Notes to Condensed Consolidated Financial Statements (unaudited)
June 30, 2017
NOTE A: BASIS OF PRESENTATION
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 subsidiaries.
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles 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, 2016 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 period ended June 30, 2017 are not necessarily indicative of the results that may be expected for the year ending December 31, 2017. 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, 2016.
NOTE B: RECENT ACCOUNTING PRONOUNCEMENTS
In May 2014, the Financial Accounting Standards Board, (“FASB”), issued Accounting Standards Update, (“ASU”) No. 2014-09, (“ASU 2014-09”),
Revenue from Contracts with Customers
. The objective of ASU 2014-19 and subsequent amendments is to establish a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and will supersede most of the existing revenue recognition guidance, including industry-specific guidance. The core principle of ASU 2014-09 is that an entity recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In applying the new guidance, an entity will (1) identify the contract(s) with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to the contract’s performance obligations; and (5) recognize revenue when (or as) the entity satisfies a performance obligation. ASU 2014-09 applies to all contracts with customers except those that are within the scope of other topics in the FASB Accounting Standards Codification, (“ASC”). The new guidance, as amended, is effective for annual reporting periods (including interim periods within those periods) beginning after December 15, 2017 for public companies. Early adoption is not permitted prior to annual periods beginning after December 31, 2016. Entities have the option of using either a full retrospective or modified approach to adopt ASU 2014-09.
The Company has performed an analysis of the effects of adopting this guidance. The analysis included the following items:
● identifying what constitutes a contract within the Company’s business practices,
● identifying performance obligations within our contracts,
● determining transaction prices,
● allocating the transaction price to performance obligations,
● determination of when performance obligations are satisfied and revenue is earned,
● disaggregation of revenue by source within segments, and
● principal versus agent considerations.
Based upon this evaluation, the adoption of this guidance is not expected to have a significant impact on the Company’s financial condition, results of operations, or cash flows.
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. ASU 2016-01 is effective for annual and interim periods beginning after December 15, 2017. With certain exceptions, early adoption is not permitted.
The Company has performed a preliminary analysis of the effects of adopting this guidance. This analysis consisted of the following items:
|
●
|
categorize securities as either equity securities or debt securities,
|
|
●
|
determine which securities held by the Company have readily determinable fair values,
|
|
●
|
determine that the exit price notion will be used 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.
|
Based upon this evaluation, the adoption of this guidance is not expected to have a significant impact on the Company’s financial condition or cash flows, but it is expected to have a significant impact on the Company’s results of operations through the recognition of changes in market value each reporting period rather than recognizing them through comprehensive income.
In February 2016, the FASB issued ASU No. 2016-02, (“ASU 2016-02”),
Leases (Topic 842)
. This update seeks to increase the transparency and comparability among entities by requiring public entities to recognize lease assets and lease liabilities on the balance sheet and disclose key information about leasing arrangements. 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 not to 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.
In transition, lessees and lessors will be 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 transition guidance also provides specific guidance for sale and leaseback transactions, build-to-suit leases, leveraged leases, and amounts previously recognized in accordance with the business combinations guidance for leases. The new standard is effective for public companies for annual periods beginning after December 15, 2018, and interim periods within those years, 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 since the Company’s current leases will expire prior to the effective date of this guidance.
In March 2016, the FASB issued ASU No. 2016-08, (“ASU 2016-08”),
Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net)
. ASU 2016-08 clarifies the implementation guidance on principal versus agent considerations. The guidance includes indicators to assist an entity in determining whether it controls a specified good or service before it is transferred to the customers.
The new guidance is effective for public companies for annual periods beginning after December 15, 2017, and interim periods within those years. Early adoption is not permitted. The Company has evaluated the effects of adopting this guidance and it is not expected to have a significant impact on the Company’s financial condition, results of operations, or cash flows.
In March 2016, the FASB issued ASU No. 2016-09, (“ASU 2016-09”),
Compensation – Stock Compensation (Topic 718)
. ASU 2016-09 identifies areas for simplification involving several aspects of accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liability, an option to recognize gross stock compensation expense with actual forfeitures recognized as they occur, as well as certain classifications on the statement of cash flows.
ASU 2016-09 is effective for annual and interim periods beginning after December 15, 2017, with early adoption permitted. The adoption of this guidance on January 1, 2017, did not have a significant 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”),
Accounting for Credit Losses (Topic 326)
. ASU 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 amortized cost of the securities. ASU 2016-13 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2019, 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 August 2016, the FASB issued ASU No. 2016-15, (“ASU 2016-15”),
Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments
. ASU 2016-15 amends the guidance in ASC 230, Statement of Cash Flows, and clarifies how entities should classify certain cash receipts and cash payments on the statement of cash flows with the objective of reducing the existing diversity in practice related to eight specific cash flow issues. The amendments in this update are effective for annual periods beginning after December 15, 2017, and interim periods within those fiscal years. Early adoption is permitted. The Company has evaluated the effects of adopting ASU 2016-15 and does not expect it to have a material impact on its financial condition, results of operations, or cash flows.
In November 2016, the FASB issued ASU No. 2016-18, (“ASU 2016-18”),
Statement of Cash Flows (Topic 230)
. ASU 2016-18 requires that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. This standard is intended to reduce diversity in practice in how restricted cash or restricted cash equivalents are presented and classified in the statement of cash flows. ASU No. 2016-18 is effective for fiscal years, and interim periods, beginning after December 15, 2017, with early adoption permitted. The standard requires application using a retrospective transition method. The adoption of ASU No. 2016-18 will change the presentation and classification of restricted cash and restricted cash equivalents in our consolidated statements of cash flows but is not expected to have a material impact on our financial condition, results of operations, or cash flows.
In May 2017, the FASB issued ASU No. 2017-09, ("ASU 2017-09"),
Compensation – Stock Compensation (Topic 718)
which provides guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting in Topic 718. ASU 2017-09 is effective for fiscal years beginning after December 15, 2017 and interim periods within those fiscal years, and early adoption is permitted, including in an interim period. ASU 2017-09 is to be applied on a prospective basis to an award modified on or after the adoption date. We do not intend to early adopt ASU 2017-09 and do not expect the adoption of ASU 2017-09 to have a material impact on our financial condition, results of operations, or cash flows.
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, 2017, as compared to the recent accounting pronouncements described in our Annual Report on Form 10-K for the fiscal year ended December 31, 2016, that are of significance or potential significance to the Company.
NOTE C: MARKETABLE EQUITY SECURITIES
The Company accounts for its marketable securities in accordance with ASC Topic 320, (“ASC Topic 320”),
Investments-Debt and Equity Securities
. ASC Topic 320 requires companies to classify their investments as trading, available-for-sale, or held-to-maturity. The Company’s investments in marketable securities are classified as available-for-sale and consist of equity securities. Management determines the appropriate classification of these securities at the time of purchase and re-evaluates such designation as of each balance sheet date. There were no reclassifications of marketable securities between trading and available-for-sale categories during the first six months of 2017 or 2016. The cost of securities sold is based on the specific identification method, and interest and dividends on securities are included in non-operating income (expense).
Marketable equity securities are carried at fair value, with the unrealized gains and losses, net of tax, included as a component of accumulated other comprehensive income in shareholders’ equity. Realized gains and losses and declines in value judged to be other-than-temporary on available-for-sale securities, if any, are included in the determination of net income. A quarterly evaluation is performed in order to judge whether declines in value below cost should be considered temporary and when losses are deemed to be other-than-temporary. Several factors are considered in this evaluation process including the severity and duration of the decline in value, the financial condition and near-term outlook for the specific issuer and the Company’s ability to hold the securities.
For the quarter ended June 30, 2017, the evaluation resulted in an impairment charge of approximately $27,000 in the Company’s non-operating income (expense) in its statement of operations. For the quarter ended June 30, 2016, the evaluation resulted in an impairment charge of approximately $297,000 in the Company’s non-operating income (expense) in its statement of operations.
For the six-month period ended June 30, 2017, the evaluation resulted in an impairment charge of approximately $27,000 in the Company’s non-operating income (expense) in its statement of operations. For the six-month period ended June 30, 2016, the evaluation resulted in an impairment charge of approximately $532,000 in the Company’s non-operating income (expense) in its statement of operations.
The following table sets forth market value, cost, and unrealized gains on equity securities as of June 30, 2017 and December 31, 2016.
|
|
June 30, 2017
|
|
|
December 31, 2016
|
|
|
|
(in thousands)
|
|
Fair market value
|
|
$
|
24,736
|
|
|
$
|
27,621
|
|
Cost
|
|
|
14,595
|
|
|
|
15,569
|
|
Unrealized gain
|
|
$
|
10,141
|
|
|
$
|
12,052
|
|
The following table sets forth the gross unrealized gains and losses on the Company’s marketable securities as of June 30, 2017 and December 31, 2016.
|
|
June 30, 2017
|
|
|
December 31, 2016
|
|
|
|
(in thousands)
|
|
Gross unrealized gains
|
|
$
|
10,287
|
|
|
$
|
12,161
|
|
Gross unrealized losses
|
|
|
146
|
|
|
|
109
|
|
Net unrealized gains
|
|
$
|
10,141
|
|
|
$
|
12,052
|
|
As of June 30, 2017 and December 31, 2016, the total net unrealized gain, net of deferred income taxes, in accumulated other comprehensive income was approximately $6,290,000 and $7,476,000, respectively.
For the six months ended June 30, 2017, the Company had net unrealized gains in market value on its marketable equity securities of approximately $1,186,000, net of deferred income taxes. For the year ended December 31, 2016, the Company had net unrealized losses in market value on securities classified as available-for-sale of approximately $2,166,000, net of deferred income taxes.
At June 30, 2017, the Company’s investments’ approximate fair value of securities in a loss position and related gross unrealized losses were $2,147,000 and $146,000, respectively. At December 31, 2016, the Company’s investments’ approximate fair value of securities in a loss position and related gross unrealized losses were $1,340,000 and $109,000, respectively. As of June 30, 2017 and December 31, 2016, there were no investments that had been in a continuous unrealized loss position for twelve months or longer.
The following table shows the Company’s net realized gains and (losses) during the first six months of 2017 and 2016 on certain marketable equity securities.
|
|
Three Months Ended
|
|
|
Six Months Ended
|
|
|
|
June 30,
|
|
|
June 30,
|
|
|
|
2017
|
|
|
2016
|
|
|
2017
|
|
|
2016
|
|
|
|
(in thousands, except per share data)
|
|
Sales proceeds
|
|
$
|
711
|
|
|
$
|
-
|
|
|
$
|
3,079
|
|
|
$
|
279
|
|
Cost of securities sold
|
|
|
349
|
|
|
|
-
|
|
|
|
934
|
|
|
|
368
|
|
Realized gain/(loss)
|
|
$
|
362
|
|
|
$
|
-
|
|
|
$
|
2,145
|
|
|
$
|
(89
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Realized gain/(loss), net of taxes
|
|
$
|
222
|
|
|
$
|
-
|
|
|
$
|
1,314
|
|
|
$
|
(55
|
)
|
For the quarter ended June 30, 2017, the Company recognized dividends of approximately $272,000 in non-operating income (expense) in its statements of operations. For the quarter ended June 30, 2016, the Company recognized dividends of approximately $243,000 in non-operating income (expense) in its statements of operations.
For the six months ended June 30, 2017, the Company recognized dividends of approximately $493,000 in non-operating income (expense) in its statements of operations. For the six months ended June 30, 2016, the Company recognized dividends of approximately $502,000 in non-operating income (expense) in its statements of operations.
The market value of the Company’s equity securities are periodically used as collateral against any outstanding margin account borrowings. As of June 30, 2017 and December 31, 2016, the Company had outstanding borrowings of approximately $6,835,000 and $10,358,000, 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.
NOTE D: STOCK BASED COMPENSATION
The Company maintains a stock incentive plan under which incentive and nonqualified stock options and other stock awards may be granted. On March 2, 2006, the Company’s Board of Directors (the “Board”) adopted, and shareholders later approved, the 2006 Stock Option Plan (the “2006 Plan”). Under the 2006 Plan, 750,000 shares were reserved for the issuance of stock options to directors, officers, key employees, and others. The option exercise price under the 2006 Plan is the fair market value of the stock on the date the option is granted. The fair market value is determined by the average of the highest and lowest sales prices for a share of the Company’s common stock, on its primary exchange, on the same date that the option is granted. On March 13, 2014, the Board adopted, and on May 29, 2014 our shareholders approved, the 2014 Amended and Restated Stock Option and Incentive Plan (the “2014 Plan”) which replaced the 2006 Plan. The shares which remained reserved under the 2006 Plan were carried over to the 2014 Plan and are reserved for the issuance of stock awards to directors, officers, key employees, and others. The stock option exercise price and the restricted stock purchase price under the 2014 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.
Outstanding nonqualified stock options at June 30, 2017, must be exercised within either five or ten years from the date of grant. Outstanding nonqualified stock options granted to members of the Board vested immediately while outstanding nonqualified stock options issued to employees vest in increments of 20% to 33% each year.
During the first six months of 2017, 4,298 shares of common stock were granted to non-employee directors under the 2014 Plan and 100,000 shares of common stock were granted to the Company’s Chief Executive Officer. The stock awarded to non-employee directors had a grant date fair value of $16.29 per share, based on the closing price of the Company’s stock on the date of grant, and vested immediately. The stock awarded to the Chief Executive Officer had a grant date fair value of $16.38 per share, based on the closing price of the Company’s stock on the date of grant, with 33% of the award vesting on each anniversary of the date of grant for the next three years.
The total grant date fair value of stock and stock options vested during the first six months of 2017 was approximately $186,000. Total pre-tax stock-based compensation expense, recognized in Salaries, wages and benefits during the first six months of 2017 was approximately $284,000 and includes approximately $70,000 recognized as a result of the grant of 614 shares to each non-employee director during the first quarter of 2017. The recognition of stock-based compensation expense decreased both diluted and basic earnings per common share by approximately $0.02 during the second quarter of 2017. The recognition of stock-based compensation expense decreased diluted and basic earnings per common share by approximately $0.02 and $0.03, respectively, during the six months ended June 30, 2017. As of June 30, 2017, the Company had stock-based compensation plans with total unvested stock-based compensation expense of approximately $1,663,000 which is being amortized on a straight-line basis over the remaining vesting period. As a result, the Company expects to recognize approximately $330,000 in additional compensation expense related to unvested option awards during the remainder of 2017 and to recognize approximately $644,000, $552,000, and $137,000 in additional compensation expense related to unvested option awards during the years 2018, 2019, and 2020, respectively.
The total grant date fair value of stock and stock options vested during the first six months of 2016 was approximately $186,000. Total pre-tax stock-based compensation expense, recognized in Salaries, wages and benefits during the second quarter of 2016 was approximately $47,000. Total pre-tax stock-based compensation expense, recognized in Salaries, wages and benefits during the first six months of 2016 was approximately $196,000 and includes approximately $70,000 recognized as a result of the grant of 325 shares to each non-employee director during the first quarter of 2016. The recognition of stock-based compensation expense did not have a recognizable impact on diluted or basic earnings per common share reported for the second quarter ended June 30, 2016. The recognition of stock-based compensation expense decreased diluted and basic earnings per common share by approximately $0.02 during the six months ended June 30, 2016. As of June 30, 2016, the Company had stock-based compensation plans with total unvested stock-based compensation expense of approximately $346,000 which is being amortized on a straight-line basis over the remaining vesting period.
Information related to stock option activity for the six months ended June 30, 2017 is as follows:
|
|
Shares
Under
Options
|
|
|
Weighted-
Average
Exercise Price
|
|
|
Weighted-
Average
Remaining
Contractua
l
Term
|
|
|
Aggregate
Intrinsi
c
Value*
|
|
|
|
|
|
|
|
(per share)
|
|
|
(in years)
|
|
|
|
|
|
Outstanding-January 1, 2017
|
|
|
56,131
|
|
|
$
|
10.85
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
(10,000
|
)
|
|
|
11.16
|
|
|
|
|
|
|
|
|
|
Cancelled/forfeited/expired
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
Outstanding at June 30, 2017
|
|
|
46,131
|
|
|
$
|
10.79
|
|
|
|
3.4
|
|
|
$
|
376,485
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable at June 30, 2017
|
|
|
46,131
|
|
|
$
|
10.79
|
|
|
|
3.4
|
|
|
$
|
376,485
|
|
__________________________
* The intrinsic value of a stock option is the amount by which the market value of the underlying stock exceeds the exercise price of the option. The per share market value of our common stock, as determined by the closing price on June 30, 2017, was $18.95.
A summary of the status of the Company’s nonvested options and restricted stock as of June 30, 2017 and changes during the six months ended June 30, 2017, is as follows:
|
|
Stock Options
|
|
|
Restricted Stock
|
|
|
|
Number of
Options
|
|
|
Weighted-
Average Grant
Date Fair Value
|
|
|
Number of
Shares
|
|
|
Weighted-
Average Grant
Date Fair Value*
|
|
Nonvested at January 1, 2017
|
|
|
12,800
|
|
|
$
|
6.06
|
|
|
|
7,050
|
|
|
$
|
36.35
|
|
Granted
|
|
|
-
|
|
|
|
-
|
|
|
|
104,298
|
|
|
|
16.38
|
|
Canceled/forfeited/expired
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Vested
|
|
|
(12,800
|
)
|
|
|
6.06
|
|
|
|
(5,548
|
)
|
|
|
19.56
|
|
Nonvested at June 30, 2017
|
|
|
-
|
|
|
$
|
-
|
|
|
|
105,800
|
|
|
$
|
17.54
|
|
___________________________
* The weighted-average grant date fair value was based on the closing price of the Company’s stock on the date of the grant.
The number, weighted average exercise price, and weighted average remaining contractual life of options outstanding as of June 30, 2017 and the number and weighted average exercise price of options exercisable as of June 30, 2017 are as follows:
Exercise Price
|
|
|
Shares Under
Outstanding
Options
|
|
|
Weighted-Average
Remaining Contractual
Term
|
|
|
Shares Under
Exercisable
Options
|
|
|
|
|
|
|
|
|
|
(in years)
|
|
|
|
|
|
$
|
10.44
|
|
|
|
15,000
|
|
|
|
0.7
|
|
|
|
15,000
|
|
$
|
10.90
|
|
|
|
25,600
|
|
|
|
4.9
|
|
|
|
25,600
|
|
$
|
11.22
|
|
|
|
5,531
|
|
|
|
3.4
|
|
|
|
5,531
|
|
|
|
|
|
|
46,131
|
|
|
|
3.4
|
|
|
|
46,131
|
|
Cash received from option exercises totaled approximately $112,000 and $74,000 during the six months ended June 30, 2017 and June 30, 2016, respectively. The Company issues new shares upon option exercise.
NOTE E: SEGMENT INFORMATION
The Company follows the guidance provided by ASC Topic 280, S
egment 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,
|
|
|
|
2017
|
|
|
2016
|
|
|
2017
|
|
|
2016
|
|
|
|
Amount
|
|
|
%
|
|
|
Amount
|
|
|
%
|
|
|
Amount
|
|
|
%
|
|
|
Amount
|
|
|
%
|
|
|
|
(in thousands, except percentage data)
|
|
Truckload Services revenue
|
|
$
|
81,656
|
|
|
|
87.7
|
|
|
$
|
86,880
|
|
|
|
87.8
|
|
|
$
|
164,575
|
|
|
|
88.1
|
|
|
$
|
168,987
|
|
|
|
87.8
|
|
Brokerage and Logistics Services revenue
|
|
|
11,441
|
|
|
|
12.3
|
|
|
|
12,041
|
|
|
|
12.2
|
|
|
|
22,125
|
|
|
|
11.9
|
|
|
|
23,583
|
|
|
|
12.2
|
|
Total revenues
|
|
$
|
93,097
|
|
|
|
100.0
|
|
|
$
|
98,921
|
|
|
|
100.0
|
|
|
$
|
186,700
|
|
|
|
100.0
|
|
|
$
|
192,570
|
|
|
|
100.0
|
|
NOTE F: TREASURY STOCK
The Company’s stock repurchase program has been extended and expanded several times, most recently in April 2017, when the Board of Directors reauthorized 500,000 shares of common stock for repurchase under the initial September 2011 authorization.
During the six months ended June 30, 2017, the Company repurchased 69,772 shares of its common stock at an aggregate cost of approximately $1,193,000 under this program.
The Company accounts for Treasury stock using the cost method and as of June 30, 2017, 5,183,832 shares were held in the treasury at an aggregate cost of approximately $124,028,000.
NOTE G: ACCUMULATED OTHER COMPREHENSIVE INCOME
The following table summarizes the changes in accumulated balances of other comprehensive income for the three and six months ended June 30, 2017:
|
|
Unrealized gains and
losses on available-
for-sale securities
|
|
|
|
(in thousands)
|
|
Balance at March 31, 2017, net of tax of $4,011
|
|
$
|
6,554
|
|
|
|
|
|
|
Other comprehensive income before reclassifications, net of tax of $(82)
|
|
|
(138
|
)
|
Amounts reclassified from accumulated other comprehensive income, net of tax of $(78)
|
|
|
(126
|
)
|
Net current-period other comprehensive income
|
|
|
(264
|
)
|
|
|
|
|
|
Balance at June 30, 2017, net of tax of $3,851
|
|
$
|
6,290
|
|
|
|
|
|
|
Balance at December 31, 2016, net of tax of $4,576
|
|
$
|
7,476
|
|
|
|
|
|
|
Other comprehensive income before reclassifications, net of tax benefit of $(97)
|
|
|
(160
|
)
|
Amounts reclassified from accumulated other comprehensive income, net of tax of $(628)
|
|
|
(1,026
|
)
|
Net current-period other comprehensive income
|
|
|
(1,186
|
)
|
|
|
|
|
|
Balance at June 30, 2017, net of tax of $3,851
|
|
$
|
6,290
|
|
The following table provides details about reclassifications out of accumulated other comprehensive income for the six months ended June 30, 2017:
Details about Accumulated Other Comprehensive Income Component
|
|
Amounts Reclassified from
Accumulated
Other Comprehensive
Income (a)
|
|
Statement of Operations Classification
|
|
|
Six Months Ended
June 30, 2017
|
|
|
|
|
(in thousands)
|
|
|
Unrealized gains and losses on available-for-sale securities:
|
|
|
|
|
|
Prior period unrealized gain (loss) on securities sold
|
|
$
|
1,681
|
|
Non-operating income (expense)
|
Impairment expense
|
|
|
(27
|
)
|
Non-operating income (expense)
|
Total before tax
|
|
|
1,654
|
|
Income before income taxes
|
Tax expense
|
|
|
(628
|
)
|
Income tax expense
|
Total after tax
|
|
$
|
1,026
|
|
Net income
|
__________________________
(a) Amounts in parentheses indicate debits to profit/loss
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 stock options. 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,
|
|
|
|
2017
|
|
|
2016
|
|
|
2017
|
|
|
2016
|
|
|
|
(in thousands, except per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
1,609
|
|
|
$
|
3,992
|
|
|
$
|
3,892
|
|
|
$
|
6,927
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic weighted average common shares outstanding
|
|
|
6,381
|
|
|
|
6,551
|
|
|
|
6,390
|
|
|
|
6,836
|
|
Dilutive effect of common stock equivalents
|
|
|
49
|
|
|
|
21
|
|
|
|
22
|
|
|
|
22
|
|
Diluted weighted average common shares outstanding
|
|
|
6,430
|
|
|
|
6,572
|
|
|
|
6,412
|
|
|
|
6,858
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per share
|
|
$
|
0.25
|
|
|
$
|
0.61
|
|
|
$
|
0.61
|
|
|
$
|
1.01
|
|
Diluted earnings per share
|
|
$
|
0.25
|
|
|
$
|
0.61
|
|
|
$
|
0.61
|
|
|
$
|
1.01
|
|
As of June 30, 2017 and June 30, 2016, there were no options outstanding to purchase shares of common stock that had an anti-dilutive effect on the computation of diluted earnings per share.
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 2013 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, 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, 2017, 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, 2017, an adjustment to the Company’s 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, 2017 and 2016, the Company has not recognized or accrued any interest or penalties related to uncertain income tax positions.
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, 2017, the following items are measured at fair value on a recurring basis:
|
|
Total
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
|
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Marketable equity securities
|
|
$
|
24,736
|
|
|
$
|
24,736
|
|
|
|
-
|
|
|
|
-
|
|
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 June 30, 2017 was as follows:
|
|
Carrying
Value
|
|
|
Estimated
Fair Value
|
|
|
|
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
Long-term debt
|
|
$
|
151,367
|
|
|
$
|
150,189
|
|
The Company has not elected the fair value option for any of its financial instruments.
NOTE K: NOTES PAYABLE
During the first six months of 2017, the Company’s subsidiaries entered into installment obligations totaling approximately $7.8 million for the purpose of purchasing revenue equipment. These obligations are payable in monthly installments.
NOTE L: OFF-BALANCE SHEET ARRANGEMENTS
As of June 30, 2017, the Company’s subsidiaries operated revenue equipment under various operating lease arrangements. Revenue equipment held under operating leases is not carried on our balance sheets and the respective lease payments are reflected in our statements of operations as a component of the Rent and purchased transportation category.
Rent expense related to revenue equipment under these leases were as follows:
|
|
Three Months Ended
|
|
|
Six Months Ended
|
|
|
|
June 30,
|
|
|
June 30,
|
|
|
|
2017
|
|
|
2016
|
|
|
2017
|
|
|
2016
|
|
|
|
(in thousands)
|
|
Rent expense related to revenue equipment
|
|
$
|
1,718
|
|
|
$
|
2,469
|
|
|
$
|
3,458
|
|
|
$
|
4,957
|
|
Leases for revenue equipment under non-cancellable operating leases expire at various dates through 2018. F
uture minimum lease payments related to non-cancellable leases for revenue equipment at June 30, 2017 are:
|
|
(in thousands)
|
|
2017
|
|
$
|
1,858
|
|
2018
|
|
|
181
|
|
Total future minimum lease payments
|
|
$
|
2,039
|
|
NOTE M: 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 lawsuit which was re-filed on December 9, 2016, in the United States District Court for the Western District of Arkansas. The plaintiffs, who are former drivers who worked for the Company during the period of December 6, 2013, through the date of the filing, 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 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. The lawsuit is currently under preliminary review. We cannot reasonably estimate, at this time, the possible loss or range of loss, if any, that may arise from this lawsuit. Management has determined that any losses under this claim will not be covered by existing insurance policies.
NOTE N: 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 events or transactions have occurred that require recognition or disclosure in our financial statements.