P.A.M. TRANSPORTATION SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 20
1
7
, 20
1
6
AND 20
1
5
(in thousands)
|
|
|
|
201
7
|
|
|
201
6
|
|
|
201
5
|
|
OPERATING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
38,899
|
|
|
$
|
11,101
|
|
|
$
|
21,436
|
|
Adjustments to reconcile net income to net cash provided by operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
42,274
|
|
|
|
39,114
|
|
|
|
32,346
|
|
Bad debt expense
|
|
|
340
|
|
|
|
445
|
|
|
|
151
|
|
Stock compensation
—net of excess tax benefits
|
|
|
614
|
|
|
|
302
|
|
|
|
267
|
|
Sale leaseback deferred gain amortization
|
|
|
0
|
|
|
|
(131
|
)
|
|
|
(224
|
)
|
(Benefit) p
rovision for deferred income taxes
|
|
|
(24,630
|
)
|
|
|
6,658
|
|
|
|
12,901
|
|
Reclassification of other than temporary impairment in marketable equity securities
|
|
|
42
|
|
|
|
709
|
|
|
|
833
|
|
Recognized gain on marketable equity securities
|
|
|
(4,735
|
)
|
|
|
(1,003
|
)
|
|
|
(1,001
|
)
|
Gain on sale or disposal of equipment
|
|
|
(58
|
)
|
|
|
(4,700
|
)
|
|
|
(5,754
|
)
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
|
(1,436
|
)
|
|
|
(6,725
|
)
|
|
|
1,128
|
|
Prepaid expenses, deposits, inventories, and other assets
|
|
|
(1,095
|
)
|
|
|
(685
|
)
|
|
|
1,470
|
|
Income taxes refundable
|
|
|
(155
|
)
|
|
|
2,127
|
|
|
|
(2,358
|
)
|
Trade accounts payable
|
|
|
682
|
|
|
|
3,231
|
|
|
|
886
|
|
Accrued expenses and other liabilities
|
|
|
(266
|
)
|
|
|
(3,041
|
)
|
|
|
(556
|
)
|
Net cash provided by operating activities
|
|
|
50,476
|
|
|
|
47,402
|
|
|
|
61,525
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INVESTING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchases of property and equipment
|
|
|
(67,674
|
)
|
|
|
(86,128
|
)
|
|
|
(125,720
|
)
|
Proceeds from disposition of equipment
|
|
|
18,766
|
|
|
|
32,256
|
|
|
|
33,472
|
|
Changes in restricted cash
|
|
|
138
|
|
|
|
317
|
|
|
|
8,012
|
|
Sales of marketable equity securities
|
|
|
6,833
|
|
|
|
1,550
|
|
|
|
1,500
|
|
Purchases of marketable equity securities, net of return of capital
|
|
|
(3,211
|
)
|
|
|
(810
|
)
|
|
|
(2,769
|
)
|
Net cash used in investing activities
|
|
|
(45,148
|
)
|
|
|
(52,815
|
)
|
|
|
(85,505
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
Borrowings under line of credit
|
|
|
483,297
|
|
|
|
520,089
|
|
|
|
549,955
|
|
Repayments under line of credit
|
|
|
(485,163
|
)
|
|
|
(528,200
|
)
|
|
|
(539,979
|
)
|
Borrowings of long-term debt
|
|
|
55,415
|
|
|
|
83,517
|
|
|
|
88,018
|
|
Repayments of long-term debt
|
|
|
(48,110
|
)
|
|
|
(47,457
|
)
|
|
|
(53,947
|
)
|
Borrowings under margin account
|
|
|
3,412
|
|
|
|
1,078
|
|
|
|
3,005
|
|
Repayments under margin account
|
|
|
(7,867
|
)
|
|
|
(2,669
|
)
|
|
|
(2,779
|
)
|
Repurchases of common stock
|
|
|
(6,348
|
)
|
|
|
(21,056
|
)
|
|
|
(48,021
|
)
|
Exercise of stock options
|
|
|
123
|
|
|
|
91
|
|
|
|
236
|
|
Net cash
(used in) provided by financing activities
|
|
|
(5,241
|
)
|
|
|
5,393
|
|
|
|
(3,512
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
|
|
|
87
|
|
|
|
(20
|
)
|
|
|
(27,492
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH
, CASH EQUIVALENTS—
Beginning of year
|
|
|
137
|
|
|
|
157
|
|
|
|
27,649
|
|
CASH
, CASH EQUIVALENTS—
End of year
|
|
$
|
224
|
|
|
$
|
137
|
|
|
$
|
157
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
—
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash paid during the period for:
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
|
|
$
|
3,905
|
|
|
$
|
3,597
|
|
|
$
|
2,821
|
|
Income taxes
|
|
$
|
518
|
|
|
$
|
286
|
|
|
$
|
2,950
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NONCASH INVESTING AND FINANCING ACTIVITIES
—
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchases of revenue equipment included in accounts payable
|
|
$
|
2,973
|
|
|
$
|
97
|
|
|
$
|
5,031
|
|
See notes to consolidated financial statements.
P.A.M. TransportATION SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER
31, 2017, 2016 AND 2015
Description of Business and Principles of Consolidation
–P.A.M. Transportation Services, Inc. (the “Company”), through its subsidiaries, operates as a truckload transportation and logistics company.
The consolidated financial statements include the accounts of the Company and its wholly owned operating subsidiaries: P.A.M. Transport, Inc., P.A.M.
Cartage Carriers, LLC, Overdrive Leasing, LLC, Choctaw Express, LLC, Decker Transport Co., LLC, T.T.X., LLC, Transcend Logistics, Inc., and East Coast Transport and Logistics, LLC. The following subsidiaries were inactive during all periods presented: P.A.M. International, Inc., P.A.M. Logistics Services, Inc., Choctaw Brokerage, Inc., and S & L Logistics, Inc.
Use of Estimates
–The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of any contingent assets and liabilities at the financial statement date and reported amounts of revenue and expenses during the reporting period. The Company periodically reviews these estimates and assumptions. The Company's estimates were based on its historical experience and various other assumptions that management believes to be reasonable under the circumstances. Actual results could differ from those estimates.
Cash and Cash Equivalents
–The Company considers all highly liquid investments with a maturity of
three
months or less when purchased to be cash equivalents. At times cash held at banks
may
exceed FDIC insured limits.
Accounts Receivable and Allowance for Doubtful Accounts
–Accounts receivable are presented in the Company’s consolidated financial statements net of an allowance for estimated uncollectible amounts. Management estimates this allowance based upon an evaluation of the aging of our customer receivables and historical write-offs, as well as other trends and factors surrounding the credit risk of specific customers. The Company continually updates the history it uses to make these estimates so as to reflect the most recent trends, factors and other information available. In order to gather information regarding these trends and factors, the Company also performs ongoing credit evaluations of its customers. Customer receivables are considered to be past due when payment has
not
been received by the invoice due date. Write-offs occur when management determines an account to be uncollectible and could differ from the allowance estimate as a result of a number of factors, including unanticipated changes in the overall economic environment or factors and risks surrounding a particular customer. Management believes its methodology for estimating the allowance for doubtful accounts to be reliable. However, additional allowances
may
be required if the financial condition of our customers were to deteriorate, and could have a material effect on the Company’s consolidated financial statements
in future periods.
Bank Overdrafts
–The Company classifies bank overdrafts in current liabilities as accounts payable and does
not
offset other positive bank account balances located at the same or other financial institutions. Bank overdrafts generally represent checks written that have
not
yet cleared the Company’s bank accounts. The majority of the Company’s bank accounts are
zero
balance accounts that are funded at the time items clear against the account by drawings against a line of credit, therefore the outstanding checks represent bank overdrafts. Because the recipients of these checks have generally
not
yet received payment, the Company continues to classify bank overdrafts as accounts payable. Bank overdrafts are classified as changes in accounts payable in the cash flows from operating activities section of the Company’s Consolidated Statement of Cash Flows. Bank overdrafts as of
December 31, 2017
and
2016
were approximately
$4,377,000
and
$3,509,000,
respectively.
Accounts Receivable Other
–The components of accounts receivable other consist primarily of amounts representing company driver advances, independent contractor advances, equipment manufacturer warranties, and restricted cash. Advances receivable from company drivers as of
December 31, 2017
and
2016,
were approximately
$448,000
and
$628,000,
respectively. Restricted cash consists of cash proceeds from the sale of trucks and trailers under our like-kind exchange (“LKE”) tax program. See Note
11,
“Federal and State Income Taxes,” for a discussion of the Company’s LKE tax program. We classify restricted cash as a current asset within “Accounts receivable-other” as the exchange process must be completed within
180
days in order to qualify for income tax deferral treatment. The changes in restricted cash balances are reflected as an investing activity in our Consolidated Statements of Cash Flows as they relate to the sales and purchases of revenue equipment.
Marketable Equity Securities
– Marketable equity securities are classified by the Company as either available for sale or trading. Securities classified as available for sale are carried at market value with unrealized gains and losses recognized in accumulated other comprehensive income in the statements of stockholders’ equity. Securities classified as trading are carried at market value with unrealized gains and losses recognized in the statements of operations. Realized gains and losses are computed utilizing the specific identification method.
Impairment of Long-Lived Assets
–The Company reviews its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of a long-lived asset
may
not
be recoverable. An impairment loss would be recognized if the carrying amount of the long-lived asset is
not
recoverable, and it exceeds its fair value. For long-lived assets classified as held and used, if the carrying value of the long-lived asset exceeds the sum of the future net undiscounted cash flows, it is
not
recoverable.
Property and Equipment
–Property and equipment is recorded at historical cost, less accumulated depreciation. For financial reporting purposes, the cost of such property is depreciated principally by the straight-line method. For tax reporting purposes, accelerated depreciation or applicable cost recovery methods are used. Depreciation is recognized over the estimated asset life, considering the estimated salvage value of the asset. Such salvage values are based on estimates using expected market values for used equipment and the estimated time of disposal which, in many cases include guaranteed residual values by the manufacturers. Gains and losses are reflected in the year of disposal. The following is a table reflecting estimated ranges of asset useful lives by major class of depreciable assets:
Asset Class
|
|
Estimated Asset Life (in years)
|
|
|
|
|
|
|
|
Service vehicles
|
|
3
|
-
|
5
|
|
Office furniture and equipment
|
|
3
|
-
|
7
|
|
Revenue equipment
|
|
3
|
-
|
12
|
|
Structure
s and improvements
|
|
5
|
-
|
40
|
|
The Company
’s management periodically evaluates whether changes to estimated useful lives and/or salvage values are necessary to ensure its estimates accurately reflect the economic use of the assets. During
2016,
management adjusted the estimated useful lives and salvage values of certain trucks based on such an evaluation. These changes resulted in an increase in depreciation expense of approximately
$2.7
million and
$1.3
million during
2017
and
2016,
respectively. During
2017,
management determined that an adjustment to the estimated useful lives or salvage values of trucks or trailers was
not
necessary based on such an evaluation.
Inventory
–Inventories consist primarily of revenue equipment parts, tires, supplies, and fuel. Inventories are carried at the lower of cost or market with cost determined using the
first
in,
first
out method.
Prepaid Tires
–Tires purchased with revenue equipment are capitalized as a cost of the related equipment. Replacement tires are included in prepaid expenses and deposits and are amortized over a
24
-month period. Amounts paid for the recapping of tires are expensed when incurred.
Advertising Expense
–Advertising costs are expensed as incurred and totaled approximately
$1,087,000,
$1,019,000
and
$988,000
for the years ended
December 31, 2017,
2016
and
2015,
respectively.
Repairs and Maintenance
–Repairs and maintenance costs are expensed as incurred.
Self
-
Insurance Liability
–A liability is recognized for known health, workers’ compensation, cargo damage, property damage, and auto liability damage claims. An estimate of the incurred but
not
reported claims for each type of liability is made based on historical claims made, estimated frequency of occurrence, and considering changing factors that contribute to the overall cost of insurance.
Income Taxes
–The Company applies the asset and liability method of accounting for income taxes, under which deferred taxes are determined based on the temporary differences between the financial statement and tax basis of assets and liabilities using tax rates expected to be in effect during the years in which the basis differences reverse. A valuation allowance is recorded when it is more likely than
not
that some or all of the deferred tax assets will
not
be realized.
The application of income tax law to multi-jurisdictional operations such as those performed by the Company, are inherently complex. Laws and regulations in this area are voluminous and often ambiguous. As such, we
may
be required to make subjective assumptions and judgments regarding our income tax exposures. Interpretations of and guidance surrounding income tax laws and regulations
may
change over time which could cause changes in our assumptions and judgments that could materially affect amounts recognized in the consolidated financial statements.
We
recognize the impact of tax positions in our financial statements. These tax positions must meet a more-likely-than-
not
recognition threshold to be recognized and tax positions that previously failed to meet the more-likely-than-
not
threshold are recognized in the
first
subsequent financial reporting period in which that threshold is met. Previously recognized tax positions that
no
longer meet the more-likely-than-
not
threshold are derecognized in the
first
subsequent financial reporting period in which that threshold is
no
longer met. We recognize potential accrued interest and penalties related to unrecognized tax benefits within the consolidated statements of income as income tax expense.
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
December 31,
201
7,
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.
Revenue Recognition
–Revenue is recognized in full upon completion of delivery to the receiver’s location. For freight in transit at the end of a reporting period, the Company recognizes revenue pro rata based on relative transit time completed as a portion of the estimated total transit time. Expenses are recognized as incurred.
S
hare-
Based
Compensation
–The Company estimates the fair value of stock option awards on the option grant date using the Black-Scholes pricing model and recognizes compensation for stock option awards expected to vest on a straight-line basis over the requisite service period for the entire award. Forfeitures are estimated at grant date based on historical experience. For additional information with respect to share-based compensation, see Note
12
to our consolidated financial statements.
Earnings Per Share
–The Company computes basic earnings per share (“EPS”) by dividing net income (loss) available to common stockholders by the weighted average number of common shares outstanding during the period. Diluted EPS includes the potential dilution that could occur from stock-based awards and other stock-based commitments using the treasury stock or the as if converted methods, as applicable.
The difference between the Company's weighted-average shares outstanding and diluted shares outstanding is due to the dilutive effect of stock options for all periods presented. See Note
13
for computation of diluted EPS.
Fair Value Measurements
–Certain financial assets and liabilities are measured at fair value within the financial statements on a recurring basis. Fair value is defined 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. The fair value hierarchy requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.
For additional information with respect to fair value measurements, see Note
17
to our consolidated financial statements.
Reporting
Segment
s
–The Company's operations are all in the motor carrier segment and are aggregated into a single reporting segment in accordance with the aggregation criteria under Generally Accepted Accounting Principles (“GAAP”). The Company provides truckload transportation services as well as brokerage and logistics services to customers throughout the United States and portions of Canada and Mexico. Truckload transportation services revenues, excluding fuel surcharges, represented
86.3%,
88.4%
and
87.6%
of total revenues, excluding fuel surcharges, for the
twelve
months ended
December 31, 2017,
2016
and
2015,
respectively. Remaining revenues, excluding fuel surcharges, for each respective year were generated by brokerage and logistics services.
Concentrations of Credit Risk
–The Company performs ongoing credit evaluations and generally does
not
require collateral from its customers. The Company maintains reserves for potential credit losses. In view of the concentration of the Company’s revenues and accounts receivable among a limited number of customers within the automobile industry, the financial health of this industry is a factor in the Company’s overall evaluation of accounts receivable.
Subsequent Events
– We have 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.
Foreign Currency Transactions
–The functional currency of the Company’s foreign branch office in Mexico is the U.S. dollar. The Company remeasures the monetary assets and liabilities of this branch office, which are maintained in the local currency ledgers, at the rates of exchange in effect at the end of the reporting period. Revenues and expenses recorded in the local currency during the period are remeasured using average exchange rates for each period. Non-monetary assets and liabilities are remeasured using historical rates. Any resulting exchange gain or loss from the remeasurement process are included in non-operating income (loss) in the Company’s consolidated statements of operations.
Recent Accounting Pronouncements
–
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. The Company has evaluated the effects of adopting ASU
2017
-
09
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
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
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
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
February
2016,
the FASB issued ASU
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
twelve
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
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 effects of adopting 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 increases or decreases in market value each reporting period rather than recognizing them through comprehensive income.
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
-
09
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 transa
ction price to performance obligations,
|
|
●
|
determination of when performance obligations are satisfied and revenue is earned,
|
|
●
|
disaggregation of revenue by source within segments, and
|
|
●
|
principal vers
us agent considerations.
|
Based upon our evaluation, the adoption of ASU
No.
2014
-
09
and subsequent amendments will result in additional note disclosures regarding the nature of the Company’s contracts with customers and the Company’s significant judgments regarding the application of these standards. However, 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.
2.
|
TRADE ACCOUNTS RECEIVABLE
|
The Company's receivables result primarily from the sale of transportation and logistics services. The
Company performs ongoing credit evaluations of its customers and generally does
not
require collateral for accounts receivable. Accounts receivable, which consist of both billed and unbilled receivables, are presented net of an allowance for doubtful accounts. Accounts outstanding longer than contractual payment terms are considered past due and are reviewed individually for collectability. Accounts receivable balances consist of the following components as of
December 31, 2017
and
2016:
|
|
20
1
7
|
|
|
20
1
6
|
|
|
|
(
i
n thousands)
|
|
|
|
|
|
|
|
|
|
|
Billed
|
|
$
|
51,236
|
|
|
$
|
48,538
|
|
Unbilled
|
|
|
9,154
|
|
|
|
8,599
|
|
Allowance for doubtful accounts
|
|
|
(1,335
|
)
|
|
|
(994
|
)
|
|
|
|
|
|
|
|
|
|
Total accounts receivable
—net
|
|
$
|
59,055
|
|
|
$
|
56,143
|
|
An analysis of changes in the allowance
for doubtful accounts for the years ended
December 31, 2017,
2016,
and
2015
follows:
|
|
20
1
7
|
|
|
20
1
6
|
|
|
20
1
5
|
|
|
|
(
i
n thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
—beginning of year
|
|
$
|
994
|
|
|
$
|
549
|
|
|
$
|
1,611
|
|
Provision for bad debts
|
|
|
341
|
|
|
|
445
|
|
|
|
151
|
|
Charge-offs
|
|
|
-
|
|
|
|
-
|
|
|
|
(1,231
|
)
|
Recoveries
|
|
|
-
|
|
|
|
-
|
|
|
|
18
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
—end of year
|
|
$
|
1,335
|
|
|
$
|
994
|
|
|
$
|
549
|
|
3.
|
MARKETABLE EQUITY SECURITIES
|
The Company accounts for its marketable securities in accordance with 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 either trading or 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. The cost of securities sold is based on the specific identification method and interest and dividends on securities are included in non-operating income (loss).
Marketable equity securities classified as available-for-sale are carried at fair value, with the unrealized gains and losses, net of tax, included as a component of accumulated other comprehensive income
(loss) in stockholders’ equity. Realized gains and losses, declines in value judged to be other-than-temporary on available-for-sale securities, and increases or decreases in value on trading 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
years ended
December 31, 2017,
2016
and
2015,
the evaluation resulted in impairment charges of approximately
$42,000,
$709,000
and
$833,000,
respectively, being reported in the Company’s non-operating income (loss) in its statements of operations.
The following table sets forth cost, market value and unrealized gain on equity securities classified as available-for-
sale as of
December 31, 2017
and
2016.
The Company had
no
securities classified as trading securities as of
December 31, 2017
or
December 31, 2016.
|
|
201
7
|
|
|
201
6
|
|
|
|
(in thousands)
|
|
Available-for-sale securities
:
|
|
|
|
|
|
|
|
|
Fair market value
|
|
$
|
26,664
|
|
|
$
|
27,621
|
|
Cost
|
|
|
16,640
|
|
|
|
15,569
|
|
Unrealized gain
|
|
$
|
10,024
|
|
|
$
|
12,052
|
|
The following table sets forth the gross unrealized gains and losses on the Company
’s marketable securities that are classified as available-for-sale as of
December 31, 2017
and
2016.
|
|
201
7
|
|
|
201
6
|
|
|
|
(in thousands)
|
|
Available-for-sale securities
:
|
|
|
|
|
|
|
|
|
Gross unrealized gains
|
|
$
|
10,150
|
|
|
$
|
12,161
|
|
Gross unrealized losses
|
|
|
126
|
|
|
|
109
|
|
Net unrealized gains
|
|
$
|
10,024
|
|
|
$
|
12,052
|
|
As of
December 31,
201
7
and
2016,
the total net unrealized gains, net of deferred income taxes, in accumulated other comprehensive income was approximately
$7,444,000
and
$7,476,000,
respectively.
For the year ended
December 31
,
2017
the Company had net unrealized loss in market value on securities classified as available-for-sale of approximately
$1,507,000,
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.
For the years ended
December 31,
201
7,
2016
and
2015,
the Company recognized dividends of approximately
$999,000,
$1,024,000,
and
$1,058,000
in non-operating income in its statements of operations, respectively.
T
here were
no
reclassifications of marketable securities between trading and available for sale during
2017
or
2016.
The following table shows the Company
’s realized gains during
2017,
2016
and
2015
on certain securities which were held as available-for-sale. The cost of securities sold is based on the specific identification method and interest and dividends on securities are included in non-operating income.
|
|
201
7
|
|
|
20
1
6
|
|
|
20
1
5
|
|
|
|
(in thousands)
|
|
Realized gains
:
|
|
|
|
|
|
|
|
|
|
|
|
|
Sale proceeds
|
|
$
|
6,833
|
|
|
$
|
1,550
|
|
|
$
|
1,500
|
|
Cost of securities sold
|
|
|
2,098
|
|
|
|
547
|
|
|
|
434
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Realized gains
|
|
$
|
4,735
|
|
|
$
|
1,003
|
|
|
$
|
1,066
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Realized gains, net of taxes
|
|
$
|
2,938
|
|
|
$
|
627
|
|
|
$
|
654
|
|
At
December 31,
201
7,
the Company’s investments’ approximate fair value of securities in a loss position and related gross unrealized losses were
$2,980,000
and
$126,000,
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
December 31, 2017
and
2016,
there were
no
investments that had been in a continuous unrealized loss position for
twelve
months or longer.
The market value of the Company
’s equity securities are periodically used as collateral against any outstanding margin account borrowings. As of
December 31, 2017
and
2016,
the Company had outstanding borrowings of
$5,903,000
and
$10,358,000
under its margin account, respectively. The interest rate on margin account borrowings was
2.07%
and
1.30%
as of
December 31, 2017
and
2016,
respectively.
4
.
|
ACCRUED EXPENSES AND OTHER LIABILITIES
|
Accrued expenses
and other liabilities at
December 31
are summarized as follows:
|
|
20
1
7
|
|
|
20
1
6
|
|
|
|
(
i
n thousands)
|
|
|
|
|
|
|
|
|
|
|
Payroll
|
|
$
|
2,710
|
|
|
$
|
2,427
|
|
Accrued vacation
|
|
|
1,762
|
|
|
|
1,862
|
|
Taxes
—other than income
|
|
|
2,488
|
|
|
|
2,062
|
|
Interest
|
|
|
99
|
|
|
|
102
|
|
Driver escrows
|
|
|
2,381
|
|
|
|
2,245
|
|
Margin account borrowings
|
|
|
5,903
|
|
|
|
10,358
|
|
Self-insurance claims
|
|
|
2,266
|
|
|
|
3,274
|
|
|
|
|
|
|
|
|
|
|
Total accrued expenses and other liabilities
|
|
$
|
17,609
|
|
|
$
|
22,330
|
|
With respect to physical damage for
trucks, cargo loss and auto liability, the Company maintains insurance coverage to protect it from certain business risks. These policies are with various carriers and have per occurrence deductibles of
$12,500,
$10,000
and
$2,500,
respectively. Prior to
October 1, 2013,
the Company was self-insured for physical damage losses on its trailers. From
October 1, 2013
until
September 30, 2015,
the Company insured its trailers for physical damage losses with a
$2,500
deductible per occurrence. Beginning
October 1, 2015,
the Company elected to self-insure trailers for physical damage losses. The Company maintains workers’ compensation coverage in Arkansas, Ohio, Oklahoma, Mississippi, and Florida with a
$500,000
self-insured retention and a
$500,000
per occurrence excess policy. The Company has elected to opt out of workers' compensation coverage in Texas and is providing coverage through the P.A.M. Texas Injury Plan. The Company has accrued for estimated losses to pay such claims as well as claims incurred but
not
yet reported. The Company has
not
experienced any adverse trends involving differences in claims experienced versus claims estimates for workers’ compensation claims. Letters of credit aggregating approximately
$521,000
and certificates of deposit totaling
$300,000
are held by banks as security for workers’ compensation claims. The Company self-insures for employee health claims with a stop loss of
$325,000
per covered employee per year and estimates its liability for claims outstanding and claims incurred but
not
reported.
Long-term debt at
December 31,
consists of the following:
|
|
201
7
|
|
|
201
6
|
|
|
|
(in thousands)
|
|
Line of credit with a bank
—due July 1, 2019, and
collateralized by accounts receivable (1)
|
|
|
-
|
|
|
$
|
1,866
|
|
Equipment financing (2)
|
|
|
172,636
|
|
|
|
165,331
|
|
Total long-term debt
|
|
|
172,636
|
|
|
|
167,197
|
|
Less current maturities
|
|
|
(73,641
|
)
|
|
|
(42,806
|
)
|
|
|
|
|
|
|
|
|
|
Long-term debt
—net of current maturities
|
|
$
|
98,995
|
|
|
$
|
124,391
|
|
|
(
1
)
|
Line of credit agreement with a bank provides for maximum borrowings of
$40.0
million and
contains certain restrictive covenants that must be maintained by the Company on a consolidated basis. Borrowings on the line of credit are at an interest rate of LIBOR as of the
first
day of the month plus
1.50%
(
2.86%
at
December
31,
2017
) and are secured by our trade accounts receivable. Monthly payments of interest are required under this agreement. Also, under the terms of the agreement the Company must maintain a debt to EBITDA (earnings before interest, taxes, depreciation, and amortization) ratio of less than
4.00:1.
The Company was in compliance with all provisions under this agreement throughout
2017.
At
December 31, 2017,
outstanding advances on the line were approximately
$0.7
million, consisting entirely of letters of credit totaling
$0.7
million, with availability to borrow
$39.3
million.
|
|
(
2
)
|
Equipment financings consist of installment obligations for revenue equipment purchases, payable in various monthly installments with various maturity dates through
December 2022,
at a weighted average interest rate of
2.52%
as of
December 31, 2017
and collateralized by revenue equipment.
|
The Company has provided letters of credit to
third
parties totaling approximately $
706,000
at
December 31, 2017.
The letters are held by these
third
parties to assist such parties in collection of any amounts due by the Company should the Company default in its commitments to the parties.
Scheduled annual maturities on long-term debt outstanding at
December 31,
201
7,
are:
201
8
|
|
$
|
73,641
|
|
201
9
|
|
|
48,256
|
|
20
20
|
|
|
40,365
|
|
20
21
|
|
|
8,355
|
|
20
22
|
|
|
2,019
|
|
|
|
|
|
|
Total
|
|
$
|
172,636
|
|
The Company's authorized capital stock consists of
40,000,000
shares of common stock, par value
$.01
per share, and
10,000,000
shares of preferred stock, par value
$.01
per share.
At
December 31, 2017,
there were
11,529,124
shares of our common stock issued and
6,160,889
shares outstanding. At
December 31, 2016,
there were
11,510,863
shares of our common stock issued and
6,396,803
shares outstanding.
No
shares of our preferred stock were issued or outstanding at
December 31, 2017
or
2016.
Common Stock
The holders of our common stock, subject to such rights as
may
be granted to any preferred stockholders, elect all directors and are entitled to
one
vote per share. All shares of common stock participate equally in dividends when and as declared by the Board of Directors and in net assets on liquidation. The shares of common stock have
no
preference, conversion, exchange, preemptive
, or cumulative voting rights.
Preferred Stock
Preferred stock
may
be issued from time to time by our Board of Directors, without stockholder approval, in such series and with such preferences, conversion or other rights, voting powers, restrictions, limitations as to dividends, qualifications or other provisions, as
may
be fixed by the Board of Directors in the resolution authorizing their issuance. The issuance of preferred stock by the Board of Directors could adversely affect the rights of holders of shares of common stock; for example, the issuance of preferred stock could result in a class of securities outstanding that would have certain preferences with respect to dividends and in liquidation over the common stock, and that could result in a
dilution of the voting rights, net income per share and net book value of the common stock. As of
December 31, 2017,
we have
no
agreements or understandings for the issuance of any shares of preferred stock.
Treasury Stock
In
October 2017,
our Board of Directors authorized the repurchase of up to
400,000
shares of our common stock through a Dutch auction tender offer (the
“2017
tender offer”). Subject to certain limitations and legal requirements, the Company could repurchase up to an additional
2%
of its outstanding shares which total
ed
126,060
shares. The
2017
tender offer commenced on
October 10, 2017
and expired on
November 7, 2017.
Through this tender offer, the Company’s shareholders had the opportunity to tender some or all of their shares at a price within the range of
$27.00
to
$30.00
per share. Upon expiration,
143,859
shares were purchased through this offer at a final purchase price of
$30.00
per share for a total of approximately
$4.4
million, including fees and commission. The repurchase was settled on
November 10, 2017.
The Company accounted for the repurchase of these shares as treasury stock on the Company’s consolidated balance sheet as of
December 31, 2017.
In
February 2016,
our Board of Directors authorized the repurchase of up to
325,000
shares of our common stock through a Dutch auction tender offer (the
“2016
tender offer”). In
March 2016,
the Company extended the offer and increased the offer from
325,000
shares to
425,000
shares. Subject to certain limitations and legal requirements, the Company could repurchase up to an additional
2%
of its outstanding shares which totaled
142,413
shares. The
2016
tender offer began on the date of the announcement,
February 18, 2016
and expired on
April 5, 2016.
Through this tender offer, the Company’s shareholders had the opportunity to tender some or all of their shares at a price within the range of
$31.00
to
$34.00
per share. Upon expiration,
567,413
shares were purchased through this offer at a final purchase price of
$31.00
per share for a total purchase price of approximately
$17.7
million, including fees and commission. The repurchase was settled on
April 5, 2016.
The Company accounted for the repurchase of these shares as treasury stock on the Company’s consolidated balance sheet as of
December 31, 2016.
In
May 2015,
our Board of Directors authorized the repurchase of up to
80,000
shares of our common stock through a Dutch auction tender offer (the
“2015
tender offer”). In
June 2015,
the Company extended the offer and increased the offer from
80,000
shares to
150,000
shares. Subject to certain limitations and legal requirements, the Company could repurchase up to an additional
2%
of its outstanding shares which totaled
148,566
shares. The
2015
tender offer began on the date of the announcement,
May 22, 2015
and expired on
July 9, 2015.
Through this tender offer, the Company’s shareholders had the opportunity to tender some or all of their shares at a price within the range of
$59.00
to
$63.00
per share. Upon expiration,
298,566
shares were purchased through this offer at a final purchase price of
$59.00
per share for a total purchase price of approximately
$17.8
million, including fees and commission. The repurchase was settled on
July 16, 2015.
The Company accounted for the repurchase of these shares as treasury stock on the Company’s consolidated balance sheet as of
December 31, 2015.
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. The Company repurchased
110,316
shares of its common stock under this program during
2017.
The Company accounts for Treasury stock using the cost method and as of
December 31,
201
7,
5,368,235
shares were held in the treasury at an aggregate cost of approximately
$129,183,000.
8.
|
COMPREHENSIVE INCOME (LOSS)
|
Comprehensive income (loss) was comprised of net income (loss) plus or minus market value adjustments related to marketable securities. The following table summarizes the changes in accumulated balances of other comprehensive income for the
years ended
December 31, 2017
and
2016:
|
|
Unrealized gains and
losses on available-for-sale
securities
|
|
|
|
(in thousands)
|
|
|
|
|
|
|
Balance at
January 1, 2016, net of tax of $3,250
|
|
$
|
5,310
|
|
|
|
|
|
|
Other comprehensive income before reclassifications, net of tax of $
1,390
|
|
|
2,269
|
|
Amounts reclassified from accumulated other comprehensive income, net of tax of $(
64)
|
|
|
(103
|
)
|
Net
other comprehensive income (loss)
|
|
|
2,166
|
|
|
|
|
|
|
Balance at December 31, 201
6, net of tax of $4,576
|
|
|
7,476
|
|
|
|
|
|
|
Other comprehensive income before reclassifications, net of tax of $
(687)
|
|
|
2,001
|
|
Amounts reclassified from accumulated other comprehensive income, net of tax of $(
1,310)
|
|
|
(2,033
|
)
|
Net other comprehensive income
(loss)
|
|
|
(32
|
)
|
|
|
|
|
|
Balance at December 31, 201
7, net of tax of $2,579
|
|
$
|
7,444
|
|
The following table provides details about reclassifications out of accumulated other comprehensive income for the
years ended
December 31, 2017
and
2016:
Details about Accumulated Other
|
|
Amounts Reclassified from
Accumulated
Other
Comprehensive Income
(a)
|
|
Statement of
Operations
|
Comprehensive Income Component
|
|
201
7
|
|
|
201
6
|
|
Classification
|
|
|
(in thousands)
|
|
|
Unrealized gains and losses on available-for-sale securities:
|
|
|
|
|
|
|
|
|
|
Unre
alized gains and losses on securities sold
|
|
$
|
3,385
|
|
|
$
|
876
|
|
Non-operating income
|
Impairment expense
|
|
|
(42
|
)
|
|
|
(709
|
)
|
Non-operating income
|
Total before tax
|
|
|
3,343
|
|
|
|
167
|
|
Income before income taxes
|
Tax expense
|
|
|
(1,310
|
)
|
|
|
(64
|
)
|
Income tax expense
|
Total after tax
|
|
$
|
2,033
|
|
|
$
|
103
|
|
Net income
|
(a) Amounts in parentheses indicate debits to profit/loss
9.
|
SIGNIFICANT CUSTOMERS AND INDUSTRY CONCENTRATION
|
In
201
7
and
2016
two
customers, who are in the automobile manufacturing industry, accounted for
28%
of revenues each year and in
2015,
three
customers, who are in the automobile manufacturing industry, accounted for
37%
of revenues. The Company also provides transportation services to other manufacturers who are suppliers for automobile manufacturers including suppliers for the Company’s largest customer. As a result, concentration of the Company’s business within the automobile industry is significant. Of the Company’s revenues for
2017,
2016
and
2015,
46%,
45%
and
47%,
respectively, were derived from transportation services provided to the automobile manufacturing industry. Accounts receivable from the
three
largest customers totaled approximately
$29,788,000
and
$27,085,000
at
December 31, 2017
and
2016,
respectively.
The Company has paid cash dividends in the
past; however, the Company currently intends to retain future earnings and does
not
anticipate paying cash dividends in the near future. Any future determination to pay dividends will be at the discretion of the Board and will depend on the Company’s financial condition, results of operations, capital requirements, any legal or contractual restrictions on the payment of dividends, and other factors the Board deems relevant.
11.
|
FEDERAL AND STATE INCOME TAXES
|
Under GAAP, deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and for income tax reporting purposes.
Significant components of the Company
’s deferred tax liabilities and assets at
December 31
are as follows:
|
|
201
7
|
|
|
201
6
|
|
|
|
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
Deferred tax liabilities:
|
|
|
|
|
|
|
|
|
Property and equipment
|
|
$
|
60,388
|
|
|
$
|
85,233
|
|
Unrealized gains on securities
|
|
|
2,580
|
|
|
|
4,576
|
|
Prepaid expenses and other
|
|
|
2,603
|
|
|
|
3,230
|
|
|
|
|
|
|
|
|
|
|
Total deferred tax liabilities
|
|
|
65,571
|
|
|
|
93,039
|
|
|
|
|
|
|
|
|
|
|
Deferred tax assets:
|
|
|
|
|
|
|
|
|
Allowance for doubtful accounts
|
|
|
344
|
|
|
|
378
|
|
Alternative minimum tax credit carryforward
|
|
|
-
|
|
|
|
1,214
|
|
QAFMV tax credit carryforward
|
|
|
864
|
|
|
|
864
|
|
New hire tax credit
|
|
|
124
|
|
|
|
124
|
|
Compensated absences
|
|
|
410
|
|
|
|
650
|
|
Self-insurance allowances
|
|
|
149
|
|
|
|
748
|
|
Share-based compensation
|
|
|
61
|
|
|
|
(54
|
)
|
Goodwill
|
|
|
-
|
|
|
|
9
|
|
Marketable equity securities
|
|
|
750
|
|
|
|
1,244
|
|
Net operating loss carryover
|
|
|
7,975
|
|
|
|
7,545
|
|
Non-competition agreement
|
|
|
-
|
|
|
|
7
|
|
Other
|
|
|
203
|
|
|
|
17
|
|
|
|
|
|
|
|
|
|
|
Total deferred tax assets
|
|
|
10,880
|
|
|
|
12,746
|
|
|
|
|
|
|
|
|
|
|
Net deferred tax liability
|
|
$
|
54,691
|
|
|
$
|
80,293
|
|
The reconciliation between the effective income tax rate and the statutory Federal income tax rate for the years ended
December
31,
2017,
2016
and
2015
is presented in the following table:
|
|
201
7
|
|
|
201
6
|
|
|
201
5
|
|
|
|
(in thousands)
|
|
|
|
Amount
|
|
|
Percent
|
|
|
Amount
|
|
|
Percent
|
|
|
Amount
|
|
|
Percent
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax at the statutory federal rate
|
|
$
|
4,975
|
|
|
|
34.0
|
|
|
$
|
6,042
|
|
|
|
34.0
|
|
|
$
|
11,876
|
|
|
|
34.0
|
|
Impact of the Tax Cut
s and Jobs Act
|
|
|
(29,255
|
)
|
|
|
(199.9
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Nondeductible expenses
|
|
|
72
|
|
|
|
0.5
|
|
|
|
130
|
|
|
|
0.7
|
|
|
|
149
|
|
|
|
0.4
|
|
State income taxes/other
—net
of federal benefit
|
|
|
(60
|
)
|
|
|
(0.5
|
)
|
|
|
499
|
|
|
|
2.8
|
|
|
|
1,467
|
|
|
|
4.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total income tax
(benefit) expense
|
|
$
|
(24,268
|
)
|
|
|
(165.9
|
)
|
|
$
|
6,671
|
|
|
|
37.5
|
|
|
$
|
13,492
|
|
|
|
38.6
|
|
________________
|
(
1
)
On
December 22, 2017,
the Tax Cuts and Jobs Act (the “Act”) was signed into law. The Act includes numerous changes to existing tax law, including a permanent reduction in the federal corporate income tax rate from
35%
to
21%
effective
January 1, 2018
and repeal of the alternative minimum tax (“AMT”) allowing a refund of existing AMT carryovers during the years
2018
through
2021.
As a result, the Company recorded a tax benefit of
$29.3
million in the
fourth
quarter of
2017
related to the revaluation of its net deferred tax liabilities.
|
The
(benefit) provision for income taxes consisted of the following:
|
|
201
7
|
|
|
201
6
|
|
|
201
5
|
|
|
|
(in thousands)
|
|
Current:
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal
|
|
$
|
(79
|
)
|
|
$
|
(225
|
)
|
|
$
|
98
|
|
State
|
|
|
441
|
|
|
|
238
|
|
|
|
493
|
|
Total current income tax provision
|
|
|
362
|
|
|
|
13
|
|
|
|
591
|
|
Deferred:
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal
|
|
|
(24,622
|
)
|
|
|
5,506
|
|
|
|
10,782
|
|
State
|
|
|
(8
|
)
|
|
|
1,152
|
|
|
|
2,119
|
|
Total deferred income tax
(benefit) provision
|
|
|
(24,630
|
)
|
|
|
6,658
|
|
|
|
12,901
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total income tax
(benefit) expense
|
|
$
|
(24,268
|
)
|
|
$
|
6,671
|
|
|
$
|
13,492
|
|
At
December 31, 2017,
the Company has alternative minimum tax credits of approximately
$1,214,000
which will either be refunded at the rate of
50%
of the remaining credit each succeeding year, or used to offset regular Federal income tax in those succeeding years. The Company has general business credits of approximately
$988,000
at
December 31, 2017,
which begin to expire after the year
2030.
The Company also has net operating loss carryovers for federal income purposes of approximately
$30,983,000
which begin to expire after the year
2030.
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
December 31,
201
7
and
2016,
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
December 31,
201
7,
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
2017
and
2016,
the Company has
not
recognized or accrued any interest or penalties related to uncertain income tax positions.
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
2014
and forward remain open to examination in those jurisdictions.
The Company contracts with a
third
-party qualified intermediary in order to maintain a like-kind exchange tax program. Under the program, dispositions of eligible trucks or trailers and acquisitions of replacement trucks or trailers are made in a form whereby any associated tax gains related to the disposal are deferred. To qualify for like-kind exchange treatment
, we exchange, through our qualified intermediary, eligible trucks or trailers being disposed with trucks or trailers being acquired that allows us to generally carryover the tax basis of the trucks or trailers sold. The program is expected to result in a significant deferral of federal and state income taxes. Under the program, the proceeds from the sale of eligible trucks or trailers carry a Company-imposed restriction for the acquisition of replacement trucks or trailers. These proceeds
may
be disqualified under the program at any time and at the Company’s sole discretion; however, income tax deferral would
not
be available for any sale for which the Company disqualifies the related proceeds. At
December
31,
2017
and
2016,
the Company had
$29,000
and
$167,000
of restricted cash held by the
third
-party qualified intermediary. Restricted cash is accounted for in “Accounts receivable-other”.
12.
|
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 Company’s Board of Directors 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
December 31,
201
7,
must be exercised within either
five
or
ten
years from the date of grant. Outstanding nonqualified stock options granted to members of the Company’s Board of Directors vested immediately while outstanding nonqualified stock options issued to employees vest in increments of
20%
to
25%
each year.
In
April 2017,
the Board of Directors granted
100,000
restricted shares of the Company
’s stock to the Company’s Chief Executive Officer. This restricted stock award has a grant date fair value of
$16.38,
based on the closing price of the Company’s stock on the date of grant, with
one
third
of the award vesting each of the next
three
years on the anniversary date.
In
March 2017,
the Company granted
4,298
shares of common stock to non-employee directors under the
2014
Plan. This stock award has 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 vests immediately.
In
March 2016,
the Company granted
2,275
shares of common stock to non-employee directors under the
2014
Plan. This stock award has a grant date fair value of
$30.80
per share, based on the closing price of the Company’s stock on the date of grant and vests immediately. Also in
March 2016,
the Board of Directors granted
5,000
restricted shares of the Company’s stock to the Company’s Chief Executive Officer. This restricted stock award has a grant date fair value of
$30.81,
based on the closing price of the Company’s stock on the date of grant, with
25%
of the award vesting immediately and
25%
vesting for each of the next
three
years.
In
March 2015,
the Company granted
1,225
shares of common stock to non-employee directors under the
2014
Plan. This stock award has a grant date fair value of
$57.27
per share, based on the closing price of the Company’s stock on the date of grant and vested immediately.
In
November 2014,
the Board of Directors granted
9,500
restricted shares of the Company
’s stock to certain key employees. This restricted stock award has a grant date fair value of
$42.65,
based on the closing price of the Company’s stock on the date of grant, of which
20%
of the award vested immediately and the remaining award vests in increments of
20%
each year for the next
four
years.
In
March 2014,
the Company granted
3,024
shares of common stock to non-employee directors under the
2014
Plan. This stock award has a grant date fair value of
$19.88
per share, based on the closing price of the Company’s stock on the date of grant and vested immediately.
In
March 2013,
the Company granted to non-employee directors,
35,000
nonqualified stock options. The exercise price for these awards was fixed at the grant date and was equal to the fair market value of the stock on that date. These nonqualified stock options vested immediately.
In
May 2012,
the Company granted to certain key employees,
104,000
nonqualified stock options. The exercise price for these awards was fixed at the grant date and was equal to the fair market value of the stock on that date. These nonqualified stock options vest in increments of
20%
each year.
In
November 2010,
the Company granted to certain key employees,
50,000
nonqualified stock options and
64,000
performance-based variable nonqualified stock options. The exercise price for these awards was fixed at the grant date and was equal to the fair market value of the stock on that date. The nonqualified stock options vest
ed in increments of
20%
each year. The performance-based nonqualified stock options were eligible to be earned in
four
quarterly installments and
one
annual installment with vesting to occur in increments of
20%
each year for any options earned. In order to meet the performance criteria, certain quarterly and annual “operating ratio” results must have been achieved during
2011.
During
2011,
4,442
performance-based variable nonqualified stock options were earned with vesting beginning during the
third
quarter of
2012.
The remaining
59,558
performance-based variable nonqualified stock options expired as the related performance criteria was
not
met.
During
201
7
and
2016,
there were
no
grants of nonqualified stock options. At
December 31, 2017,
440,000
shares were available for granting future options or restricted stock.
The grant date fair value of stock and stock options vested during
201
7,
2016
and
2015
was approximately
$256,000,
$273,000
and
$274,000,
respectively. Total pre-tax stock-based compensation expense, recognized in Salaries, wages and benefits was approximately
$614,000
during
2017
and includes approximately
$70,000
recognized as a result of the grant of
614
shares of stock to each non-employee director during the
first
quarter of
2017.
The Company recognized a total income tax benefit of approximately
$231,000
related to stock-based compensation expense during
2017.
The recognition of stock-based compensation expense decreased diluted and basic earnings per common share by approximately
$0.26
during
2017.
As of
December
31,
2017,
the Company had stock-based compensation plans with total unvested stock-based compensation expense of approximately
$1,333,000
which is being amortized on a straight-line basis over the remaining vesting period. As a result, the Company expects to recognize approximately
$644,000
in additional compensation expense related to unvested option awards during
2018,
$552,000
in additional compensation expense related to unvested option awards during
2019
and
$137,000
in additional compensation expense related to unvested option awards during
2020.
Total pre-tax stock-based compensation expense, recognized in Salaries, wages and benefits was approximately $
302,000
during
2016
and included approximately
$70,000
recognized as a result of the grant of
325
shares of stock to each non-employee director during the
first
quarter of
2016.
The Company recognized a total income tax benefit of approximately
$113,000
related to stock-based compensation expense during
2016.
The recognition of stock-based compensation expense decreased diluted and basic earnings per common share by approximately
$0.03
and
$0.02
during
2016.
Total pre-tax stock-based compensation expense, recognized in Salaries, wages and benefits was approximately
$267,000
during
2015
and included approximately
$70,000
recognized as a result of the grant of
175
shares of stock to each non-employee director during the
first
quarter of
2015.
The Company recognized a total income tax benefit of approximately
$103,000
related to stock-based compensation expense during
2015.
The recognition of stock-based compensation expense decreased diluted and basic earnings per common share by approximately
$0.02
during
2015.
Transactions in stock options under these plans are summarized as follows:
|
|
Shares
Under
Option
|
|
|
Weighted-
Average
Exercise Price
|
|
|
|
|
|
|
|
|
|
|
Outstanding
—January 1, 2015:
|
|
|
86,348
|
|
|
$
|
11.09
|
|
Granted
|
|
|
-
|
|
|
|
-
|
|
Exercised
|
|
|
(20,250
|
)
|
|
|
11.65
|
|
Canceled
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Outstanding
—December 31, 2015:
|
|
|
66,098
|
|
|
$
|
10.92
|
|
Granted
|
|
|
-
|
|
|
|
-
|
|
Exercised
|
|
|
(7,917
|
)
|
|
|
11.41
|
|
Canceled
|
|
|
(2,050
|
)
|
|
|
10.91
|
|
|
|
|
|
|
|
|
|
|
Outstanding
—December 31, 2016:
|
|
|
56,131
|
|
|
$
|
10.85
|
|
Granted
|
|
|
-
|
|
|
|
-
|
|
Exercised
|
|
|
(11,063
|
)
|
|
|
11.13
|
|
Canceled
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Outstanding
—December 31, 2017:
|
|
|
45,068
|
|
|
$
|
10.79
|
|
|
|
|
|
|
|
|
|
|
Options exercisable
—December 31, 2017:
|
|
|
45,068
|
|
|
$
|
10.79
|
|
Information related to the Company
’s option activity as of
December 31, 2017,
and changes during the year then ended is presented below:
|
|
Shares
Under
Option
|
|
|
Weighted-
Average
Exercise
Price
|
|
|
Weighted-
Average
Remaining
Contractual
Term
|
|
|
Aggregate
Intrinsic
Value*
|
|
|
|
|
|
|
|
(per share)
|
|
|
(in years)
|
|
|
|
|
|
Outstanding at January 1, 201
7
|
|
|
56,131
|
|
|
$
|
10.85
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
(11,063
|
)
|
|
|
11.13
|
|
|
|
|
|
|
|
|
|
Canceled/forfeited/expired
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
Outstanding at December 31, 201
7
|
|
|
45,068
|
|
|
$
|
10.79
|
|
|
|
2.8
|
|
|
$
|
1,065,600
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fully vested and exercisable at December 31, 201
7
|
|
|
45,068
|
|
|
$
|
10.79
|
|
|
|
2.8
|
|
|
$
|
1,065,600
|
|
___________________________
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* 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
December
29,
2017,
was
$34.43.
|
|
There were
no
options granted during
201
7,
2016,
or
2015.
There were
no
options canceled, forfeited, or expired during
2017
or
2015.
The weighted-average grant-date fair value of options canceled, forfeited, or expired during
2016
was
$6.07.
The total intrinsic value of options exercised during the years ended
December 31,
201
7,
2016
and
2015,
were approximately
$82,000,
$101,000
and
$940,000,
respectively.
A summary of the status of the Company
’s nonvested options and restricted stock as of
December 31, 2017
and changes during the year ended
December 31, 2017,
is presented below:
|
|
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, 201
7
|
|
|
12,800
|
|
|
$
|
6.06
|
|
|
|
7,050
|
|
|
$
|
36.35
|
|
Granted
|
|
|
-
|
|
|
|
-
|
|
|
|
104,298
|
|
|
|
16.38
|
|
Canceled/forfeited/expired
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Vested
|
|
|
(12,800
|
)
|
|
|
6.06
|
|
|
|
(7,198
|
)
|
|
|
24.85
|
|
Nonvested at December 31, 201
7
|
|
|
-
|
|
|
|
-
|
|
|
|
104,150
|
|
|
$
|
17.14
|
|
___________________________
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* 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
December 31,
201
7
and the number and weighted average exercise price of options exercisable as of
December 31, 2017
is as follows:
Exercise Price
|
|
|
Shares Under Outstanding Options
|
|
|
Weighted-Average Remaining Contractual Term
|
|
|
Shares Under Exercisable Options
|
|
|
|
|
|
|
|
|
|
(in years)
|
|
|
|
|
|
|
$10.44
|
|
|
|
15,000
|
|
|
|
0.2
|
|
|
|
15,000
|
|
|
$10.90
|
|
|
|
24,600
|
|
|
|
4.4
|
|
|
|
24,600
|
|
|
$11.22
|
|
|
|
5,468
|
|
|
|
2.9
|
|
|
|
5,468
|
|
|
|
|
|
|
45,068
|
|
|
|
2.8
|
|
|
|
45,068
|
|
Cash received from option exercises totaled approximately $
123,000,
$91,000
and
$236,000
during the years ended
December 31, 2017,
2016
and
2015,
respectively. The Company issues new shares upon option exercise.
Basic earnings per common share was computed by dividing net income by the weighted average number of shares outstanding during the period. Diluted earnings per common share was calculated as follows:
|
|
For the Year Ended December 31,
|
|
|
|
201
7
|
|
|
201
6
|
|
|
201
5
|
|
|
|
(in thousands, except per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
38,899
|
|
|
$
|
11,101
|
|
|
$
|
21,436
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic weighted average common shares outstanding
|
|
|
6,331
|
|
|
|
6,627
|
|
|
|
7,288
|
|
Dilutive effect of common stock equivalents
|
|
|
67
|
|
|
|
22
|
|
|
|
37
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted weighted average common shares outstanding
|
|
|
6,398
|
|
|
|
6,649
|
|
|
|
7,325
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per share
|
|
$
|
6.14
|
|
|
$
|
1.68
|
|
|
$
|
2.94
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per share
|
|
$
|
6.08
|
|
|
$
|
1.67
|
|
|
$
|
2.93
|
|
The Company sponsors a benefit plan for the benefit of all eligible employees. The plan qualifies under Section
401
(k) of the Internal Revenue Code thereby allowing eligible employees to make tax-deductible contributions to the plan. The plan provides for employer matching contributions of
50%
of each participant
’s voluntary contribution up to
3%
of the participant’s compensation and vests at the rate of
20%
each year until fully vested after
five
years. Total employer matching contributions to the plan were approximately
$179,000,
$161,000
and
$171,000
in
2017,
2016
and
2015,
respectively.
15.
|
COMMITMENTS AND CONTINGENCIES
|
Other than the lawsuit discussed below, the Company is
not
a party to any pending legal proceedings which management believes to be material to the Consolidated financial statements of the Company. The Company maintains liability insurance against risks arising
in 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 unsubstantiated 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.
During
2014
and
2015,
the Company’s subsidiaries operated equipment under operating leases for the lease of
471
trucks. Revenue equipment held under operating leases is
not
carried on our balance sheet and the respective lease payments are reflected in our consolidated statements of operations as a component of the Rents and purchased transportation category. The final
56
trucks operated under these lease agreements were returned or purchased in by
January 31, 2018.
Leases for revenue equipment and certain premises under non-cancellable operating leases expire at various dates through
20
21.
Future minimum lease payments related to these non-cancellable leases at
December 31, 2017
are as follows:
|
|
|
(in thousands)
|
|
|
|
|
|
|
201
8
|
|
$
|
382
|
|
201
9
|
|
|
67
|
|
20
20
|
|
|
36
|
|
20
21
|
|
|
6
|
|
20
22 and thereafter
|
|
|
-
|
|
|
|
|
|
|
Total
|
|
$
|
491
|
|
Total rental expense, net of amounts reimbursed
, for the years ended
December 31, 2017,
2016
and
2015
was approximately
$5,460,000,
$10,294,000,
and
$12,057,000,
respectively.
The Company
has a lease-purchase program whereby we offer independent contractors the opportunity to lease a Company-owned truck. The terms associated with these leases require weekly lease payments over the term of the leases which range from
7
to
35
months. The cost and carrying amount of Company-owned trucks in this program at
December 31, 2017
were approximately
$42,206,000
and
$17,028,000,
respectively. The cost and carrying amount of Company-owned trucks in this program at
December 31, 2016
was
$44,691,000
and
$16,522,000,
respectively.
Leases in our lease-purchase program expire at various dates through
201
9.
Payments received under this program are classified in the Company’s financial statements under the consolidated statements of operations category Revenue. Future minimum lease receipts related to these leases at
December 31, 2017
and
2016
were approximately
$9,360,000
and
$5,935,000,
respectively.
The Company leases office and shop facilities to a related party. At
December 31,
201
7,
the cost and carrying amount of the facilities leased were approximately
$1,697,000
and
$1,195,000,
respectively. At
December 31, 2016,
the cost and carrying amount of the facilities leased were approximately
$1,697,000
and
$1,253,000,
respectively. Future minimum lease receipts related to this lease at
December 31, 2017
are approximately
$12,000.
See Note
18
to our consolidated financial statements.
1
7.
|
FAIR VALUE OF FINANCIAL INSTRUMENTS
|
Our financial instruments consist of cash and cash equivalents, marketable equity securities, accounts
receivable, trade accounts payable, and borrowings.
The Company adopted guidance effective
January
1,
2008
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
December 31,
201
7,
the following items are measured at fair value on a recurring basis:
|
|
Total
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
|
(in thousands)
|
|
Marketable equity securities
|
|
$
|
26,664
|
|
|
$
|
26,664
|
|
|
|
-
|
|
|
|
-
|
|
During
201
7
and
2016,
there were
no
transfers of marketable securities between levels of fair value measurement.
The Company
’s investments in marketable equity securities are recorded at fair value based on quoted market prices. The carrying value of cash and cash equivalents, accounts receivable, trade 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 values and estimated fair values of this other long-term debt at
December 31, 2017
and
2016
are summarized as follows:
|
|
201
7
|
|
|
201
6
|
|
|
|
Carrying
Value
|
|
|
Estimated
Fair Value
|
|
|
Carrying
Value
|
|
|
Estimated
Fair Value
|
|
|
|
(in thousands)
|
|
Long-term debt
|
|
$
|
172,636
|
|
|
$
|
171,289
|
|
|
$
|
165,331
|
|
|
$
|
163,975
|
|
The Company has
not
elected the fair
value option for any of our financial instruments.
1
8.
|
RELATED PARTY TRANSACTIONS
|
In the normal course of business, transactions for transportation and repair services,
equipment, property leases and other services are conducted between the Company and companies affiliated with our Chairman and controlling stockholder. The Company recognized approximately
$585,000,
$4,834,000
and
$11,325,000
in operating revenue and approximately
$7,497,000
$8,837,000
and
$4,834,000
in operating expenses in
2017,
2016,
and
2015,
respectively. In addition, also in the normal course of business, the Company sold trucks to an affiliated company owned by our Chairman and controlling stockholder for approximately
$67,500
during
2015.
The Company purchased physical damage, auto liability, general liability
, and workers’ compensation insurance through an unaffiliated insurance broker which was written by an insurance company affiliated with our Chairman and controlling stockholder. Premiums for physical damage coverage were approximately
$1,808,000,
$2,091,000
and
$2,467,000
for
2017,
2016,
and
2015,
respectively. Premiums for auto liability coverage during
2017,
2016,
and
2015
were approximately
$10,860,000,
$11,030,000,
and
$9,605,000,
respectively. Premiums for general liability coverage during
2017,
2016,
and
2015
were approximately
$35,000,
21,000
and
$23,000,
respectively. Premiums for workers’ compensation coverage during
2017,
2016,
and
2015
were approximately
$286,000,
$298,000
and
$276,000,
respectively.
Amounts owed to the Company by these affiliates were approximately
$21,000
and
$929,000
at
December 31, 2017
and
2016,
respectively. Of the accounts receivable at
December 31, 2017
and
2016,
approximately
$19,000
and
$925,000
represent freight transportation and approximately
$2,000
and
$4,000
represent revenue resulting from maintenance performed in the Company’s maintenance facilities and charges paid by the Company to
third
parties on behalf of their affiliate and charged back at the amount paid, respectively. Amounts representing prepaid insurance premiums at
December 31, 2017
and
2016
were approximately
$1,385,000
and
$472,000,
respectively. Amounts payable to affiliates at
December 31, 2017
and
2016
were approximately
$971,000
and
$1,297,000
respectively.
1
9.
|
QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
|
The tables below present quarterly financial information for
201
7
and
2016:
|
|
201
7
|
|
|
|
Three Months Ended
|
|
|
|
March 31
|
|
|
June 30
|
|
|
September 30
|
|
|
December 31
|
|
|
|
(in thousands, except per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating revenues
|
|
$
|
109,405
|
|
|
$
|
108,646
|
|
|
$
|
108,899
|
|
|
$
|
110,888
|
|
Operating expenses and costs
|
|
|
106,743
|
|
|
|
105,748
|
|
|
|
105,131
|
|
|
|
107,536
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
|
2,662
|
|
|
|
2,898
|
|
|
|
3,768
|
|
|
|
3,352
|
|
Non-operating
(loss) income
|
|
|
2,052
|
|
|
|
650
|
|
|
|
2,767
|
|
|
|
384
|
|
Interest expense
|
|
|
(977
|
)
|
|
|
(935
|
)
|
|
|
(920
|
)
|
|
|
(1,070
|
)
|
Income tax
(benefit) expense
|
|
|
(1,454
|
)
|
|
|
(1,004
|
)
|
|
|
(2,169
|
)
|
|
|
28,895
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
2,283
|
|
|
$
|
1,609
|
|
|
$
|
3,446
|
|
|
$
|
31,561
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income per common share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.36
|
|
|
$
|
0.25
|
|
|
$
|
0.54
|
|
|
$
|
5.07
|
|
Diluted
|
|
$
|
0.36
|
|
|
$
|
0.25
|
|
|
$
|
0.54
|
|
|
$
|
5.00
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average common shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
6,399
|
|
|
|
6,381
|
|
|
|
6,326
|
|
|
|
6,219
|
|
Diluted
|
|
|
6,425
|
|
|
|
6,430
|
|
|
|
6,373
|
|
|
|
6,312
|
|
|
|
201
6
|
|
|
|
Three Months Ended
|
|
|
|
March 31
|
|
|
June 30
|
|
|
September 30
|
|
|
December 31
|
|
|
|
(in thousands, except per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating revenues
|
|
$
|
103,589
|
|
|
$
|
111,516
|
|
|
$
|
109,393
|
|
|
$
|
108,354
|
|
Operating expenses and costs
|
|
|
98,003
|
|
|
|
104,162
|
|
|
|
104,098
|
|
|
|
106,661
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
|
5,586
|
|
|
|
7,354
|
|
|
|
5,295
|
|
|
|
1,693
|
|
Non-operating income (loss)
|
|
|
(22
|
)
|
|
|
(10
|
)
|
|
|
1,235
|
|
|
|
282
|
|
Interest expense
|
|
|
(822
|
)
|
|
|
(910
|
)
|
|
|
(927
|
)
|
|
|
(982
|
)
|
Income tax expense
|
|
|
(1,807
|
)
|
|
|
(2,442
|
)
|
|
|
(2,152
|
)
|
|
|
(270
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
2,935
|
|
|
$
|
3,992
|
|
|
$
|
3,451
|
|
|
$
|
723
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income per common share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.41
|
|
|
$
|
0.61
|
|
|
$
|
0.54
|
|
|
$
|
0.11
|
|
Diluted
|
|
$
|
0.41
|
|
|
$
|
0.61
|
|
|
$
|
0.53
|
|
|
$
|
0.11
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average common shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
7,121
|
|
|
|
6,551
|
|
|
|
6,439
|
|
|
|
6,400
|
|
Diluted
|
|
|
7,145
|
|
|
|
6,572
|
|
|
|
6,458
|
|
|
|
6,425
|
|