PART I. FINANCIAL INFORMATION

Item 1. Financial Statements.

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

Condensed Consolidated Balance Sheets

(unaudited)

(in thousands, except share and per share data)

See notes to condensed consolidated financial statements.

All prior period share and per share data has been retroactively adjusted to reflect the stock split effective March 29,2022.29, 2022.

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

Condensed Consolidated Statements of Operations

(unaudited)

(in thousands, except per share data)

See notes to condensed consolidated financial statements.

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

29, 2022.

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

Condensed Consolidated Statements of Cash Flows

(unaudited)

(in thousands)

See notes to condensed consolidated financial statements.

See notes to condensed consolidated financial statements.

All prior period share and per share data has been retroactively adjusted to reflect the stock split effective March 29,2022.29, 2022.

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

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

Notes to Condensed Consolidated Financial Statements (unaudited)

March 31,June 30, 2022

NOTE A: BASIS OF PRESENTATION

In accordance with generally accepted accounting principles (“GAAP”) and applicable rules of the Securities and Exchange Commission, the information reported in this Quarterly Report on Form 10-Q for P.A.M. Transportation Services, Inc. and its legally distinct subsidiaries, unless otherwise indicated, is presented on a consolidated basis. Unless the context otherwise requires, all references in this Quarterly Report on Form 10-Q to “P.A.M.,” the “Company,” “we,” “our,” or “us” mean P.A.M. Transportation Services, Inc. and its consolidated subsidiaries.

The consolidated financial results for the three and six months ended June 30, 2022, include the results of our newly formed subsidiaries, Met Express, Inc. and Costar Equipment, Inc., from June 14, 2022, the date of the acquisition of substantially all of the assets and certain liabilities of Metropolitan Trucking, Inc. and its related entities, through June 30, 2022. All material intercompany items and transactions have been eliminated in consolidation. The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles (“GAAP”)GAAP for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In management’s opinion, all adjustments (consisting of normal recurring adjustments) necessary for a fair presentation have been included. The consolidated balance sheet at December 31, 2021 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. Operating results for the three and six-month periodperiods ended March 31,June 30, 2022 are not necessarily indicative of the results that may be expected for the year ending December 31, 2022. For further information, refer to the consolidated financial statements and the footnotes thereto included in the Company’s annual report on Form 10-K for the year ended December 31, 2021.

On March 8, 2022, our Board of Directors authorizeddeclared a 2-for-1 forward stock split of the shares of our common stock, which was effected in the form of a 100% stock dividend. The stock split entitled each shareholder of record at the close of business on March 18, 2022, to receive one additional share of common stock for each share of common stock owned as of that date and was paid on March 29, 2022. Upon the completion of the stock split, our outstanding shares increased from approximately 11.1 million shares to approximately 22.2 million shares. All share and per share amounts in this quarterly report on Form 10-Q give effect to the stock split and have been adjusted retrospectively, where applicable, for all periods presented.

NOTE B: RECENT ACCOUNTING PRONOUNCEMENTS

In March 2020, the FASB issued Accounting Standards Update No. 2020-04, (“ASU 2020-04”), Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. ASU 2020-04 was issued to provide optional guidance for a limited period of time to ease the potential burden in accounting for reference rate reform on financial reporting. ASU 2020-04 is effective as of March 12, 2020, through December 31, 2022. The Company has evaluated the provisions of this standard and determined that it is applicable to our line of credit and investment margin account. The London Interbank Offered Rate (“LIBOR”) is the basis for interest charges on outstanding borrowings for our line of credit. During the year 2021, the index for interest charges on the Company’s investment margin accounts was transitioned to the Secured Overnight Financing Rate (“SOFR”). The new index rate did not vary materially from LIBOR at the time of transition. The scheduled discontinuation of LIBOR is not expected to materially alter any provisions of either of these debt instruments, except for the identification of a replacement reference rate for our line of credit. The Company has evaluated the new guidance and does not expect it to have a material impact on its financial condition, results of operations, or cash flows.

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 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.

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.

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 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 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.

Marketable equity securities are carried at fair value, with gains and losses in fair market value included in the determination of net income. The fair value of marketable equity securities is determined based on quoted market prices in active markets, as described in Note J.

The following table sets forth market value, cost, and unrealized gains on equity securities as of March 31,June 30, 2022 and December 31, 2021.

The following table sets forth the gross unrealized gains and losses on the Company’s marketable securities as of March 31,June 30, 2022 and December 31, 2021.

The following table shows the Company’s net realized gains during the three and sixmonths ending on March 31,June 30, 2022 and 2021, respectively, on certain marketable equity securities.

For the quarter ended March 31,June 30, 2022,the Company recognized dividends received of approximately $357,000 in non-operating income in its condensed consolidated statements of operations. For the quarter ended June 30, 2021, the Company recognized dividends received of approximately $309,000 in non-operating income in its condensed consolidated statements of operations.

For the quartersix months ended March 31,June 30, 2022, the Company recognized dividends received of approximately $666,000 in non-operating income in its condensed consolidated statements of operations. For the six months ended June 30, 2021, the Company recognized dividends received of approximately $352,000$660,000 in non-operating income in its condensed consolidated statements of operations.

The Company’s equity securities are periodically used as collateral against any outstanding margin account borrowings. As of March 31,June 30, 2022, and December 31, 2021, the Company had outstanding borrowings of approximately $866,000$640,000 and $1,214,000, respectively, under its margin account. Margin account borrowings are used for the purchase of marketable equity securities and as a source of short-term liquidity and are included in accrued expenses and other liabilities on our condensed consolidated balance sheets.

Our marketable equity securities portfolio had a net unrealized pre-tax gainloss in market value of approximately $1,397,000$3,349,000 during the firstsecond quarter of 2022, and a net unrealized pre-tax gain in market value of approximately $4,205,000$1,632,000 during the firstsecond quarter of 2021, which were reported as non-operating income in its condensed consolidated statements of operations 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, 3,000,000 shares are reserved for the issuance of stock awards to directors, officers, key employees, and others. The stock option exercise price and the restricted stock value under the Plan shall not be less than 85% of the fair market value of the Company’s common stock on the date the award is granted. The fair market value is determined by the closing price of the Company’s common stock, on its primary exchange, on the same date that the option or award is granted.

During the firstFebruary 2022, three months of 2022,the Company granted 29,120 shares of common stock to certain key employees. These stock awards havehad grant date fair values of $38.80 per share, based on the closing price of the Company’s stock on the date of grant, and vest in 25% increments over four years, beginning one year from the anniversary date of the grant.

During May 2022, the Company granted 1,855 shares of common stock to non-employee directors. These stock awards had a grant date fair value of $29.60 per share, based on the closing price of the Company’s stock on the date of grant, and vested immediately.

During June 2022, the Company granted 3,500 shares of common stock to a key employee. This stock award had a grant date fair value of $27.68 per share, based on the closing price of the Company’s stock on the date of grant, and vests in 25% increments over four years, beginning one year from the anniversary date of the grant.

There were 0The total grant date fair value of stock awards that vested during the first threesix months of 2022.2022 was approximately $93,000. The total pre-tax stock-based compensation expense, recognized in salaries, wages and benefits during the first threesix months of 2022, was approximately $137,000.$353,000 and includes approximately $55,000 recognized as a result of the grant of shares to certain non-employee directors. The recognition of stock-based compensation expense decreased both diluted and basic earnings per common share by approximately $0.01 during the first threesix months of 2022. As of March 31,June 30, 2022, the Company had stock-based compensation plans with total unvested stock-based compensation expense of approximately $2,840,000,$2,776,000, which is being amortized on a straight-line basis over the remaining vesting period. As a result, the Company expects to recognize approximately $510,000$362,000 in additional compensation expense related to unvested stock awards during the remainder of 2022 and to recognize approximately $625,000, $617,000, $646,000, $331,000,$649,000, $641,000, $670,000, $343,000, and $111,000 in additional compensation expense related to unvested stock awards during the years 2023, 2024, 2025, 2026, and 2027, respectively.

The total grant date fair value of stock vested during the firstsix months of 2021 was approximately $80,000. The total pre-tax stock-based compensation expense, recognized in salaries, wages and benefits during the first threesix months of 2021, was approximately $160,000$253,000 and includedincludes approximately $80,000 recognized as a result of the accrualgrant of 326 split-adjusted shares to each non-employee director during the firstthree months of 2021.director. The recognition of stock-based compensation expense decreased both diluted and basic earnings per common share by approximately $0.02$0.03 during the first threesix months of 2021. As of March 31,June 30, 2021, the Company had stock-based compensation plans with total unvested stock-based compensation expense of approximately $1,977,000,$2,035,000, which wasis being amortized on a straight-line basis over the remaining vesting period.

A summary of the status of the Company’s non-vested restricted stock as of March 31,June 30, 2022, and changes during the threesix months ended March 31,June 30, 2022, is as follows:

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 2 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 2 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:

These segment results include of the results of the truckload services and brokerage operations acquired from Metropolitan Trucking, Inc., and related subsidiaries in the business combination discussed in Note P to the condensed consolidated financial statements.

NOTE G: TREASURY STOCK

The Company’s stock repurchase program has been extended and expanded several times, most recently in November 2021, when the Board of Directors reauthorized 500,000 shares of common stock for repurchase under the initial September 2011 authorization. During the three months ended March 31, 2022, the Company repurchased 83,220 stock-split adjusted shares (41,610 shares, prior to the stock-split), of its common stock at an aggregate cost of approximately $3,000,000 under this program. As of March 31,June 30, 2022, there remain 458,390 shares of common stock authorized for repurchase under this plan.

During the first quarter of 2022, prior to the stock split, we retired 12,268,395 shares of our treasury stock. Upon retirement of the treasury shares, we allocated the excess of the repurchase price over the par value of shares acquired to both retained earnings and paid-in capital. The portion allocated to paid-in capital was determined by applying the average paid-in capital per share, and the remaining portion was recorded to retained earnings. There was no effect on the Company’s overall equity position due to the retirement of treasury shares.

The Company accounts for treasury stock using the cost method. As of March 31,June 30, 2022, there were 0 shares held in the treasury.

NOTE H: 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:

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 limitations period of three years, and as a result, the Company’s tax years 2018 and forward remain open to examination in those jurisdictions.

In determining whether a tax asset valuation allowance is necessary, management, in accordance with the provisions of ASC 740-10-30, Accounting for Income Taxes, weighs all available evidence, both positive and negative, to determine whether, based on the weight of that evidence, a valuation allowance is necessary. If negative conditions exist which indicate a valuation allowance might be necessary, consideration is then given to what effect the future reversals of existing taxable temporary differences and the availability of tax strategies might have on future taxable income to determine the amount, if any, of the required valuation allowance. As of March 31,June 30, 2022, management determined that the future reversals of existing taxable temporary differences and available tax strategies would generate sufficient future taxable income to realize its tax assets and therefore a valuation allowance was not necessary.

The Company recognizes a tax benefit from an uncertain tax position only if it is more likely than not that the position will be sustained on examination by taxing authorities, based on the technical merits of the position. As of March 31,June 30, 2022, an adjustment to the Company’s condensed consolidated financial statements for uncertain tax positions has not been required as management believes that the Company’s tax positions taken in income tax returns filed or to be filed are supported by clear and unambiguous income tax laws. The Company recognizes interest and penalties related to uncertain income tax positions, if any, in income tax expense. During the threesix months ended March 31,June 30, 2022 and 2021, the Company has not recognized or accrued any interest or penalties related to uncertain income tax positions.

The Company’s effective income tax rates were 24.3%24.1% and 25.7%26.3% for the threesix months ended March 31,June 30, 2022 and 2021, respectively. Our effective tax rate for the threesix months ended March 31,June 30, 2022 differs from amounts computed by applying the United States federal statutory rates to pre-tax income primarily due to state income taxes and the tax benefits related to stock compensation.

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:

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

At March 31,June 30, 2022, the following items are measured at fair value on a recurring basis:

The Company’s investments in marketable securities are recorded at fair value based on quoted market prices. The carrying value of other financial instruments, including cash, accounts receivable, accounts payable, and accrued liabilities approximate fair value due to their short maturities.

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

For long-term debt other than the lines of credit, the fair values are estimated using discounted cash flow analyses, based on the Company’s current incremental borrowing rates for similar types of borrowing arrangements. The carrying value and estimated fair value of this other long-term debt at March 31,June 30, 2022 was as follows:

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

NOTE K: NOTES PAYABLE

During the first threesix months of 2022, the Company’s subsidiaries entered into installment obligations totaling approximately $48.7$53.8 million for the purpose of purchasing revenue equipment and financing existing owned real estate.equipment. These obligations are payable in monthly installments and are recorded in long term debt and current maturities on the condensed consolidated balance sheets. The terms of these obligations vary from 36 months for trucks to 120 months for real estate. In addition, during June 2022 the Company’s subsidiaries assumed approximately $12.3 million of installment obligations as part of a business acquisition. The terms of these obligations vary from 1 month to 36 months for trucks acquired and from 24 months to 34 months for trailers acquired.

NOTE L: COMMITMENTS AND CONTINGENCIESLITIGATION

We are involved in certain claims and pending litigation arising from the ordinary conduct of business. We also provide accruals for claims within our self-insured retention amounts. On September 1, 2019, we elected to become self-insured for certain layers of auto liability claims in excess of $1.0 million for which we previously maintained auto liability insurance coverage. On September 1, 2020, we elected to become self-insured for certain layers of auto liability claims in excess of $2.0 million. We currently specifically reserve for claims that are expected to exceed $2.0 million when fully developed, based on the facts and circumstances of those claims. Based on our knowledge

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

We are a defendant in a lawsuit which was filed on August 6, 2021, in the United States District Court for the Western District of Arkansas. The plaintiff is a former driver and is seeking class certification. The complaint alleges failure to pay minimum wage under the Fair Labor Standards Act and the Arkansas Minimum Wage Act, violations of the Electronic Funds Transfer Act (EFTA), violations of the Arkansas Wage Payment Law (discharge pay and unlawful, usurious advance fees), violations of the Arkansas Common Law, and violations of the Racketeer Influenced and Corrupt Organizations Act (RICO).  Should this lawsuit be certified as a class action, to include similarly situated drivers as the plaintiff, the class will seek actual and liquated damages to include court costs and legal fees associated with the lawsuit. The class, if certified, will include any company driver employed from January 1, 2020 through the present and ongoing. A mediation was held on January 14, 2022 in an attempt to resolve the case but was unsuccessful.settlement agreement has been reached and is pending court approval. Management has determined that any losses under this claim will not be covered by existing insurance policies. The settlement has been fully reserved as of June 30, 2022.

NOTE M: LEASES

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 leases that become operationally unjustified and to allow the flexibility to pursue more 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.

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.

Right-of-Use Leases

The Company is party to operating leases which include initial terms ranging from three to five years and which do not include an option for early cancellation. In accordance with the provisions of ASC Topic 842, these leases resulted in the recognition of right-of-use assets and corresponding operating lease liabilities, respectively, valued at $0.8$0.7 million as of March 31,June 30, 2022. These assets and liabilities are recognized based on the present value of future minimum lease payments over the lease term at commencement date, using the Company’s incremental borrowing rate as of the respective dates of lease inception, as the rate implicit in each lease is not readily determinable. The right-of-use assets are recorded in other assets, and the lease liability is recorded in accrued expenses and other liabilities and in other long-term liabilities on our condensed consolidated balance 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 of operations. While these lease agreements may contain provisions to extend after the initial term for an additional five years, the Company is not reasonably certain these extension options will be exercised. Therefore, potential lease payments that might occur under this extension period are not included in amounts recorded in our condensed consolidated balance sheets as of March 31,June 30, 2022.

Scheduled amounts and timing of cash flows arising from future right-of-use operating lease payments at March 31,June 30, 2022, are:

Cash Flows

NaN new right-of-use assets were recognized as a non-cash asset addition that resulted from new operating lease liabilities during the three and sixmonths ended March 31,June 30, 2022. Cash paid for amounts included in the present value of operating lease liabilities was $0.2 million during the three months ended March 31,June 30, 2022 and is included in operating cash flows, within the condensed consolidated statement of cash flows. Cash paid for amounts included in the present value of operating lease liabilities was $0.3 million during the six months ended June 30, 2022 and is included in operating cash flows, within the condensed consolidated statement of cash flows.

Operating Lease Costs

Lease Revenue

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

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

As of March 31, June 30,2022,the gross carrying value of trucks underlying these leases was $56.7$55.9 million and accumulated depreciation was $33.3$34.2 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 March 31,June 30, 2022, the Company incurred $1.9 million of depreciation expense for these assets.

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

Lease Receivables

Future minimum operating lease payments receivable at March 31,June 30, 2022:

NOTE N: EFFECT OF COVID-19 PANDEMIC

The rapid spread of COVID-19 resulted in governmental authorities implementing numerous measures to try to contain the virus, such as travel bans and restrictions, quarantines, shelter in place orders, increased border and port controls and closures, and shutdowns. These measures and the public health concerns resulting from the outbreak severely disrupted economic and commercial activity. The resulting impact on domestic and global supply chains caused slowdowns and reduced freight demand for transportation companies such as ours. Because we have a significant concentration of customers within the automotive industry, our freight volumes and revenues were significantly affected by the closure of North American automotive manufacturing facilities beginning in late March of 2020. Our automotive customers resumed operations during the second quarter of 2020 and have not been materially disrupted during 2021 or the first threesix months of 2022. Any future delays or interruptions of automotive production and other consumer activity affecting our customers that could result from any future wave of the virus or other similar outbreaks could further adversely affect our business. In addition, the implementation of measures to protect the health and safety of our employees, customers, vendors and the general public, or any state of federal vaccination mandates, may disrupt our ability to efficiently manage personnel and operations and to recruit and retain driver and non-driver personnel, which could have a material adverse effect on our operating results. Further, negative financial results, an economic downturn or uncertainty, or a tightening of credit markets caused by COVID-19 or other similar outbreaks could have a material adverse effect on our liquidity and our ability to effectively meet our short- and long-term financial obligations.

NOTE O: NONCASH INVESTING AND FINANCING ACTIVITIES

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

NOTE P: ACQUISITION OF METROPOLITAN TRUCKING

On June 14, 2022, subsidiaries of the Company, Met Express, Inc. and Costar Equipment, Inc. (collectively, the “Buyer”), entered into an Asset Purchase Agreement with Metropolitan Trucking, Inc., and related subsidiaries. Metropolitan Trucking, Inc. is a truckload carrier headquartered in Saddle Brook, New Jersey, providing asset-based dry van truckload transportation services, including local, regional, and dedicated services. The acquisition has been determined to be a business combination.

Pursuant to the Asset Purchase Agreement, the Buyer acquired substantially all the assets and certain specified liabilities of Metropolitan Trucking, Inc., and its related entities (the “Transaction”). The Buyer paid $79.9 million of total consideration, including cash and certain assumed indebtedness of Metropolitan Trucking, Inc., and its related entities. The Transaction closed on June 14, 2022.

Total cash paid of $64.3 million was funded out of the Company’s available cash. The Transaction included the assumption of $12.6 million of indebtedness and $2.9 million of other current liabilities. The Asset Purchase Agreement contains customary representations, warranties, covenants, escrow, and indemnification provisions.

The results of the acquired business have been included in the consolidated financial statements since the date of acquisition and represented 12.6% of consolidated total assets as of June 30, 2022 and represented 2.6% and 1.3% of operating revenue for the three and six months ended June 30, 2022, respectively. Acquisition related expenses of $0.4 million are included in the condensed consolidated statements of operations for the three and six months ended June 30, 2022.

The allocation of the purchase price is detailed in the tables below. The final purchase price allocation remains subject to other purchase accounting adjustments which may be identified, such as the final valuation of intangible assets and working capital adjustments, and therefore may differ materially from that reflected below.

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

FORWARD-LOOKING INFORMATION

Certain information included in this Quarterly Report on Form 10-Q constitutes “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements may relate to expected future financial and operating results, prospects, plans or events, and are thus prospective. Such forward-looking statements are subject to risks, uncertainties and other factors which could cause actual results to differ materially from future results expressed or implied by such forward-looking statements. Potential risks and uncertainties include, but are not limited to, ongoing and potential future economic, business and operational disruptions and uncertainties due to the COVID-19 pandemic, including from any future spikes or outbreaks of the virus, or other public health crises, includingas well as from the implementation of vaccine mandates and other government actions taken in response to the pandemic; excess capacity in the trucking industry; surplus inventories; recessionary economic cycles and downturns in 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 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; the risk that the benefits from the business combination transaction involving the Company and Metropolitan Trucking, Inc. and related entities may not be fully realized or may take longer to realize than expected, including as a result of any of the factors described in this paragraph; the reaction to the transaction of the companies’ customers, employees and counterparties; diversion of management time on acquisition-related issues; our ability to develop and implement suitable information technology systems and prevent failures in or breaches of such systems; the impact of pending or future litigation; 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; and other factors, including risk factors, included from time to time in filings made by the Company with the Securities and Exchange Commission. The Company undertakes no obligation to publicly update or 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

ThereExcept as noted below, 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, 2021.

Business Combinations. Assets acquired and liabilities assumed as part of a business acquisition are generally recorded at their fair value at the date of acquisition. The excess of purchase price over the fair value of assets acquired and liabilities assumed is recorded as goodwill. Determining fair value of identifiable assets, particularly intangibles, and liabilities acquired also requires management to make estimates, which are based on all available information and in some cases assumptions with respect to the timing and amount of future revenues and expenses associated with an asset. Accounting for business acquisitions requires management to make judgments as to whether a purchase transaction is a multiple element contract, meaning that it includes other transaction components such as a settlement of a preexisting relationship. This judgment and determination affects the amount of consideration paid that is allocable to assets and liabilities acquired in the business purchase transaction.

BUSINESS OVERVIEW

The Company is a holding company that owns subsidiaries engaged in providing truckload dry van carrier services transporting general commodities throughout the continental United States, as well as in the Canadian provinces of Ontario and Quebec. Unless the context otherwise requires, this report presents information regarding the Company and its subsidiaries on a consolidated basis. The Company’s administrative headquarters are in Tontitown, Arkansas. From this location we manage operations conducted through our wholly-owned subsidiaries based in various locations around the United States and in Mexico and Canada. 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 63.7%66.4% and 66.9%67.5% of total revenues, excluding fuel surcharges, for the three months ended March 31,June 30, 2022 and 2021, respectively. Truckload services revenues, excluding fuel surcharges, represented 65.1% and 67.2% of total revenues, excluding fuel surcharges, for the six months ended June 30, 2022 and 2021, 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.

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 March 31,June 30, 2022 and 2021, approximately $23.4$34.4 million and $13.7$16.1 million, respectively, of the Company’s total revenue was generated from fuel surcharges. During the six months ended June 30, 2022 and 2021, approximately $57.8 million and $29.8 million, respectively, of the Company’s total revenue was generated from fuel surcharges. We may also discuss certain changes in our expenses as a percentage of revenue, before fuel surcharge, rather than absolute dollar changes. We do this because we believe the variable cost nature of certain expenses makes a comparison of changes in expenses as a percentage of revenue more meaningful than absolute dollar changes.

On March 8, 2022, the Company’s Board of Directors declared a 2-for-1 forward stock split of its common stock in the form of a 100% stock dividend, payable on March 29, 2022, to stockholders of record on March 18, 2022. All share and per share amounts in this quarterly report on Form 10-Q give effect to the stock split and have been adjusted retroactively, where applicable, for all periods presented. See Note A to the condensed consolidated financial statements for additional information on the stock split.

On June 14, 2022, newly formed subsidiaries of the Company completed the acquisition of substantially all the assets and certain liabilities of Metropolitan Trucking, Inc. and related entities (“Metropolitan”). Metropolitan was a 320-truck dry van truckload carrier headquartered near New York City, New York, with the East Coast serving as its primary operating territory. The purchase price paid at closing included approximately $15.5 million in assumed debt and $64.3 million paid using available cash balances. The Company is currently operating these assets through its newly formed subsidiary, Met Express, Inc. See Note P to the condensed consolidated financial statements for more information regarding this acquisition.

IMPACT OF COVID-19

The Company’s primary concern during the COVID-19 pandemic has been to do its part to protect its employees, customers, vendors and the general public from the spread of COVID-19 while continuing to serve the vital role of supplying essential goods to the nation. For essential functions, including our driving professionals, we have distributed cleaning and protective supplies to various terminals so that they are available to those that need them, increased cleaning frequency and coverage, and provided employees direction on precautionary measures, such as sanitizing truck interiors, personal hygiene, and social distancing. We will continue to adapt our operations as required to ensure safety while continuing to provide a high level of service to our customers.

While we and most of our customers have returned to normal operations and economic activity continued to increase during the periods presented, we continue to monitor ongoing developments with the COVID-19 pandemic. Any future waves or outbreaks of alternative strains of the virus could adversely impact our future operations and financial results.

On September 9, 2021, President Biden announced that he directed the Occupational Safety and Health Administration (OSHA) to develop an Emergency Temporary Standard (ETS) mandating either the full vaccination or weekly testing of employees for employers with 100 or more employees. On January 13, 2022, the Supreme Court ruled that the mandate could not be enforced. We continue to monitor new regulations for any potential impacts to our operations.

The ultimate extent of the pandemic’s impact on the Company’s financial and operating results, which could be material, will be determined by the length of time the pandemic continues, its continued severity, further government regulations imposed in response to the pandemic and the pandemic’s continued effect on the economy and transportation demand.

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

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 MARCH 31,JUNE 30, 2022 VS. THREE MONTHS ENDED MARCH 31,JUNE 30, 2021

During the firstsecond quarter of 2022, truckload services revenue, before fuel surcharges, increased 38.3%37.4% to $125.0$134.7 million as compared to $90.4$98.0 million during the firstsecond quarter of 2021. The increase in revenue was primarily the result of increases in the average rate per mile charged to our customers and in the average number of trucks in our fleet during the firstsecond quarter of 2022 compared to the firstsecond quarter of 2021. These increases were partially offset by a decrease in the total number of miles driven per truck for the firstsecond quarter of 2022 compared to the firstsecond quarter of 2021.

Salaries, wages and benefits decreased from 34.7%32.3% of revenues, before fuel surcharges, in the firstsecond quarter of 2021 to 28.8%29.6% of revenues, before fuel surcharges, during the firstsecond quarter of 2022. This percentage-based decrease is primarily a result of the interaction of expenses with fixed-cost characteristics, such as general and administrative wages, maintenance wages, and operations wages with an increase in revenues for the periods compared.

Operating supplies and expenses decreased from 10.8%9.1% of revenues, before fuel surcharges, during the firstsecond quarter of 2021 to 6.5%6.6% of revenues, before fuel surcharges, during the firstsecond quarter of 2022. The decrease relates primarily to a decrease in the average surcharge-adjusted fuel price paid per gallon of diesel fuel, which was a result of increased fuel surcharge collections from customers. Fuel surcharge collections can fluctuate significantly from period to period as they are generally based on changes in fuel prices from period to period so that, during periods of rising fuel prices, fuel surcharge collections increase, while fuel surcharge collections decrease during periods of falling fuel prices. Fuel surcharge revenue generated from transportation services performed by owner-operators is reflected as a reduction in net operating supplies and expenses, while fuel surcharges paid to owner-operators for their services is reported along with their base rate of pay in the Rent and purchased transportation category. These categorizations have the effect of reducing our net operating supplies and expenses while increasing the Rent and purchased transportation category, as discussed below.

Rent and purchased transportation increased from 23.1% of revenues, before fuel surcharges, during the second quarter of 2021 to 25.5% of revenues, before fuel surcharges, during the second quarter of 2022. The increase was primarily due to an increase in the rates charged by third-party carriers during the second quarter of 2022 compared to the second quarter of 2021. Also contributing to the increase were an increase in the average number of owner-operators under contract from 370 during the second quarter of 2021 to 381 during the second quarter of 2022, as well as an increase in the average rate per mile, including fuel surcharges, paid to owner-operators during the respective periods.

Depreciation decreased from 14.5% of revenues, before fuel surcharges, during the second quarter of 2021 to 11.2% of revenues, before fuel surcharges, during the second quarter of 2022. This percentage-based decrease is primarily a result of the interaction of an increase in operating revenues with the fixed-cost nature of depreciation expense. Due to the fixed-cost nature of depreciation, an increase in operating revenues, before fuel surcharge, without a corresponding proportional increase in depreciation, decreases depreciation expense as a percentage of operating revenues.

Insurance and claims increased from 3.2% of revenues, before fuel surcharges, during the second quarter 2021 to 5.4% of revenues, before fuel surcharges, during the second quarter 2022. This increase as a percentage of revenue, before fuel surcharges, is largely attributable to an increase in litigation reserves due to a preliminary settlement agreement regarding the minimum wage lawsuit discussed 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 from 84.0% for the second quarter of 2021 to 79.7% for the second quarter of 2022.

Non-operating income (expense) decreased from income of 1.8% of revenues, before fuel surcharges, during the second quarter of 2021 to expense of 1.6% of revenues, before fuel surcharges, during the second quarter of 2022. This decrease primarily resulted from the change in the market values of our portfolio of marketable equity securities. The Company recorded a $3.2 million decrease in the market value of our marketable equity securities in non-operating income (expense) during the second quarter of 2022, compared to a $1.6 million increase in the market value of our marketable equity securities during the second quarter of 2021.

SIX MONTHS ENDED JUNE 30, 2022 VS. SIX MONTHS ENDED JUNE 30, 2021

For the six months ended June 30, 2022, truckload services revenue, before fuel surcharges, increased 37.8% to $259.7 million as compared to $188.4 million for the six months ended June 30, 2021. The increase in revenue was primarily the result of an increase in the average rate per mile charged to our customers during the first six months of 2022 compared to first six months of 2021. The increase in rates was partially offset by a decrease in average miles driven per truck for the first six months of 2022 compared to the first six months of 2021.

Salaries, wages and benefits decreased from 33.5% of revenues, before fuel surcharges, in the first six months of 2021 to 29.2% of revenues, before fuel surcharges, during the first six months of 2022. The percentage-based decrease is primarily a result of the interaction of expenses with fixed-cost characteristics, such as general and administrative wages, maintenance wages, and operations wages with an increase in revenues for the periods compared.

Operating supplies and expenses decreased from 9.9% of revenues, before fuel surcharges, during the first six months of 2021 to 6.5% of revenues, before fuel surcharges, during the first six months of 2022. The percentage-based decrease relates primarily to a decrease in the average surcharge-adjusted fuel price paid per gallon of diesel fuel, which decreased as a result of increased fuel surcharge collections from customers. Fuel surcharge collections can fluctuate significantly from period to period as they are generally based on changes in fuel prices from period to period so that, during periods of rising fuel prices, fuel surcharge collections increase, while fuel surcharge collections decrease during periods of falling fuel prices. Fuel surcharge revenue generated from transportation services performed by owner-operators is reflected as a reduction in net operating supplies and expenses, while fuel surcharges paid to owner-operators for their services is reported along with their base rate of pay in the rent and purchased transportation category. These categorizations have the effect of reducing our net operating supplies and expenses while increasing the rent and purchased transportation category, as discussed below.

Rent and purchased transportation increased from 22.7%22.9% of revenues, before fuel surcharges, during the first quartersix months of 2021 to 26.3%25.9% of revenues, before fuel surcharges, during the first quartersix months of 2022. The increase was primarily due to an increase in the rates charged by third-party carriers during the first quartersix months of 2022 compared to the first quartersix months of 2021. Also contributing to the increase waswere an increase in the average number of units in our owner-operator divisionowner-operators under contract from 368369 during the first quartersix months of 2021 to 388385 during the first quartersix months of 2022, as well as an increase in the average rate per mile, including fuel surcharges, paid to owner-operators during the respective periods.

Depreciation decreased from 15.8%15.1% of revenues, before fuel surcharges, during the first quartersix months of 2021 to 11.5%11.3% of revenues, before fuel surcharges, during the first quartersix months of 2022. This percentage-based decrease is primarily a result of the interaction of an increase in operating revenues with the fixed-cost nature of depreciation expense. Due to the fixed-cost nature of depreciation, an increase in operating revenues, before fuel surcharge, without a corresponding proportional increase in depreciation, decreases depreciation expense as a percentage of operating revenues.

Insurance and claims expense increased from 3.4% of revenues, before fuel surcharges, during the first six months of 2021 to 5.4% of revenues before fuel surcharges, during the first six months of 2022. This increase resulted from an increase in litigation reserves due to a preliminary settlement agreement regarding the minimum wage lawsuit discussed in Note L to our condensed consolidated financial statement and to increases in loss reserves.

Insurance and claims increased from 3.6% of revenues, before fuel surcharges, during the first quarter 2021 to 5.5% of revenues, before fuel surcharges, during the first quarter 2022. This increase related primarily to an increase in accident and legal reserves recognized in the first quarter of 2022, as compared to the first quarter of 2021.

Non-operating income decreased from 4.2% of revenues, before fuel surcharges, during the first quarter of 2021 to 1.2% of revenues, before fuel surcharges, during the first quarter of 2022. This increase primarily resulted from the change in the market values of our portfolio of marketable equity securities. The Company recorded a $4.2 million increase in the market values of our marketable equity securities in non-operating income during the first quarter of 2021, compared to a $1.4 million increase in the market value of our marketable equity securities during the first quarter of 2022.

The truckload services division operating ratio, which measures the ratio of operating expenses, net of fuel surcharges, to operating revenues, before fuel surcharges, improved from 90.1%86.9% for the first quartersix months of 2021 to 81.4%80.5% for the first quartersix months of 2022.

Non-operating income (expense) decreased from income of 2.9% of revenues, before fuel surcharges, during the first six months of 2021 to expense of 0.3% of revenues, before fuel surcharges, during the first six months of 2022. This decrease primarily resulted from the change in the market values of our portfolio of marketable equity securities. The Company recorded a $2.0 million decrease in the market value of our marketable equity securities in non-operating income (expense) during the first six months of 2022, compared to a $5.8 million increase in the market value of our marketable equity securities during the first six months of 2021.

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 MARCH 31,JUNE 30, 2022 VS. THREE MONTHS ENDED MARCH 31,JUNE 30, 2021

During the firstsecond quarter of 2022, logistics and brokerage services revenue, before fuel surcharges, increased 58.8%44.3% to $71.1$68.0 million as compared to $44.8$47.1 million during the firstsecond quarter of 2021. The increase relates to a 55%an increase in the number of loads serviced and to an increase in the average rates charged to customers during the firstsecond quarter of 2022 as compared to the firstsecond quarter of 2021.

Rents and purchased transportation decreased from 83.7%82.7% of revenues, before fuel surcharges, during the firstsecond quarter of 2021 to 82.2%79.7% of revenues, before fuel surcharges, during the firstsecond quarter of 2022. The decrease resulted from paying third-party carriers a smaller percentage of customer revenue.

The logistics and brokerage services division operating ratio, which measures the ratio of operating expenses, net of fuel surcharges, to operating revenues, before fuel surcharges, improved from 89.5%88.7% for the firstsecond quarter of 2021 to 88.6%86.2% for the second quarter of 2022.

SIX MONTHS ENDED JUNE 30, 2022 VS. SIX MONTHS ENDED JUNE 30, 2021

During the first six months of 2022, logistics and brokerage services revenue, before fuel surcharges, increased 51.4% to $139.2 million as compared to $91.9 million during the first six months of 2021. The increase relates to an increase in the number of loads serviced and in the average rates charged to customers during the first six months of 2022 as compared to the first six months of 2021.

Rents and purchased transportation decreased from 83.2% of revenues, before fuel surcharges, during the first six months of 2021 to 81.0% of revenues, before fuel surcharges, during the first six months of 2022. The decrease resulted from paying third-party carriers a smaller percentage of customer revenue.

The logistics and brokerage services division operating ratio, which measures the ratio of operating expenses, net of fuel surcharges, to operating revenues, before fuel surcharges, improved from 89.1% for the first quartersix months of 2021 to 87.4% for the first six months of 2022.

RESULTS OF OPERATIONS – COMBINED SERVICES

THREE MONTHS ENDED MARCH 31,JUNE 30, 2022 VS. THREE MONTHS ENDED MARCH 31,JUNE 30, 2021

Net income for all divisions was approximately $23.9$24.2 million, or 12.2%11.9% of revenues, before fuel surcharges for the firstsecond quarter of 2022 as compared to net income of $11.9$15.3 million, or 8.8%10.6% of revenues, before fuel surcharges for the firstsecond quarter of 2021. The increase in net income resulted in diluted earnings per share of $1.06$1.08 for the firstsecond quarter of 2022 as compared to diluted earnings per share of $0.52$0.67 for the firstsecond quarter of 2021.

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 credit facilities, installment notes, and investment margin account.

During the first threesix months of 2022, we generated $41.1$74.9 million in cash from operating activities. Investing activities used $9.0$81.4 million in cash in the first threesix months of 2022. Financing activities provided $27.3generated $4.6 million in cash in the first threesix months of 2022.

Our primary use of funds is for the purchase of revenue equipment. We typically use installment notes, our existing line of credit on an interim basis, proceeds from the sale or trade of equipment, and cash flows from operations to finance capital expenditures and repay long-term debt. During the first threesix months of 2022, we utilized cash on hand, installment notes, and our line of credit to finance purchases of revenue equipment and other assets of approximately $16.6 million.$86.7 million, including the purchase of assets associated with the Metropolitan business acquisition.

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 threesix months of 2022, the Company’s subsidiary, P.A.M. Transport, Inc., entered into installment obligations totaling approximately $13.2$53.8 million, including $35.5 million for the financing of real estate and $18.3 million for the purpose of purchasing revenue equipment and entered into an installment obligation in the amount of $35.5 million to finance existing owned real estate.other assets. These obligations are payable in monthly installments.

During the remainder of 2022, we expect to purchase approximately 450250 new trucks and 500200 new trailers while continuing to sell or trade older equipment, which we expect to result in net capital expenditures of approximately $87.3$44.7 million.

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

During the first threesix months of 2022, we maintained a revolving line of credit. Amounts outstanding under the line bear interest at LIBOR (determined as of the first day of each month and assuming a floor of 0.50%) plus 1.25% (1.75%(2.37% at March 31,June 30, 2022), are secured by our trade accounts receivable and mature on July 1, 2024. An “unused fee” of 0.25% is charged if average borrowings are less than $18.0 million. At March 31,June 30, 2022 outstanding advances on the line of credit were approximately $0.4 million, including approximately $0.3 million inconsisting of letters of credit, and a credit reserve of $0.1 million, with availability to borrow $59.6 million.

In February 2022, we borrowed $35.5 million under a term loan secured by our real estate. This term loan bears interest at a fixed rate of 3.62%, with principal and interest payable monthly, and matures on March 1, 2032. The loan is secured by mortgages and assignments of rents on the Company’s principal office and four terminal locations.

Cash increased from $18.5 million at December 31, 2021 to $77.9 million at March 31, 2022. The increase relates primarily to the $41.1 million in cash provided by operating activities in the first three months of 2022 and is supplemented by $35.5 million in cash obtained by financing existing owned real estate during the first three months of 2022. Refer to the condensed consolidated statements of cash flows for additional information for more information regarding the increase in cash.

Trade accounts receivable increased from $121.9 million at December 31, 2021 to $137.9$155.9 million at March 31,June 30, 2022. The increase resulted from an increase in freight revenues, which flow through accounts receivable, during the firstsecond quarter of 2022 as compared to the fourth quarter of 2021.

Prepaid expenses and deposits decreased from $11.0 million at December 31, 2021 to $10.5$9.6 million at March 31,June 30, 2022. The decrease relates to the normal amortization of items prepaid as of December 31, 2021.

Revenue equipment increased from $520.8 million at December 31, 2021 to $608.0 million at June 30, 2022. The increase is due to the acquisition of trucks and trailers as part of the acquisition of Metropolitan Trucking during the second quarter of 2022.

Marketable equity securities increaseddecreased from $39.4 million at December 31, 2021 to $40.8$37.6 million at March 31,June 30, 2022. The $1.4$1.8 million increasedecrease was due to an increasea decrease in the market value of held marketable equity securities of $1.4$1.9 million and the purchase of marketable equity securities with a combined purchase cost of approximately $0.1 million during the first threesix months of 2022.

Accounts payable increased from $43.4$43.3 million at December 31, 2021 to $48.6$51.2 million at March 31,June 30, 2022. This increase was primarily attributable to an increase in the amount accrued for fixed asset purchases and an increase in the amount due to third-party carriers as of March 31,June 30, 2022.

Accrued expenses and other liabilities increased from $14.1 million at December 31, 2021 to $19.7$23.8 million at March 31,June 30, 2022. ThisThe increase is largely due to increases inaccruals of legal reserves andduring the effectfirst six months of timing for accrued pay for employees and owner-operators.2022.

Long-term debt and current maturities of long term-debt are reviewed on an aggregate basis, as the classification of amounts in each category are typically affected merely by the passage of time. Long-term debt and current maturities of long-term debt, on an aggregate basis, increased from $222.3 million at December 31, 2021 to $259.5$249.3 million at March 31,June 30, 2022. The increase was primarily related to the financing of certain real estate holdings to generate $35.5 million in available cash during the first three months of 2022 and to the assumption of $12.6 million of installment debt associated with the acquisition of Metropolitan Trucking during the second quarter of 2022.

NEW ACCOUNTING PRONOUNCEMENTS

See Note B to the 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 are 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.