is recorded as a component of non-operating income in our ~~condensed consolidated statements~~Condensed Consolidated Statements of ~~operations.~~Operations.

Lease Revenue

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

Three Months Ended

Six Months Ended

June 30,

June 30,

2019

2018

2019

2018

(in thousands)

Leased truck revenue(recorded revenue, before fuel surcharge)
$ 2,332 $ 1,858 $ 4,780 $ 3,627
Leased dock space revenue (recorded in non-operating income)
39 39 77 77
Total lease revenue
$ 2,371 $ 1,897 $ 4,857 $ 3,704

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2020		2019		2020		2019
	(in thousands)

Leased truck revenue (recorded in revenue, before fuel surcharge)	$	1,585	$	2,332	$	3,979	$	4,780
Leased building space revenue (recorded in non-operating income)		168		39		235		77
Total lease revenue	$	1,753	$	2,371	$	4,214	$	4,857

Lease Receivables

Future minimum operating lease payments receivable at June 30, ~~2019:~~2020:

	(in thousands)

2020 (remaining)	$	2,736
2021		4,022
2022		3,217
2023		2,093
2024		754
Thereafter		-
Total future minimum lease payments receivable	$	12,822

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NOTE N: EFFECT OF COVID-19 PANDEMIC

The rapid spread of COVID-19 has resulted in governmental authorities implementing numerous measures to try to contain the virus, such as travel bans and restrictions, quarantines, shelter in place orders, increased border and port controls and closures, and shutdowns. These measures and the public health concerns resulting from the outbreak have severely disrupted economic and commercial activity. The resulting impact on domestic and global supply chains has caused slowdowns and reduced freight demand for transportation companies such as ours. Because we have a significant concentration of customers within the automotive industry, our freight volumes and revenues have been significantly affected by the closure of North American automotive manufacturing facilities beginning in late March. Our automotive customers resumed partial operations during the second quarter; however, the extent to which production will return to pre-pandemic levels remains uncertain. Any additional delays in the resumption of automotive production and other consumer activity affecting our customers, as well as any future wave of the virus or other similar outbreaks could further adversely affect our business. In addition, the implementation of measures to protect the health and safety of our employees, customers, vendors and the general public may disrupt our ability to efficiently manage personnel and operations and to recruit and retain driver and non-driver personnel, which could have a material adverse effect on our operating results. Further, negative financial results, an economic downturn or uncertainty, or a tightening of credit markets caused by COVID-19 or other similar outbreaks could have a material adverse effect on our liquidity and our ability to effectively meet our short- and long-term financial obligations.

(In thousands)

2019 (remaining)
$ 4,481
2020
6,130
2021
2,521
2022
2,150
2023
1,440
Thereafter
-
Total future minimum lease payments receivable
$ 16,722

NOTE NO: ~~SUBSEQUENT EVENTS~~

Management has evaluated subsequent events for recognition and disclosure through the date these financial statements were filed with the United States Securities and Exchange Commission and concluded that no subsequent event or transactions have occurred that required recognition or disclosure in our consolidated financial statements.

~~NOTE~~ O: NONCASH INVESTING AND FINANCING ACTIVITIES

The Company financed approximately ~~$16.0~~$18.4 million in equipment purchases during the firstsix months of ~~2019~~2020 utilizing noncash financing.

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Item 2. Management’s Discussion and Analysis of ~~FinancialCondition~~FinancialCondition and Results of ~~Operations~~.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. Such forward-looking statements may relate to expected future financial and operating results, prospects, plans or events, and are thus prospective. Such forward-looking statements are subject to risks, uncertainties and other factors which could cause actual results to differ materially from future results expressed or implied by such forward-looking statements. Potential risks and uncertainties include, but are not limited to, ongoing and potential future economic, business and operational disruptions and uncertainties due to the COVID-19 pandemic or other public health crises; excess capacity in the trucking industry; surplus inventories; recessionary economic cycles and downturns in ~~customers’~~customers' business cycles; increases or rapid fluctuations in fuel prices, interest rates, fuel taxes, tolls, and license and registration fees; the resale value of the ~~Company’s~~Company's used equipment and the price of new equipment; increases in compensation for and difficulty in attracting and retaining qualified drivers and owner-operators; increases in insurance premiums and deductible amounts relating to accident, cargo, workers' compensation, health, and other claims; unanticipated increases in the number or amount of claims for which the Company is self-insured; inability of the Company to continue to secure acceptable financing arrangements; seasonal factors such as harsh weather conditions that increase operating costs; competition from trucking, rail, and intermodal competitors including reductions in rates resulting from competitive bidding; the ability to identify acceptable acquisition candidates, consummate acquisitions, and integrate acquired operations; our ability to develop and implement suitable information technology systems and prevent failures in or breaches of such systems; litigation, including litigation related to alleged violations under the Fair Labor Standards Act and the Arkansas Minimum Wage Law; 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; a significant reduction in or termination of the Company's trucking service by a key customer; ~~losses or fluctuations in the value of our marketable equity securities portfolio;~~ and other factors, including risk factors, included from time to time in filings made by the Company with the Securities and Exchange ~~Commission (“SEC”).~~Commission. The Company undertakes no obligation to publicly update or ~~clarify~~revise forward-looking statements, whether as a result of new information, future events or otherwise. In light of these risks and uncertainties, the forward-looking events and circumstances discussed above and in company filings might not transpire.

CRITICAL ACCOUNTING POLICIES

There have been no material changes to our critical accounting policies and estimates from the information provided in Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, included in our Form 10-K for the fiscal year ended December 31, ~~2018.~~2019.

BUSINESS OVERVIEW

The Company’s administrative headquarters are in Tontitown, Arkansas. From this location we manage operations conducted through wholly-owned subsidiaries based in various locations around the United States and in Mexico and Canada. The operations of these subsidiaries can generally be classified into either truckload services or brokerage and logistics services. This designation is based primarily on the ownership of the asset that performed the freight transportation service. Truckload services are performed by Company divisions that generally utilize Company owned trucks, long-term contractors, or single-trip contractors to transport loads of freight for customers, while brokerage and logistics services coordinate or facilitate the transport of loads of freight for customers and generally involve the utilization of single-trip contractors. Both our truckload operations and our brokerage and logistics operations have similar economic characteristics and are impacted by virtually the same economic factors as discussed elsewhere in this Report.

For both operations, substantially all of our revenue is generated by transporting freight for customers and is predominantly affected by the rates per mile received from our customers, equipment utilization, and our percentage of non-compensated miles. These aspects of our business are carefully managed, and efforts are continuously underway to achieve favorable results. Truckload services revenues, excluding fuel surcharges, represented ~~82.7%~~81.6% and ~~79.0%~~82.7% of total revenues, excluding fuel surcharges, for the three months ended June 30, ~~2019~~2020 and ~~2018,~~2019, respectively. Truckload services revenues, excluding fuel surcharges, represented ~~82.1%~~81.6% and ~~80.0%~~82.1% of total revenues, excluding fuel surcharges, for the six months ended June 30, ~~2019~~2020 and ~~2018,~~2019, respectively. The remaining revenues, excluding fuel surcharges, were generated from brokerage and logistics services.

The main factors that impact our profitability on the expense side are costs incurred in transporting freight for our customers. Currently, our most challenging costs include fuel, driver recruitment, training, wage and benefits costs, independent broker costs (which we record as purchased transportation), insurance, maintenance and capital equipment costs.

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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 June 30, 2020 and 2019, ~~and 2018,~~ approximately ~~$20.6~~$7.2 million and ~~$22.4~~$20.6 million, respectively, of the Company’s total revenue was generated from fuel surcharges. During the six months ended June 30, 2020 and 2019, ~~and 2018,~~ approximately ~~$39.0~~$24.5 million and ~~$42.8~~$39.0 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.

~~Table~~

IMPACT OF COVID-19

The Company’s primary concern during the COVID-19 pandemic is to do its part to protect its employees, customers, vendors and the general public from the spread of ~~Contents~~

COVID-19 while continuing to serve the vital role of supplying essential goods to the nation. Where possible, our employees are working remotely from their homes. For essential functions, including our driving professionals, we have distributed cleaning and protective supplies to various terminals so that they are available to those that need them, increased cleaning frequency and coverage, and provided employees direction on precautionary measures, such as sanitizing truck interiors, personal hygiene, and social distancing. We will continue to adapt our operations as required to ensure safety while continuing to provide a high level of service to our customers.

As the escalation of the COVID-19 pandemic has extended through the end of the second quarter, the Company has experienced the increasing effects of weakening economic conditions, most notably the late March COVID-19 related shutdown of automotive customers, representing approximately 45% of the Company’s revenue. While we have vigorously sought to replace lost automotive revenue with freight from customers supporting the effort to supply essential goods to the nation, competition for this freight has increased as industry capacity has collectively focused on freight that has continued to move during this time. The ultimate magnitude of COVID-19, including the extent of its 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, government regulations imposed in response to the pandemic, and its general effect on the economy and transportation demand.

While operating cash flows may be negatively impacted by the pandemic, the Company believes we will be able to finance our near term needs for working capital over the next twelve months, as well as any planned capital expenditures during such period, with cash balances, cash flows from operations, and borrowings believed to be available from financing sources.

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. Fuel costs are reported net of fuel surcharges.

	Three Months Ended						Six Months Ended							Three Months Ended						Six Months Ended
	June 30,						June 30,							June 30,						June 30,
	2019			2018			2019			2018				2020			2019			2020			2019
	(percentages)													(percentages)
													��
Operating revenues, before fuel surcharge		100.0			100.0			100.0			100.0				100.0			100.0			100.0			100.0

Operating expenses:
Salaries, wages and benefits		31.8			32.5			32.5			33.5				38.1			31.8			36.2			32.5
Operating supplies and expenses		4.1			1.2			4.9			2.0				15.7			4.1			10.7			4.9
Rent and purchased transportation		28.7			34.7			29.5			35.5				23.7			28.7			25.5			29.5
Depreciation		14.6			14.2			14.5			14.3			20.2				14.6			17.6			14.5
Insurance and claims		4.3			5.0			4.4			5.1				3.6			4.3			1.6			4.4
Other		3.5			3.2			3.3			3.1				2.5			3.5			4.4			3.3
(Gain) loss on sale or disposal of property		0.1			(0.6	)		(0.1	)		(0.3	)
Loss (gain) on sale or disposal of property															0.1			0.1			0.1			(0.1	)
Total operating expenses		87.1			90.2			89.0			93.2				103.9			87.1			96.1			89.0
Operating income		12.9			9.8			11.0			6.8
Non-operating (expense) income		(0.1	)		0.6			1.6			(0.1	)
Operating (loss) income															(3.9	)		12.9			3.9			11.0
Non-operating income (expense)															3.8			(0.1	)		(3.4	)		1.6
Interest expense		(2.0	)		(1.4	)		(2.0	)		(1.3	)			(2.8	)		(2.0	)		(2.4	)		(2.0	)
Income before income taxes		10.8			9.0			10.6			5.4
(Loss) income before income taxes															(2.9	)		10.8			(1.9	)		10.6

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THREE MONTHS ENDED JUNE 30, ~~2019~~2020 VS. THREE MONTHS ENDED JUNE 30, ~~2018~~2019

During the second quarter of ~~2019,~~2020, truckload services revenue, before fuel surcharges, ~~increased 4.2%~~decreased 24.7% to ~~$92.9~~$70.0 million as compared to ~~$89.1~~$92.9 million during the second quarter of ~~2018.~~2019. The ~~increase~~decrease in revenue was primarily the result of ~~increases~~unfavorable market conditions experienced when more than 50% of the Company’s customers imposed COVID-19 related shutdowns during the quarter. This interruption in our ~~average fleet size and average rate per mile charged to our customers during the second quarter 2019 compared to the second quarter 2018. These increases were partially offset by a decrease~~regular sources of freight, particularly in the ~~total number~~automotive sector, forced the Company to seek alternative revenue sources, much of ~~miles driven~~which was from the spot market. These factors combined to be the primary cause of the reduction in revenue, before fuel surcharges, for the second quarter of ~~2019~~2020 compared to the second quarter of ~~2018.~~2019.

Salaries, wages and benefits ~~decreased~~increased from ~~32.5%~~31.8% of revenues, before fuel surcharges, in the second quarter of ~~2018~~2019 to ~~31.8%~~38.1% of revenues, before fuel surcharges, during the second quarter of ~~2019. This decrease~~2020. The percentage-based increase is primarily ~~attributable to~~ a ~~decrease in group health insurance claims for~~result of the ~~second quarter~~interaction of ~~2019 compared to the second quarter of 2018. To a lesser degree, the effect of higher revenues without a corresponding increase in those wages~~expenses with ~~fixed cost~~fixed-cost characteristics, such as general and administrative wages, ~~also contributed to~~maintenance wages, operations wages, and payroll taxes with a decrease in revenues for the ~~decrease in~~periods compared. On a dollar basis, salaries, wages and benefits ~~as a percentage~~decreased from $29.5 million during the second quarter 2019 to $26.6 million during the second quarter of ~~revenues, before fuel surcharges.~~2020.

Operating supplies and expenses increased from ~~1.2% of revenues, before fuel surcharges, during the second quarter of 2018 to~~ 4.1% of revenues, before fuel surcharges, during the second quarter of ~~2019.~~2019 to 15.7% of revenues, before fuel surcharges, during the second quarter of 2020. The increase relates primarily to an increase in the average surcharge-adjusted fuel price paid per gallon of diesel fuel, and to an increase in the average number of company owned trucks during the second quarter 2019 compared to the second quarter 2018. The average surcharge-adjusted fuel price paid per gallon of diesel fuel increased aswhich was a result of ~~lower~~decreased fuel surcharge collections from customers. Fuel surcharge collections can fluctuate significantly from period to period as they are generally based on changes in fuel prices from period to period so that, during periods of rising fuel prices, fuel surcharge collections increase, while fuel surcharge collections decrease during periods of falling fuel prices. Also contributing to the increase was an increase in the proportion of total miles driven by company drivers for the quarter ended June 30, 2020 compared to June 30, 2019. This increase in miles driven by company drivers has the effect of increasing our net operating supplies and expenses while decreasing the rent and purchased transportation category, as fuel surcharge revenue generated from transportation services performed by owner-operators is reflected as a reduction in net operating supplies and expenses, while fuel surcharges paid to owner-operators for their services is reported along with their base rate of pay in the rent and purchased transportation category.

Rent and purchased transportation decreased from ~~34.7% of revenues, before fuel surcharges, during the second quarter of 2018 to~~ 28.7% of revenues, before fuel surcharges, during the second quarter of ~~2019.~~2019 to 23.7% of revenues, before fuel surcharges, during the second quarter of 2020. The decrease was primarily due to a decrease in the number of loads transported by ~~third party~~third-party carriers during the second quarter ~~2019~~2020 compared to the second quarter ~~2018.~~2019. This decrease occurred as the average number of ~~company owned~~company-owned trucks increased for the second quarter ~~2019~~2020 compared to the second quarter ~~2018,~~2019, providing additional company-owned capacity and diminishing ~~some of~~ the need to utilize ~~third party~~third-party carriers.

Depreciation increased from ~~14.2% of revenues, before fuel surcharges, during the second quarter of 2018 to~~ 14.6% of revenues, before fuel surcharges, during the second quarter of ~~2019.~~2019 to 20.2% of revenues, before fuel surcharges, during the second quarter of 2020. This increase is primarily the result of an increase in the average number of trucks and trailers within our fleet for the second quarter of ~~2019~~2020 compared to the second quarter of ~~2018.~~2019. Due to the fixed nature of depreciation, a decrease in operating revenues, before fuel surcharge, without a corresponding proportional decrease in depreciation increases depreciation expense as a percentage of operating revenues.

Insurance and claims expense decreased from ~~5.0% of revenues, before fuel surcharges, during the second quarter of 2018 to~~ 4.3% of revenues, before fuel surcharges, during the second quarter of ~~2019. This decrease primarily resulted from our decision~~2019 to become self-insured for property damage on company owned trucks. During the second quarter 2018, the Company was insured for property damage insurance coverage for company owned trucks through a third party insurance carrier. Effective September 1, 2018, the Company became self-insured for property damage. Also contributing to the decrease as a percentage of revenue, before fuel surcharges, is the interaction of the increase in revenue with the decrease in total miles driven. Miles driven generally serve as the premium basis for the majority of our insurance coverage.

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~~Non-operating (expense)/income decreased from 0.6%~~3.6% of revenues, before fuel surcharges, during the second quarter of ~~2018 to (0.1%)~~2020. This decrease primarily resulted from a reduction in auto liability insurance premiums, as the Company became self-insured for certain layers of auto liability claims in excess of $1.0 million commencing September 1, 2019. During the second quarter of 2019, the Company paid for auto liability insurance coverage for claims in excess of $1.0 million through various third-party insurance carriers.

Non-operating income / (expense) decreased from (0.1)% of revenues, before fuel surcharges, during the second quarter of ~~2019.~~2019 to 3.8% of revenues, before fuel surcharges, during the second quarter of 2020. This decrease primarily resulted from ~~a decrease in income related to~~ the change in the market values of our portfolio of marketable equity securities. ~~An approximate~~The Company recorded a $2.5 million increase in the market values of our marketable equity securities in non-operating income / (expense) during the second quarter of 2020, compared to a $0.6 million ~~loss~~decrease in the market value of our marketable equity securities ~~was recorded in non-operating income~~ during the second quarter of ~~2019, compared to approximately $0.3 million gain in the market value of our equity securities recorded in non-operating income during the second quarter of 2018.~~2019.

~~Interest~~Other expense ~~increased~~decreased from ~~1.4%~~3.5% of revenues, before fuel surcharges, during the second quarter ~~2018~~2019 to ~~2.0%~~2.5% of revenues, before fuel surcharges, during the second quarter ~~2019.~~2020. This ~~increase~~decrease is primarily attributable to ~~market increases~~a decrease in ~~interest rates.~~legal fees incurred in our defense against certain litigation described in Note L to our condensed consolidated financial statements.

The truckload services division operating ratio, which measures the ratio of operating expenses, net of fuel surcharges, to operating revenues, before fuel surcharges, ~~improved~~increased from ~~90.2% for the second quarter of 2018 to~~ 87.1% for the second quarter of ~~2019.~~2019 to 103.9% for the second quarter of 2020.

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SIX MONTHS ENDED JUNE 30, 2020 VS. SIX MONTHS ENDED JUNE 30, ~~2019~~ ~~VS. SIX MONTHS ENDED JUNE 30,~~ 20~~2018~~19

For the six months ended June 30, ~~2019,~~2020, truckload services revenue, before fuel surcharges, ~~increased 7.8%~~decreased 11.8% to ~~$182.9~~$161.3 million as compared to ~~$169.7~~$182.9 million for the six months ended June 30, ~~2018.~~2019. The ~~increase~~decrease in revenue was primarily the result of ~~increases in our average fleet size and average rate per mile charged to our~~unfavorable market conditions experienced when more than 50% of the Company’s customers imposed COVID-19 related shutdowns during the second quarter ~~2019~~of 2020. This interruption in our regular sources of freight, particularly in the automotive sector, forced the Company to seek alternative revenue sources, much of which was from the spot market. These factors combined to be the primary cause of the reduction in revenue, before fuel surcharges, for the six months ended June 30, 2020 compared to the second quarter 2018. These increases were partially offset by a decrease in the total number of miles driven and by there being one less business day for the second quarter of 2019 compared to the second quarter of 2018.six months ended June 30, 2019.

Salaries, wages and benefits ~~decreased~~increased from ~~33.5%~~32.5% of revenues, before fuel surcharges, in the first six months of ~~2018~~2019 to ~~32.5%~~36.2% of revenues, before fuel surcharges, during the first six months of ~~2019. This decrease~~2020. The percentage-based increase is primarily ~~attributable to decreases in worker’s compensation and group health insurance claims for~~a result of the ~~first six months~~interaction of ~~2019 compared to the first six months of 2018. To a lesser degree, the effect of higher revenues without a corresponding increase in those wages~~expenses with ~~fixed cost~~fixed-cost characteristics, such as general and administrative wages, ~~also contributed to~~maintenance wages, operations wages, and payroll taxes with a decrease in revenues for the ~~decrease in~~periods compared. On a dollar basis, salaries, wages and benefits ~~as a percentage~~decreased from $59.5 million during the second quarter 2019 to $58.3 million during the second quarter of ~~revenues, before fuel surcharges.~~2020.

Operating supplies and expenses increased from ~~2.0% of revenues, before fuel surcharges, during the first six months of 2018 to~~ 4.9% of revenues, before fuel surcharges, during the first six months of ~~2019.~~2019 to 10.7% of revenues, before fuel surcharges, during the first six months of 2020. The increase relates primarily to an increase in the average surcharge-adjusted fuel price paid per gallon of diesel fuel, and to an increase in the average number of company owned trucks during the first six months of 2019 compared to the first six months of 2018. The average surcharge-adjusted fuel price paid per gallon of diesel fuel increased aswhich was a result of ~~lower~~decreased fuel surcharge collections from customers. Fuel surcharge collections can fluctuate significantly from period to period as they are generally based on changes in fuel prices from period to period so that, during periods of rising fuel prices, fuel surcharge collections increase, while fuel surcharge collections decrease during periods of falling fuel prices. Also contributing to the increase was an increase in the proportion of total miles driven by company drivers for the six months ended June 30, 2020 compared to June 30, 2019. This increase in miles driven by company drivers has the effect of increasing our net operating supplies and expenses while decreasing the rent and purchased transportation category, as fuel surcharge revenue generated from transportation services performed by owner-operators is reflected as a reduction in net operating supplies and expenses, while fuel surcharges paid to owner-operators for their services is reported along with their base rate of pay in the rent and purchased transportation category.

Rent and purchased transportation decreased from ~~35.5% of revenues, before fuel surcharges, during the first six months of 2018 to~~ 29.5% of revenues, before fuel surcharges, during the first six months of ~~2019.~~2019 to 25.5% of revenues, before fuel surcharges, during the first six months of 2020. The decrease was primarily due to a decrease in the number of loads transported by ~~third party~~third-party carriers during the first six months ~~2019~~2020 compared to the first six months ~~2018.~~2019. This decrease occurred as the average number of ~~company owned~~company-owned trucks increased for the first six months ~~2019~~2020 compared to the first six months ~~2018,~~2019, providing additional company-owned capacity and diminishing some of the need to utilize ~~third party~~third-party carriers.

Depreciation increased from ~~14.3% of revenues, before fuel surcharges, during the first six months of 2018 to~~ 14.5% of revenues, before fuel surcharges, during the first six months of ~~2019.~~2019 to 17.6% of revenues, before fuel surcharges, during the first six months of 2020. This increase is primarily the result of an increase in the average number of trucks and trailers within our fleet for the first six months of ~~2019~~2020 compared to the first six months of ~~2018.~~2019. Due to the fixed nature of depreciation, a decrease in operating revenues, before fuel surcharge, without a corresponding proportional decrease in depreciation increases depreciation expense as a percentage of operating revenues.

Insurance and claims expense decreased from ~~5.1% of revenues, before fuel surcharges, during the first six months of 2018 to~~ 4.4% of revenues, before fuel surcharges, during the first six months of 2019. This decrease primarily resulted from our decision to become self-insured for property damage on company owned trucks. During the second quarter 2018, the Company was insured for property damage insurance coverage for company owned trucks through a third party insurance carrier. Effective September 1, 2018 the Company became self-insured for property damage. Also contributing to the decrease as a percentage of revenue, before fuel surcharges, is the interaction of the increase in revenue with the decrease in total miles driven. Miles driven generally serve as the premium basis for the majority of our insurance coverage.

~~Non-operating income/(expense) increased from (0.1%) of revenues, before fuel surcharges, during the first six months of 2018~~2019 to 1.6% of revenues before fuel surcharges, during the first six months of ~~2019.~~2020. This ~~increase~~decrease primarily resulted from ~~an increase~~a reduction in auto liability insurance premiums, as the Company became self-insured for certain layers of auto liability claims in excess of $1.0 million commencing September 1, 2019. During the first three months of 2019, the Company paid for auto liability insurance coverage for claims in excess of $1.0 million through various third-party insurance carriers. Also contributing to the decrease was the first quarter 2020 settlement of a lawsuit brought against the Company by individuals who asserted they were misclassified as owner-operators. The amount of the settlement was less than the amount previously reserved for the suit.

Non-operating income ~~related~~/ (expense) decreased from 1.6% of revenues, before fuel surcharges, during the first six months of 2019 to (3.4%) of revenues, before fuel surcharges, during the first six months of 2020. This decrease primarily resulted from the change in the market values of our portfolio of marketable equity securities. ~~An approximate~~The Company recorded a $6.3 million decrease in the market value of our marketable equity securities in non-operating income / (expense) during the first six months of 2020, compared to a $2.6 million increase in the market value of our marketable equity securities was recorded in non-operating income during the first six months of 2019, compared to an approximate $0.8 million loss in the market value of our equity securities recorded in non-operating income during the first six months of 2018.

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~~Interest expense increased from 1.3% of revenues, before fuel surcharges, during the first six months of 2018 to 2.0% of revenues, before fuel surcharges~~ during the first six months of 2019. ~~This increase is attributable to market increases in interest rates.~~

The truckload services division operating ratio, which measures the ratio of operating expenses, net of fuel surcharges, to operating revenues, before fuel surcharges, ~~improved~~increased from ~~93.2% for the first six months of 2018 to~~ 89.0% for the first six months of ~~2019.~~2019 to 96.1% for the first six months of 2020.

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RESULTS OF OPERATIONS – LOGISTICS AND BROKERAGE SERVICES

The following table sets forth, for logistics and brokerage services, the percentage relationship of expense items to operating revenues, before fuel surcharges, for the periods indicated. Brokerage service operations occur specifically in certain divisions; however, brokerage operations occur throughout the Company in similar operations having substantially similar economic characteristics.

Three Months Ended

Six Months Ended

June 30,

June 30,

2019

2018

2019

2018

(percentages)

Operating revenues, before fuel surcharge
100.0 100.0 100.0 100.0

Operating expenses:

Salaries, wages and benefits
5.5 4.1 6.4 4.2
Rent and purchased transportation
86.0 89.3 85.5 89.6
Other
2.4 1.0 1.2 1.0
Total operating expenses
93.9 94.4 93.1 94.8
Operating income
6.1 5.6 6.9 5.2
Non-operating (expense) income
(0.1 ) 0.3 0.8 (0.1 )
Interest expense
(1.0 ) (0.6 ) (1.0 ) (0.6 )
Income before income taxes
5.0 5.3 6.7 4.5

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2020			2019			2020			2019
	(percentages)

Operating revenues, before fuel surcharge		100.0			100.0			100.0			100.0

Operating expenses:
Salaries, wages and benefits		6.0			5.5			5.7			6.4
Rent and purchased transportation		87.0			86.0			88.3			85.5
Other		2.2			2.4			2.5			1.2
Total operating expenses		95.2			93.9			96.5			93.1
Operating income		4.8			6.1			3.5			6.9
Non-operating income (expense)		2.1			(0.1	)		(2.0	)		0.8
Interest expense		(1.7	)		(1.0	)		(1.4	)		(1.0	)
Income before income taxes		5.2			5.0			0.1			6.7

THREE MONTHS ENDED JUNE 30, ~~2019~~2020 VS. THREE MONTHS ENDED JUNE 30, ~~2018~~2019

During the second quarter of ~~2019,~~2020, logistics and brokerage services revenue, before fuel surcharges, decreased ~~18.0%~~18.9% to ~~$19.5~~$15.8 million as compared to ~~$23.7~~$19.5 million during the second quarter of ~~2018.~~2019. The decrease relates ~~to a decrease in the number of loads and~~ to a decrease in average rates charged during the second quarter of ~~2019~~2020 as compared to the second quarter of ~~2018.~~2019.

Salaries, wages and benefits increased from ~~4.1%~~5.5% of revenues, before fuel surcharges, in the second quarter of ~~2018~~2019 to ~~5.5%~~6.0% of revenues, before fuel surcharges, during the second quarter of ~~2019.~~2020. The increase relates primarily ~~to an increase in the number of employees utilized by logistics and brokerage service operations and~~ to the effect of lower revenues without a corresponding decrease in those wages with fixed cost characteristics, such as general and administrative wages.

Rents and purchased transportation decreased from 89.3% of revenues, before fuel surcharges, during the second quarter of 2018 to 87.0% of revenues, before fuel surcharges, during the second quarter of 2019. The decrease results from paying third party carriers a smaller percentage of customer revenue.

Non-operating (expense)/income decreased from 0.3% of revenues, before fuel surcharges, during the second quarter of 2018 to (0.1%) of revenues, before fuel surcharges, during the second quarter of 2019. This decrease primarily resulted from a decrease in income related to the change in market values of equity securities. An approximate $0.6 million decrease in the market value of our marketable equity securities was recorded in non-operating income during the second quarter of 2019, compared to approximately $0.3 million gain in the market value of our equity securities recorded in non-operating income during the second quarter of 2018.

Interest expense increased from 0.6% of revenues, before fuel surcharges, during the second quarter of 2018 to 1.0% of revenues, before fuel surcharges during the second quarter of 2019. This increase is attributable to market increases in interest rates.

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~~increased from ~~94.4% for the second quarter of 2018 to~~ 93.9% for the second quarter of ~~2019.~~2019 to 95.2% for the second quarter of 2020.

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Non-operating income/(expense) increased from (0.1%) of ~~Contents~~

revenues, before fuel surcharges, during the second quarter of 2020 to 2.1% of revenues, before fuel surcharges, during the second quarter of 2020. This increase primarily resulted from the change in the market values of our portfolio of marketable equity securities. The Company recorded a $2.5 million increase in the market values of our marketable equity securities in non-operating income / (expense) during the second quarter of 2020, compared to a $0.6 million decrease in the market value of our marketable equity securities during the second quarter of 2019.

SIX MONTHS ENDED JUNE 30, 2020 VS. SIX MONTHS ENDED JUNE 30, ~~2019~~ ~~VS. SIX MONTHS ENDED JUNE 30,~~ 20~~2018~~19

During the first six months of ~~2019,~~2020, logistics and brokerage services revenue, before fuel surcharges, decreased ~~5.9%~~8.8% to ~~$39.8~~$36.3 million as compared to ~~$42.3~~$39.8 million during the first six months of ~~2018.~~2019. The decrease relates to a decrease in average rates charged during the first six months of ~~2019~~2020 as compared to the first six months of ~~2018.~~2019.

Salaries, wages and benefits ~~increased~~decreased from ~~4.2%~~6.4% of revenues, before fuel surcharges, in the first six months of ~~2018~~2019 to ~~6.4%~~5.7% of revenues, before fuel surcharges, during the first six months of ~~2019.~~2020. The ~~increase~~decrease relates primarily to ~~an increase~~a decrease in the average number of employees utilized by logistics and brokerage service ~~operations and to the effect of lower revenues without a corresponding decrease in those wages with fixed cost characteristics, such as general and administrative wages.~~operations.

Rents and purchased transportation ~~decreased~~increased from ~~89.6% of revenues, before fuel surcharges, during the first six months of 2018 to~~ 85.5% of revenues, before fuel surcharges, during the first six months of ~~2019. The decrease results from paying third party carriers a smaller percentage of customer revenue.~~

~~Non-operating income/(expense) increased from (0.1%)~~2019 to 88.3% of revenues, before fuel surcharges, during the first six months of ~~2018 to 0.8% of revenues, before fuel surcharges, during the first six months of 2019. This~~2020. The increase ~~primarily~~ resulted from ~~an increase in income related to the change in market values~~paying third-party carriers a larger percentage of equity securities. An approximate $2.6 million increase in the market value of our marketable equity securities was recorded in non-operating income during the first six months of 2019, compared to an approximate $0.8 million loss in the market value of our equity securities recorded in non-operating income during the first six months of 2018.

Interest expense increased from 0.6% of revenues, before fuel surcharges, during the first six months of 2018 to 1.0% of revenues, before fuel surcharges during the first six months of 2019. This increase is attributable to market increases in interest rates.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~~increased from ~~94.8%~~93.1% for the first six months of ~~2018~~2019 to ~~93.1%~~96.5% for the first six months of 2020.

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Non-operating income / (expense) decreased from 0.8% of revenues, before fuel surcharges, during the first six months of 2019 to (2.0%) of revenues, before fuel surcharges, during the first six months of 2020. This decrease primarily resulted from the change in the market values of our portfolio of marketable equity securities. The Company recorded a $6.3 million decrease in the market value of our marketable equity securities in non-operating income / (expense) during the first six months of 2020, compared to a $2.6 million increase in the market value of our marketable equity securities during the first six months of 2019.

RESULTS OF OPERATIONS – COMBINED SERVICES

THREE MONTHS ENDED JUNE 30, ~~2019~~2020 VS. THREE MONTHS ENDED JUNE 30, ~~2018~~2019

Net ~~income~~loss for all divisions was approximately $0.8 million, or 1.0% of revenues, before fuel surcharges for the second quarter of 2020 as compared to net income of $8.7 million, or 7.7% of revenues, before fuel surcharges for the second quarter of ~~2019 as compared to~~2019. The decrease in net income resulted in diluted loss per share of ~~$7.3 million, or 6.5% of revenues, before fuel surcharges~~$0.14 for the second quarter of ~~2018. The increase in net income resulted in~~2020 as compared to diluted earnings per share of $1.45 for the second quarter of ~~2019 as compared to diluted earnings per share of $1.17 for the second quarter of 2018.~~2019.

SIX MONTHS ENDED JUNE 30, 2020 VS. SIX MONTHS ENDED JUNE 30, ~~2019~~ ~~VS. SIX MONTHS ENDED JUNE 30,~~ 20~~2018~~19

Net ~~income~~loss for all divisions was approximately $2.1 million, or 1.1% of revenues, before fuel surcharges for the first six months of 2020 as compared to net income of $17.0 million, or 7.6% of revenues, before fuel surcharges for the first six months of ~~2019 as compared to~~2019. The decrease in net income resulted in a diluted loss per share of ~~$8.7 million, or 4.1% of revenues, before fuel surcharges~~$0.37 for the first six months of ~~2018. The increase in net income resulted in~~2020 as compared to diluted earnings per share of $2.84 for the first six months of ~~2019 as compared to diluted earnings per share of $1.39 for the first six months of 2018.~~2019.

LIQUIDITY AND CAPITAL RESOURCES

Our business has required, and will continue to require, a significant investment in new revenue equipment. Our primary sources of liquidity have been funds provided by operations, proceeds from the sales of revenue equipment, and borrowings under our lines of credit, installment notes, and our investment margin account.

During the first six months of ~~2019,~~2020, we generated ~~$53.2~~$44.0 million in cash from operating activities. Investing activities used ~~$18.5~~$19.0 million in cash in the first six months of ~~2019.~~2020. Financing activities used ~~$34.7~~$24.9 million in cash in the first six months of ~~2019.~~2020.

Our primary use of funds is for the purchase of revenue equipment. We typically use installment notes, our existing line of credit on an interim basis, proceeds from the sale or trade of equipment, and cash flows from operations to finance capital expenditures and repay long-term debt. During the first six months of ~~2019,~~2020, we utilized cash on hand, installment notes, and our line of credit to finance purchases of revenue equipment and other assets of approximately ~~$42.9~~$41.4 million.

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We commonly finance the acquisition of revenue equipment through installment notes with fixed interest rates and terms ranging from 36 to 84 months. During the first six months of ~~2019,~~2020, the Company’s subsidiary, P.A.M. Transport, Inc., entered into installment obligations totaling approximately ~~$32.4~~$18.4 million for the purpose of purchasing revenue equipment. These obligations are payable in monthly installments.

During the remainder of ~~2019,~~2020, we expect to purchase approximately ~~320~~350 new trucks and ~~350~~250 new trailers while continuing to sell or trade older equipment, which we expect to result in net capital expenditures of approximately ~~$43.6~~$34.6 million. Management believes we will be able to finance our ~~near term~~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. We will continue to have significant capital requirements over the long-term, which may require us to incur debt or seek additional equity capital. The availability of additional capital will depend upon prevailing market conditions, the market price of our common stock and several other factors over which we have limited control, as well as our financial condition and results of operations. Nevertheless, based on our recent operating results, current cash position, anticipated future cash flows, and sources of financing that we expect will be available to us, we do not expect that we will experience any significant liquidity constraints in the foreseeable future.

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

During the first six months of ~~2019,~~2020, we maintained a revolving line of credit. On January 25, 2019, certain terms of this revolving line of credit were amended to increase the borrowing limit from $40.0 million to $60.0 million, extend the term by one year, reduce the interest rate by 25 basis points and make certain other changes. See “Item 8. Financial Statements and Supplementary Data, Note 1 to the Consolidated Financial Statements – Subsequent Events” in our Annual Report on Form 10K for the year ended December 31, 2018, for additional information. Under the amended credit facility, amountsAmounts outstanding under the line bear interest at LIBOR (determined as of the first day of each month) plus 1.25% ~~(3.69%~~(1.43% at June 30, ~~2019)~~2020), are secured by our trade accounts receivable and mature on July 1, 2022. ~~The amended credit facility also establishes an~~An “unused fee” of 0.25% is charged if average borrowings are less than $18.0 million. At June 30, ~~2019~~2020 outstanding advances on the line of credit were approximately ~~$11.3~~$12.9 million, including approximately ~~$0.6~~$0.4 million in letters of credit, with availability to borrow ~~$48.7~~$47.1 million.

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Trade accounts receivable decreased from $61.8 million at December 31, 2019 to $56.4 million at June 30, 2020. The decrease resulted from a decrease in freight revenues, which flow through accounts receivable, during the second quarter of 2020 as compared to the fourth quarter of 2019.

Prepaid expenses and deposits decreased from ~~$10.4~~$8.7 million at December 31, ~~2018~~2019 to ~~$7.8~~$7.3 million at June 30, ~~2019.~~2020. The decrease relates to the normal amortization of items prepaid as of December 31, ~~2018.~~2019.

Marketable equity securities ~~increased~~decreased from ~~$27.5~~$29.5 million at December 31, ~~2018~~2019 to ~~$29.5~~$25.7 million at June 30, ~~2019.~~2020. The ~~$2.0~~$3.8 million ~~increase~~decrease was due to ~~an increase~~a decrease in the market value of held marketable equity securities of ~~$2.6~~$6.9 million, the purchase of marketable equity securities with a combined market value of approximately ~~$0.1~~$3.9 million ~~partially offset by sales~~and the sale of marketable equity securities with a combined market value of ~~$0.7~~$0.8 million during the first six months of ~~2019.~~2020.

The Company purchased a 51.6-acre terminal in Laredo, TX which includes office, shop, and yard space during the six months ended June 30, 2020. This transaction resulted in an increase of $8.8 million in land and $10.9 million in structures and improvements recorded in our Condensed Consolidated Balance Sheet as of June 30, 2020.

Accounts payable increased from $16.6 million at December 31, 2019 to $29.5 million at June 30, 2020. This increase was primarily attributable to extended payment terms with certain suppliers.

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 ~~$221.2~~$241.8 million at December 31, ~~2018~~2019 to ~~$217.1~~$233.1 million at June 30, ~~2019.~~2020. The decrease was primarily related to ~~the net effect of installment~~ note payments made during the first six months of ~~2019,~~2020, partially offset by ~~$32.4~~the addition of $18.4 million ~~of additional borrowings received~~in equipment installment notes entered into during the first six months of ~~2019.~~the year.

NEW ACCOUNTING PRONOUNCEMENTS

See Note B to the ~~condensed consolidated financial statements~~Condensed Consolidated Financial Statements for a description of the most recent accounting pronouncements and their impact, if any, on the Company.

Item 3. Quantitative and Qualitative Disclosures about Market Risk.

Our primary market risk exposures include equity price risk, interest rate risk, commodity price risk (the price paid to obtain diesel fuel for our trucks), and foreign currency exchange rate risk. The potential adverse impact of these risks isare discussed below. While the Company has used derivative financial instruments in the past to manage its interest rate and commodity price risks, the Company does not currently enter into such instruments for risk management purposes or for speculation or trading.

The following sensitivity analyses do not consider the effects that an adverse change may have on the overall economy nor do they consider additional actions we may take to mitigate our exposure to such changes. Actual results of changes in prices or rates may differ materially from the hypothetical results described below.

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Equity Price Risk

We hold certain actively traded marketable equity securities, which subjects the Company to fluctuations in the fair market value of its investment portfolio based on the current market price of such securities. The recorded value of marketable equity securities ~~increased~~decreased to ~~$29.5~~$25.7 million at June 30, ~~2019~~2020 from ~~$27.5~~$29.5 million at December 31, ~~2018.~~2019. A 10% decrease in the market price of our marketable equity securities would cause a corresponding 10% decrease in the carrying amounts of these securities, or approximately ~~$2.9~~$2.6 million. For additional information with respect to the marketable equity securities, see Note D to our ~~condensed consolidated financial statements.~~Condensed Consolidated Financial Statements.

Interest Rate Risk

Our line of credit bears interest at a floating rate equal to LIBOR plus a fixed percentage. Accordingly, changes in LIBOR, which are affected by changes in interest rates, will affect the interest rate on, and therefore our costs under, the line of credit. Assuming ~~$10.7~~$12.5 million of variable rate debt was outstanding under our line of credit for a full fiscal year; a hypothetical 100 basis point increase in LIBOR would result in approximately ~~$107,000~~$125,000 of additional interest expense.

Commodity Price Risk

Prices and availability of all petroleum products are subject to political, economic, and market factors that are generally outside of our control. Accordingly, the price and availability of diesel fuel, as well as other petroleum products, can be unpredictable. Because our operations are dependent upon diesel fuel, significant increases in diesel fuel costs could materially and adversely affect our results of operations and financial condition. Based upon our ~~2018~~2019 fuel consumption, a 10% increase in the average annual price per gallon of diesel fuel would increase our annual fuel expenses by ~~$5.2~~$5.1 million.

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Foreign Currency Exchange Rate Risk

We are exposed to foreign currency exchange rate risk related to the activities of our branch office located in Mexico. Currently, we do not hedge our exchange rate exposure through any currency forward contracts, currency options, or currency swaps as all of our revenues, and substantially all of our expenses and capital expenditures, are transacted in U.S. dollars. However, certain operating expenditures and capital purchases related to our Mexico branch office are incurred in or exposed to fluctuations in the exchange rate between the U.S. dollar and the Mexican peso. Based on ~~2018~~2019 expenditures denominated in pesos, a 10% increase in the exchange rate would increase our annual operating expenses by ~~$267,000.~~$860,000.

Item 4. Controls and Procedures.

Evaluation of disclosure controls and procedures. Our management, with the participation of our chief executive officer and chief financial officer, evaluated the effectiveness of our disclosure controls and procedures pursuant to Rule 13a-15 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the

fact that there are resource constraints and that management is required to apply its judgment in evaluating the benefits of possible controls and procedures relative to their costs.

Based on management’s evaluation, our chief executive officer and chief financial officer concluded that, as of June 30, ~~2019,~~2020, our disclosure controls and procedures are designed at a reasonable assurance level and are effective to provide reasonable assurance that information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms, and that such information is accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate, to allow timely decisions regarding required disclosure.

Changes in internal controls over financial reporting. We regularly review our system of internal control over financial reporting and make changes to our processes and systems to improve controls and increase efficiency, while ensuring that we maintain an effective internal control environment. Changes may include such activities as implementing new, more efficient systems, consolidating activities, and migrating processes.

There were no changes in our internal control over financial reporting that occurred during the quarter ended June 30, ~~2019~~2020 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

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PART II. OTHER INFORMATION

Item 1. Legal Proceedings.

The nature of our business routinely results in litigation, primarily involving claims for personal injuries and property damage incurred in the transportation of freight. We believe that all such routine litigation is adequately covered by insurance and that adverse results in one or more of those cases would not have a material adverse effect on our financial condition.

We are a defendant in a ~~collective-action~~collective- and class-action lawsuit which was ~~re-filed~~filed on December 9, 2016, in the United States District Court for the Western District of Arkansas. The plaintiffs, who ~~are~~include current and former employee drivers who worked for the Company during the period of December 6,9, 2013, through ~~the date of the filing,~~December 31, 2019, allege violations under the Fair Labor Standards Act and the Arkansas Minimum Wage ~~Law. The plaintiffs, through their attorneys, have filed causes of action alleging “Failure~~Law including “failure to pay minimum wage during orientation, failure to pay minimum wage to team drivers after initial orientation, failure to pay minimum wage to solo-drivers after initial orientation, failure to pay for compensable travel time, Comdata card fees, unlawful deductions, and breach of contract.” The plaintiffs are seeking actual and liquidated damages to include court costs and legal fees. On February 18, 2020, the United States District Court for the Western District of Arkansas granted preliminary approval of a $16.5 million settlement reached with the plaintiffs. The ~~lawsuit~~settlement is ~~being vigorously defended~~subject to final approval by the court. As of June 30, 2020, the preliminary settlement amount of $16.5 million is reserved in accrued expenses and ~~we cannot reasonably estimate, at this time,~~other liabilities in the ~~possible loss or range of loss, if any, that may arise from this lawsuit.~~Company’s consolidated balance sheets. Management has determined that any losses under this claim will not be covered by existing insurance policies.

On March 31, 2020, the United States District Court for the Western District of Arkansas dismissed the collective- and class-action lawsuit filed against the company on May 29, 2019 by plaintiffs, who were independent contractors alleging violations under the Fair Labor Standards Act and the Arkansas Minimum Wage Law. The plaintiffs, through their attorneys, alleged “misclassification as independent contractors, payment on the basis of miles without regard to the number of hours worked, improper deductions, and failure to pay minimum wage.” The dismissal of this lawsuit resulted when the Company and plaintiffs reached a settlement agreement and paid approximately $421,000, plus legal fees. Legal reserve accruals in excess of the amount outlined in the settlement agreement were reversed during the six months ended June 30, 2020, resulting in a reduction in accrued expenses and other liabilities in the Company’s consolidated balance sheets.

The Company’s participation in the settlements of the above matters does not constitute an admission by the Company of any fault or liability, and the Company does not admit any fault or liability.

Item 1A.Risk Factors.

Except as noted below, there have been no material changes to the Company’s risk factors as previously disclosed in Item 1A to Part I of the Company’s Annual Report on Form 10-K for the year ended December 31, 2019.

The coronavirus outbreak or other similar outbreaks could negatively impact our financial condition, liquidity, results of operations, and cash flows.

The recent outbreak of the novel coronavirus (COVID-19), and any other outbreaks of contagious diseases or other adverse public health developments, could have a materially adverse effect on our financial condition, liquidity, results of operations, and cash flows. The rapid spread of COVID-19 has resulted in governmental authorities implementing numerous measures to try to contain the virus, such as travel bans and restrictions, quarantines, shelter in place orders, increased border and port controls and closures, and shutdowns. These measures and the public health concerns resulting from the outbreak have severely disrupted economic and commercial activity. The resulting impact on domestic and global supply chains has caused slowdowns and reduced freight demand for transportation companies such as ours. Because we have a significant concentration of customers within the automotive industry, our freight volumes and revenues have been significantly affected by the closure of North American automotive manufacturing facilities beginning in late March. Our automotive customers resumed partial operations during the second quarter, however the extent to which production will return to pre-pandemic levels remains uncertain. Any additional delays in the resumption of automotive production and other consumer activity affecting our customers as well as any future wave of the virus or other similar outbreaks could further adversely affect our business. In addition, the implementation of measures to protect the health and safety of our employees, customers, vendors and the general public may disrupt our ability to efficiently manage personnel and operations and to recruit and retain driver and non-driver personnel, which could have a material adverse effect on our operating results. Further, negative financial results, an economic downturn or uncertainty, or a tightening of credit markets caused by COVID-19 or other similar outbreaks could have a material adverse effect on our liquidity and our ability to effectively meet our short- and long-term financial obligations.

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Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

The Company’s stock repurchase program has been extended and expanded several times, most recently in April 2017, when the Board of Directors reauthorized 500,000 shares of common stock for repurchase under the initial September 2011 authorization. Since the reauthorization, the Company has repurchased ~~255,208~~280,179 shares of its common stock under this repurchase program.

~~On May 13, 2019, the Company commenced a tender offer to repurchase up to 200,000~~No shares ofwere repurchased under the Company’s ~~outstanding common~~ stock at a price of not greater than $60.00 nor less than $55.00 per share. Following the expiration of the tender offer on June 11, 2019, the Company accepted 192,743 shares of its common stock for purchase at $60.00 per share, at an aggregate purchase price of approximately $11.6 million, excluding fees and expenses related to the offer. The Company funded the purchase of the accepted shares tendered with available cash, cash equivalents and borrowings available under our existing line of credit and accounted for the repurchase ~~of these shares as treasury stock on the Company’s condensed consolidated balance sheet as of June 30, 2019.~~

~~The following table summarizes the Company’s common stock repurchases~~program during the second quarter of 2019. No shares were purchased during the quarter other than through this program or through the 2019 tender offer, and all purchases were made by or on behalf of the Company and not by any “affiliated purchaser.”2020.

Issuer Purchases of Equity Securities

Period
Total number
of shares
purchased

Average
price paid
per share

Total number of
shares purchased
as part of publicly
announced plans or
programs

Maximum number
of shares that may
yet be purchased
under the plans or
programs⁽¹⁾

April 1-30, 2019
2,489 $ 52.93 2,489 245,793
May 1-31, 2019
1,001 49.82 1,001 244,792
June 1-30, 2019
192,743 (2) 60.00 192,743 (2) 244,792
Total
196,233 $ 59.86 196,233

~~(1)~~

~~The Company’s stock repurchase program does not have an expiration date.~~

~~(2)~~

~~Consists of shares purchased pursuant to the 2019 tender offer.~~

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Item 6. 6. Exhibits.

Exhibit Number		Exhibit Description

3.1		Amended and Restated Certificate of Incorporation of the Registrant (incorporated by reference to Exhibit 3.1 of the Company's Form 10-Q filed on May 15, 2002.)
3.2		Certificate of Amendment of Amended and Restated Certificate of Incorporation of the Registrant, filed with the Secretary of State of the State of Delaware on April 30, 2020 (incorporated by reference to Exhibit 3.1 of the Company's Form 8-K filed on May 1, 2020.)
~~3.2~~3.3		Amended and Restated By-Laws of the Registrant (incorporated by reference to Exhibit 3.2 of the Company's Form 8-K filed on December 11, 2007.)
~~4.1~~3.4		First Amendment to the Amended and Restated ~~Loan Agreement, dated March 28, 2016, by and among P.A.M. Transport, Inc., First Tennessee Bank National Association and~~By-Laws of the ~~Company~~Registrant (incorporated by reference to Exhibit ~~4.1 of the Company’s Form 8-K filed on April 1, 2016.)~~
~~4.2~~		Amendment to Amended and Restated Loan Agreement, dated July 27, 2017, by and among P.A.M. Transport, Inc., First Tennessee Bank National Association and the Company (incorporated by reference to Exhibit 4.23.2 of the Company’s Form 8-K filed on January ~~31, 2019.~~7, 2020.)
~~4.3~~ 3.5		Second Amendment to the Amended and Restated ~~Loan Agreement, dated January 25, 2019 by and among P.A.M. Transport, Inc., First Tennessee Bank National Association and~~By-Laws of the ~~Company~~Registrant (incorporated by reference to Exhibit ~~4.3~~3.3 of the Company’s Form 8-K filed on ~~January 31, 2019.~~August 5, 2020.)
~~4.4~~		Fifth Amended and Restated Consolidated Revolving Credit Note, dated January 25, 2019, by P.A.M. Transport, Inc. in favor of First Tennessee Bank National Association (incorporated by reference to Exhibit 4.4 of the Company’s Form 8-K filed on January 31, 2019.)
~~4.5~~		Amended and Restated Security Agreement, dated March 28, 2016, by and between P.A.M. Transport, Inc. and First Tennessee Bank National Association (incorporated by reference to Exhibit 4.3 of the Company’s Form 8-K filed on April 1, 2016.)
~~4.6~~		First Amendment to Amended and Restated Security Agreement, dated January 25, 2019, by and between P.A.M. Transport, Inc. and First Tennessee Bank National Association (incorporated by reference to Exhibit 4.6 of the Company’s Form 8-k filed on January 31, 2019.)
~~4.7~~		Fifth Amended and Restated Guaranty Agreement of the Company, dated January 25, 2019, in favor of First Tennessee Bank National Association (incorporated by reference to Exhibit 4.7 of the Company’s Form 8-K filed on January 31, 2019.)
31.1		Rule 13a-14(a) Certification of Principal Executive Officer
31.2		Rule 13a-14(a) Certification of Principal Financial Officer
32.1		Certification Pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS		Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document).
101.SCH		Inline XBRL Taxonomy Extension Schema Document
101.CAL		Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF		Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB		Inline XBRL Taxonomy Extension Labels Linkbase Document
101.PRE		Inline XBRL Taxonomy Extension Presentation Linkbase Document
104		Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	P.A.M. TRANSPORTATION SERVICES, INC.


Dated: August ~~2, 2019~~4, 2020	By: /s/ ~~Daniel H. Cushman~~Matthew T. Moroun
	~~Daniel H. Cushman~~Matthew T. Moroun
	President and Chief Executive Officer
	(principal executive officer)

Dated: August ~~2, 2019~~4, 2020	By: /s/ Allen W. West
	Allen W. West
	Vice President-Finance, Chief Financial
	Officer, Secretary and Treasurer
	(principal accounting and financial officer)

	Common Stock Shares / Amount					Additional Paid-In Capital		Accumulated Other Comprehensive Income			Treasury Stock			Retained Earnings		Total

Balance at January 1, 2018		6,161		$	115	$	81,559	$	7,444		$	(129,183	)	$	167,669	$	127,604

Net Income															1,387		1,387

Exercise of stock options and vesting of stock awards-shares issued including tax benefits		17					168										168

Treasury stock repurchases		(1	)									(36	)				(36	)

Stock based compensation (1)							162										162

Cumulative effect adjustment – ASU 2016-01									(7,444	)					7,444		-

Balance at March 31, 2018		6,177		$	115	$	81,889		-		$	(129,219	)	$	176,500	$	129,285

Net Income															7,289		7,289

Exercise of stock options and vesting of stock awards-shares issued including tax benefits		63			1		299										300

Treasury stock repurchases		(186	)									(7,495	)				(7,495	)

Stock based compensation (1)							233										233

Balance at June 30, 2018		6,054		$	116	$	82,421		-		$	(136,714	)	$	183,789	$	129,612

	(In thousands)
Maturity of Lease Liabilities
2019 (remaining)	$	142
2020		286
2021		292
2022		297
2023		302
Thereafter		101
Total undiscounted operating lease payments	$	1,420
Less: Imputed interest		(121	)
Present value of operating lease liabilities	$	1,299

Balance Sheet Classification
Right-of-use assets (recorded in other non-current assets)	$	1,299

Current lease liabilities (recorded in other current liabilities)	$	284
Long-term lease liabilities (recorded in other long-term liabilities)		1,015
Total operating lease liabilities	$	1,299

Other Information
Weighted-average remaining lease term for operating leases (in years)		4.83
Weighted-average discount rate for operating leases		3.8	%

	(In thousands)

2019 (remaining)	$	4,481
2020		6,130
2021		2,521
2022		2,150
2023		1,440
Thereafter		-
Total future minimum lease payments receivable	$	16,722

Issuer Purchases of Equity Securities
Period	Total number of shares purchased			Average price paid per share		Total number of shares purchased as part of publicly announced plans or programs			Maximum number of shares that may yet be purchased under the plans or programs⁽¹⁾
April 1-30, 2019		2,489		$	52.93		2,489			245,793
May 1-31, 2019		1,001			49.82		1,001			244,792
June 1-30, 2019		192,743	(2)		60.00		192,743	(2)		244,792
Total		196,233		$	59.86		196,233