UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.20549

FORM 10-Q

☒ ~~QUARTERLY REPORT PURSUANT TO SECTION~~Quarterly Report Pursuant to Section 13 ~~OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF~~or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended September 30, ~~2017~~2020

☐ ~~TRANSITION REPORT PURSUANT TO SECTION~~Transition Report Pursuant to the Section 13 ~~OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF~~or 15(d) of the Securities Exchange Act of 1934

For the transition period from __________to__________

~~Commission File Number: 0-15057~~

P.A.M. TRANSPORTATION SERVICES, INC.

(Exact name of registrant as specified in its charter)

Delaware	0-1507	71-0633135
(State or other jurisdiction of incorporation or organization)	(Commission File Number)	(I.R.S. Employer Identification no.)

297 West Henri De Tonti, Tontitown, Arkansas 72770

(Address of principal executive offices) (Zip Code)

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

N/A

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

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

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

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to the filing requirements for the past 90 days.

Yes ☑

No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files.)
~~(Former name, former address and former fiscal year, if changed since last report)~~				Yes ☑	No ☐

~~Yes~~ ☑ No ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

~~Yes~~ ☑ No ☐

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

Large accelerated filer ☐		Accelerated filer ☐ ☑
Non-accelerated filer ☐ ~~(Do not check if a smaller reporting company)~~		Smaller reporting company ☑
		Emerging growth company ☐

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

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

~~Yes~~ ☐ No ☑

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

Yes ☐

No ☑

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

Class		Outstanding at October ~~25, 2017~~28, 2020
Common Stock, $.01 Par Value		~~6,303,035~~5,734,512

Table of Contents

P.A.M. TRANSPORTATION SERVICES, INC.

Form 10-Q

For ~~The~~the Quarter Ended September 30, ~~2017~~2020

Table of Contents

Part I.I. Financial Information

Item 1.	Financial Statements (unaudited).	3

	Condensed Consolidated Balance Sheets as of September 30, ~~2017~~2020 and December 31, ~~2016~~2019	3

	Condensed Consolidated Statements of Operations for the Three and Nine Months Ended September 30, ~~2017~~2020 and ~~2016~~2019	4

	Condensed Consolidated Statements of ~~Comprehensive Income~~Cash Flows for the ~~Three and~~ Nine Months Ended September 30, ~~2017~~2020 and ~~2016~~2019	5

	~~Condensed Consolidated Statements of Cash Flows for the~~ ~~Nine Months Ended September 30, 2017 and 2016~~	6

	Condensed Consolidated ~~Statements~~Statement of ~~Shareholders~~’Stockholders’ Equity for the Nine Months Ended September 30, ~~2017~~2020 and 2019	76

	Notes to Condensed Consolidated Financial Statements as of September 30, ~~2017~~2020	8

Item 2.	~~Management~~’sManagement’s Discussion and Analysis of Financial Condition and Results of Operations.	17

Item 3.	Quantitative and Qualitative Disclosures ~~About~~about Market Risk.	23

Item 4.	Controls and Procedures.	2324

		Part II. Other Information
~~Part II. Other Information~~

Item 1.	Legal Proceedings.	25

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds.	2526

Item 6.	Exhibits.	2627

Signatures		27

~~Exhibits~~		28

Table of Contents

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements.

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

~~Condensed Consolidated Balance Sheets~~

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

September 30,

December 31,

2017

2016

(unaudited)

(audited)

ASSETS

Current assets:

Cash and cash equivalents
$ 207 $ 137
Accounts receivable-net:

Trade, less allowance of $1,181 and $994, respectively
58,640 56,143
Other
9,490 4,982
Inventories
1,607 1,900
Prepaid expenses and deposits
9,000 8,777
Marketable equity securities
24,994 27,621
Income taxes refundable
639 738
Total current assets
104,577 100,298

Property and equipment:

Land
5,374 5,374
Structures and improvements
18,914 18,861
Revenue equipment
353,736 355,339
Office furniture and equipment
10,744 10,402
Total property and equipment
388,768 389,976
Accumulated depreciation
(116,376 ) (112,600 )
Net property and equipment
272,392 277,376

Other assets
2,393 2,392

TOTAL ASSETS
$ 379,362 $ 380,066

LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:

Accounts payable
$ 29,691 $ 16,088
Accrued expenses and other liabilities
19,975 22,330
Current maturities of long-term debt
59,224 42,806
Total current liabilities
108,890 81,224

Long-term debt-less current portion
88,931 124,391
Deferred income taxes
83,253 80,293
Total liabilities
281,074 285,908

SHAREHOLDERS' EQUITY

Preferred stock, $.01 par value, 10,000,000 shares authorized; none issued
- -
Common stock, $.01 par value, 40,000,000 shares authorized; 11,527,411 and 11,510,863 shares issued; 6,303,035 and 6,396,803 shares outstanding at September 30, 2017 and December 31, 2016, respectively
115 115
Additional paid-in capital
81,390 80,822
Accumulated other comprehensive income
5,471 7,476
Treasury stock, at cost; 5,224,376 and 5,114,060 shares at September 30, 2017 and December 31, 2016, respectively
(124,796 ) (122,835 )
Retained earnings
136,108 128,580
Total shareholders’ equity
98,288 94,158

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY
$ 379,362 $ 380,066

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

~~Table of Contents~~

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

Condensed Consolidated ~~Statements of Operations~~

~~(unaudited)~~Balance Sheets

(in thousands, except share and per share data)

	September 30,			December 31,
	2020			2019
	(unaudited)			(audited)
ASSETS
Current assets:
Cash and cash equivalents	$	328		$	318
Accounts receivable-net:
Trade, less current estimated credit loss of $3,281 and $2,952, respectively		69,984			61,784
Other		3,650			3,769
Inventories		1,093			1,327
Prepaid expenses and deposits		7,579			8,669
Marketable equity securities		25,157			29,521
Income taxes refundable		860			504
Total current assets		108,651			105,892

Property and equipment:
Land		16,086			7,246
Structures and improvements		32,011			20,204
Revenue equipment		556,100			524,527
Office furniture and equipment		11,779			11,185
Total property and equipment		615,976			563,162
Accumulated depreciation		(196,931	)		(175,887	)
Net property and equipment		419,045			387,275

Other assets		4,387			4,842

TOTAL ASSETS	$	532,083		$	498,009

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	42,226		$	16,597
Accrued expenses and other liabilities		29,495			40,610
Current maturities of long-term debt		63,777			67,637
Total current liabilities		135,498			124,844

Long-term debt - less current portion		194,753			174,187
Deferred income taxes		64,284			63,522
Other long-term liabilities		1,063			1,481
Total liabilities		395,598			364,034

STOCKHOLDERS' EQUITY
Preferred stock, $.01 par value, 10,000,000 shares authorized; none issued		0			0
Common stock, $.01 par value, 40,000,000 shares authorized; 11,692,344 and 11,656,160 shares issued; 5,735,326 and 5,748,897 shares outstanding at September 30, 2020 and December 31, 2019, respectively		117			117
Additional paid-in capital		84,118			83,688
Treasury stock, at cost; 5,957,018 and 5,907,263 shares at September 30, 2020 and December 31, 2019, respectively		(158,630	)		(156,837	)
Retained earnings		210,880			207,007
Total stockholders’ equity		136,485			133,975

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	532,083		$	498,009

Three Months Ended

Nine Months Ended

September 30,

September 30,

2017

2016

2017

2016

OPERATING REVENUES:

Revenue, before fuel surcharge
$ 93,457 $ 95,926 $ 280,157 $ 288,496
Fuel surcharge
15,442 13,467 46,792 36,002
Total operating revenues
108,899 109,393 326,949 324,498

OPERATING EXPENSES AND COSTS:

Salaries, wages and benefits
24,718 28,167 75,885 83,490
Operating supplies and expenses
19,502 21,155 59,144 61,315
Rent and purchased transportation
44,000 40,013 130,840 118,119
Depreciation
10,177 10,166 31,333 29,011
Insurance and claims
4,232 3,609 13,367 12,158
Other
2,371 1,937 6,791 6,121
Loss (gain) on disposition of equipment
131 (949 ) 261 (3,951 )
Total operating expenses and costs
105,131 104,098 317,621 306,263

OPERATING INCOME
3,768 5,295 9,328 18,235

NON-OPERATING INCOME
2,767 1,235 5,469 1,203
INTEREST EXPENSE
(920 ) (927 ) (2,832 ) (2,659 )

INCOME BEFORE INCOME TAXES
5,615 5,603 11,965 16,779

FEDERAL AND STATE INCOME TAX EXPENSE:

Current
116 115 249 168
Deferred
2,053 2,037 4,378 6,233
Total federal and state income tax expense
2,169 2,152 4,627 6,401

NET INCOME
$ 3,446 $ 3,451 $ 7,338 $ 10,378

INCOME PER COMMON SHARE:

Basic
$ 0.54 $ 0.54 $ 1.15 $ 1.55
Diluted
$ 0.54 $ 0.53 $ 1.14 $ 1.54

AVERAGE COMMON SHARES OUTSTANDING:

Basic
6,326 6,439 6,368 6,703
Diluted
6,373 6,458 6,413 6,725

See notes to condensed consolidated financial statements.

Table of Contents

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

Condensed Consolidated Statements of ~~Comprehensive Income~~Operations

(unaudited)

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

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2020			2019			2020			2019
OPERATING REVENUES:
Revenue, before fuel surcharge	$	109,854		$	110,149		$	307,441		$	332,846
Fuel surcharge		12,088			18,845			36,634			57,834
Total operating revenues		121,942			128,994			344,075			390,680

OPERATING EXPENSES AND COSTS:
Salaries, wages and benefits		30,618			32,920			90,991			94,586
Operating supplies and expenses		20,875			25,455			62,866			73,487
Rent and purchased transportation		41,402			40,740			114,688			128,647
Depreciation		13,403			14,173			41,936			40,974
Insurance and claims		3,145			3,697			5,701			11,872
Other		2,599			3,788			10,411			10,321
(Gain) Loss on sale or disposition of equipment		(174	)		688			(71	)		362
Total operating expenses and costs		111,868			121,461			326,522			360,249

OPERATING INCOME		10,074			7,533			17,553			30,431

NON-OPERATING (EXPENSE) INCOME		(94	)		490			(6,209	)		3,765
INTEREST EXPENSE		(2,211	)		(2,178	)		(6,601	)		(6,277	)

INCOME BEFORE INCOME TAXES		7,769			5,845			4,743			27,919

FEDERAL AND STATE INCOME TAX EXPENSE:
Current		106			106			106			302
Deferred		1,663			1,158			763			6,081
Total federal and state income tax expense		1,769			1,264			869			6,383

NET INCOME	$	6,000		$	4,581		$	3,874		$	21,536

INCOME PER COMMON SHARE:
Basic	$	1.04		$	0.80		$	0.67		$	3.68
Diluted	$	1.04		$	0.79		$	0.67		$	3.65

AVERAGE COMMON SHARES OUTSTANDING:
Basic		5,763			5,756			5,758			5,859
Diluted		5,768			5,799			5,775			5,907

Three Months Ended

Nine Months Ended

September 30,

September 30,

2017

2016

2017

2016

NET INCOME
$ 3,446 $ 3,451 $ 7,338 $ 10,378

Other comprehensive income, net of tax:

Reclassification adjustment for realized gains on marketable equity securities included in net income (1)
(1,265 ) (594 ) (2,308 ) (543 )

Reclassification adjustment for unrealized losses on marketable securities included in net income, net of income taxes (2)
9 109 26 440

Changes in fair value of marketable securities (3)
437 (376 ) 277 1,009

COMPREHENSIVE INCOME
$ 2,627 $ 2,590 $ 5,333 $ 11,284

~~(1)~~

~~Net of deferred income taxes of $(774), $(364), $(1,412), and $(333), respectively.~~

(2)	~~Net of deferred income taxes of $6, $67, $16, and $269, respectively.~~

(3)	~~Net of deferred income taxes of $ 266, $(230), $ 168, and $618, respectively.~~

See notes to condensed consolidated financial statements.

Table of Contents

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

Condensed Consolidated Statements of Cash Flows

(unaudited)

(in thousands)

	Nine Months Ended
	September 30,
	2020			2019
OPERATING ACTIVITIES:
Net income	$	3,874		$	21,536
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation		41,936			40,974
Bad debt expense		329			694
Stock compensation-net of excess tax benefits		430			736
Provision for deferred income taxes		763			6,081
Recognized loss / (gain) on marketable equity securities		7,484			(2,728	)
(Gain) / loss on sale or disposition of equipment		(71	)		362
Changes in operating assets and liabilities:
Accounts receivable		(8,409	)		2,312
Prepaid expenses, deposits, inventories, and other assets		1,064			2,169
Income taxes payable		(52	)		(299	)
Trade accounts payable		22,112			3,218
Accrued expenses and other liabilities		(16,354	)		1,340
Net cash provided by operating activities		53,106			76,395

INVESTING ACTIVITIES:
Purchases of property and equipment		(39,763	)		(68,046	)
Proceeds from disposition of equipment		13,502			12,714
Sales of marketable equity securities		860			1,645
Purchases of marketable equity securities, net of return of capital		(3,982	)		(128	)
Net cash used in investing activities		(29,383	)		(53,815	)

FINANCING ACTIVITIES:
Borrowings under line of credit		365,263			444,362
Repayments under line of credit		(371,182	)		(445,318	)
Borrowings of long-term debt		17,640			45,557
Repayments of long-term debt		(38,872	)		(51,253	)
Borrowings under margin account		7,037			387
Repayments under margin account		(1,806	)		(2,676	)
Repurchases of common stock		(1,793	)		(13,616	)
Net cash used in financing activities		(23,713	)		(22,557	)

NET INCREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH		10			23

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

CASH, CASH EQUIVALENTS AND RESTRICTED CASH -End of period	$	328		$	305

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION-
Cash paid during the period for:
Interest	$	6,544		$	6,258
Income taxes	$	159		$	601

NONCASH INVESTING AND FINANCING ACTIVITIES-
Purchases of property and equipment included in accounts payable	$	3,944		$	5,711

Nine Months Ended

September 30,

2017

2016

OPERATING ACTIVITIES:

Net income
$ 7,338 $ 10,378
Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation
31,333 29,011
Bad debt expense
186 354
Sale leaseback deferred gain amortization
- (131 )
Stock compensation-net of excess tax benefits
446 251
Provision for deferred income taxes
4,378 6,233
Reclassification of unrealized loss on marketable equity securities
42 709
Recognized gain on marketable equity securities
(4,669 ) (1,003 )
Loss (gain) on sale or disposition of equipment
261 (3,951 )
Changes in operating assets and liabilities:

Accounts receivable
(1,683 ) (10,354 )
Prepaid expenses, deposits, inventories, and other assets
70 100
Income taxes refundable
99 2,308
Trade accounts payable
9,086 10,195
Accrued expenses and other liabilities
2,296 (1,917 )
Net cash provided by operating activities
49,183 42,183

INVESTING ACTIVITIES:

Purchases of property and equipment
(38,578 ) (55,948 )
Proceeds from disposition of equipment
16,485 24,479
Change in restricted cash
(5,508 ) (5,461 )
Sales of marketable equity securities
6,007 1,550
Purchases of marketable equity securities, net of return of capital
(1,988 ) (836 )
Net cash used in investing activities
(23,582 ) (36,216 )

FINANCING ACTIVITIES:

Borrowings under line of credit
341,106 375,930
Repayments under line of credit
(342,190 ) (379,043 )
Borrowings of long-term debt
17,598 52,224
Repayments of long-term debt
(35,554 ) (33,092 )
Borrowings under margin account
2,133 1,040
Repayments under margin account
(6,785 ) (2,392 )
Repurchases of common stock
(1,961 ) (20,726 )
Exercise of stock options
122 74
Net cash used in financing activities
(25,531 ) (5,985 )

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
70 (18 )

CASH AND CASH EQUIVALENTS-Beginning of period
137 157

CASH AND CASH EQUIVALENTS-End of period
$ 207 $ 139

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION-

Cash paid during the period for:

Interest
$ 2,860 $ 2,643
Income taxes
$ 151 $ 260

NONCASH INVESTING AND FINANCING ACTIVITIES-

Purchases of property and equipment included in accounts payable
$ 7,819 $ 2,788

See notes to condensed consolidated financial statements.

Table of Contents

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

Condensed Consolidated ~~Statement~~Statements of ~~Shareholders~~’Stockholders’ Equity

(unaudited)

(in thousands)

Common Stock
Shares / Amount

Additional
Paid-In Capital

Accumulated
Other
Comprehensive
Income

Treasury
Stock

Retained
Earnings

Total

Balance at January 1, 2017
6,397 $ 115 $ 80,822 $ 7,476 $ (122,835 ) $ 128,580 $ 94,158

Net Income
7,338 7,338

Other comprehensive income, net of tax of $(1,228)
(2,005 ) (2,005 )

Exercise of stock options and stock awards-shares issued including tax benefits
16 - 122 122

Treasury stock repurchases
(110 ) (1,961 ) (1,961 )

Share-based compensation
446 446

Cumulative effect adjustment – ASU 2016-09
190 190

Balance at September 30, 2017
6,303 $ 115 $ 81,390 $ 5,471 $ (124,796 ) $ 136,108 $ 98,288

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

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

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

Stock awards-shares issued including tax benefits		2			0		0		0			0			0

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

Stock based compensation		-			-		305		-			-			305

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

Net Loss		-			-		-		-			(823	)		(823	)

Stock awards-shares issued including tax benefits		34			0		0		0			0			0

Treasury stock repurchases		-			-		-		-			-			0

Stock based compensation		-			-		21		-			-			21

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

Net Income		-			0		0		0			6,000			6,000

Stock awards-shares issued including tax benefits		-			0		0		0			0			0

Treasury stock repurchases		(41	)		0		0		(1,472	)		0			(1,472	)

Stock based compensation		-			0		104		0			0			104

Balance at September 30, 2020		5,735		$	117	$	84,118	$	(158,630	)	$	210,880		$	136,485

See notes to condensed consolidated financial statements.

Table of Contents

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

Condensed Consolidated Statements of Stockholders’ Equity

(unaudited)

(in thousands)

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

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

Net Income		-			-		-		-			8,301		8,301

Stock awards-shares issued including tax benefits		1			0		0		0			0		0

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

Stock based compensation (1)		-			-		216		-			-		216

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

Net Income		-			-		-		-			8,654		8,654

Stock awards-shares issued including tax benefits		35			0		0		0			0		0

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

Stock based compensation		-			-		310		-			-		310

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

Net Income		-			0		0		0			4,581		4,581

Stock awards-shares issued including tax benefits		-			0		0		0			0		0

Treasury stock repurchases		(3	)		0		0		(174	)		0		(174	)

Stock based compensation		-			0		210		0			0		210

Balance at September 30, 2019		5,754		$	116	$	83,512	$	(156,167	)	$	220,643	$	148,104

(1)

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

See notes to condensed consolidated financial statements.

Table of Contents

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

Notes to Condensed Consolidated Financial Statements (unaudited)

September 30, 20, 20~~2017~~

NOTE A: BASIS OF PRESENTATION

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

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles (“GAAP”) for interim financial information and with the instructions to Form ~~10-Q~~10-Q and Article 10 of Regulation ~~S-X.~~S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In ~~management~~’smanagement’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~~ 2019 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. Operating results for the ~~nine-month~~three and nine-month period ended September 30, ~~2017~~ 2020 are not necessarily indicative of the results that may be expected for the year ending December 31, ~~2017.~~ 2020. For further information, refer to the consolidated financial statements and the footnotes thereto included in the Company’s annual report on Form ~~10-K~~10-K for the year ended December 31, ~~2016.~~2019.

NOTE B:B: RECENT ACCOUNTING PRONOUNCEMENTS

In ~~May 2014,~~ March 2020, the ~~Financial Accounting Standards Board, (“FASB”),~~FASB issued Accounting Standards Update ~~(“ASU”)~~ No. ~~2014-09,~~2020-04, (“ASU ~~2014-09”~~2020-04”), ~~Revenue from Contracts with Customers~~~~. The objective~~Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. ASU ~~2014-09 and subsequent amendments is~~2020-04 was issued to ~~establish~~provide optional guidance for a ~~single comprehensive model for entities~~limited period of time to ~~use~~ease the potential burden 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~~reference rate reform on financial reporting. 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,2020-04 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 as of March 12, 2020 through December 31, ~~2016. Entities have the option of using either a full retrospective or modified approach to adopt ASU 2014-09.~~

2022. The Company has ~~performed an analysis~~evaluated the provisions of this standard and determined that it is applicable to our line of credit and investment margin account. The London Interbank Offered Rate (“LIBOR”) is the ~~effects~~basis for interest charges on outstanding borrowings for both our line of ~~adopting this guidance.~~credit and investment margin account. 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~~scheduled discontinuation of LIBOR is not expected to ~~performance obligations,~~

~~● determination~~materially alter any provisions of ~~when performance obligations are satisfied and revenue is earned,~~

~~● disaggregation of revenue by source within segments, and~~

~~● principal versus 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 applicationeither 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.~~

~~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~~debt 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.

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

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.~~replacement reference rate. The Company has evaluated the new guidance and does not expect it to have a material impact on its financial condition, results of operations, or cash ~~flows since the Company’s current leases will expire prior to the effective date of this guidance.~~flows.

In ~~March~~June 2016, the FASB issued ASU No. ~~2016-09,~~2016-13, (“ASU ~~2016-09”~~2016-13”), ~~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)~~326). ASU ~~2016-13~~2016-13 requires the use of an “expected loss” model on certain types of financial instruments. The standard also amends the impairment model for available-for-sale debt securities and requires estimated credit losses to be recorded as allowances instead of reductions to the amortized cost of the securities. For smaller reporting companies, ASU ~~2016-13~~2016-13 is effective for fiscal years, and interim periods within those years, beginning after December 15, ~~2019,~~ 2022, with early adoption permitted. The ~~Company is evaluating the new~~adoption of this guidance ~~but does~~ on January 1, 2020 did not ~~expect it to~~ have a material impact on ~~its~~the Company’s 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. NOTE C: REVENUE RECOGNITION

The Company has ~~evaluated~~a single performance obligation, to transport our customer’s freight from a specified origin to a specified destination. The Company has the ~~effects~~discretion to choose to self-transport or to arrange for alternate transportation to fulfill the performance obligation. Where the Company decides to self-transport the freight, the Company classifies the service as truckload services, and where the Company arranges for alternate transportation of ~~adopting ASU 2016-15~~the freight, the Company classifies the service as brokerage and ~~does not expect it~~logistics services. In either case, the Company is paid a rate to ~~have~~transport freight from its origin location to a ~~material impact on~~specified destination. Because the primary factors influencing revenue recognition, including performance obligation, customer base, and timing of revenue recognition, are the same for both of its ~~financial condition, results~~service categories, the Company utilizes the same revenue recognition method throughout its operations.

Company revenue is generated from freight transportation services performed utilizing heavy truck trailer combinations. While various ownership arrangements may exist for the equipment utilized to perform these services, including Company owned or leased, owner-operator owned, and third-party carriers, revenue is generated from the same base of customers. Contracts with these customers establish rates for services performed, which are predominantly rates that will be paid to pick up, transport and drop off freight at various locations. In addition to transportation, revenue is also awarded for various accessorial services performed in conjunction with the base transportation service. The Company also has other revenue categories that are not discussed in this note or broken out in our condensed consolidated statements of operations ~~or cash flows.~~due to their immaterial amounts.

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In ~~November 2016,~~fulfilling the ~~FASB issued ASU No. 2016-18, (“ASU 2016-18”),~~ ~~Statement~~Company’s obligation to transport freight from a specified origin to a specified destination, control of ~~Cash Flows (Topic 230)~~~~. ASU 2016-18 requires~~freight is transferred to us at the point it has been loaded into the driver’s trailer, the doors are sealed and the driver has signed a bill of lading, which is the basic transportation agreement that establishes the nature, quantity and condition of the freight loaded, the responsibility for invoice payment and the pickup and delivery locations. Our revenue is generated, and our customer receives benefit, as the freight progresses towards delivery locations. In the event our customer cancels the shipment at some point prior to the final delivery location and re-consigns the shipment to an alternate delivery location, we are entitled to receive payment for services performed for the partial shipment. Shipments are generally conducted over a ~~statement~~relatively short time span, generally one to three days; however, freight is sometimes stored temporarily in our trailer at one of ~~cash flows explain~~our drop yard locations or at a location designated by a customer. Our revenue is categorized as either Freight Revenue or Fuel Surcharge Revenue, and both are earned by performing the ~~change~~same freight transportation services, as discussed further below.

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

Fuel Surcharge Revenue – revenue designed to adjust freight revenue rates to an agreed-upon base cost for diesel fuel. Diesel fuel prices can fluctuate widely during the ~~period in~~term of a contract with a customer. At the ~~total of cash, cash equivalents, and amounts generally described~~point that freight revenue rates are negotiated with customers, a sliding scale is agreed upon that approximately adjusts diesel fuel costs to an agreed-upon base amount. In general, as ~~restricted cash or restricted cash equivalents. This standard~~fuel prices increase, revenue from fuel surcharge increases, so that diesel fuel cost is ~~intended~~adjusted 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.approximate base amount agreed upon.

~~In May 2017,~~Revenue is recognized over time as the ~~FASB issued ASU No. 2017-09, ("ASU 2017-09"),~~ ~~Compensation – Stock Compensation (Topic 718)~~ ~~which provides guidance about which changes~~freight progresses towards its destination and the transportation service obligation is fulfilled. For loads picked up during the reporting period, but delivered in a subsequent reporting period, revenue is allocated to each period based on the ~~terms~~transit time in each period as a percentage of total transit time. There are no assets or ~~conditions of a share-based payment award require an entity to apply modification accounting~~liabilities recorded in ~~Topic 718. ASU 2017-09 is effective for fiscal years beginning after December 15, 2017~~conjunction with revenue recognized, other than Accounts Receivable 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.Estimated Credit Losses.

~~With the exception of the new standards discussed above, there have been no recent accounting pronouncements or changes in accounting pronouncements during the~~ nine months ended September 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:D: 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 nine months of 2017 or 2016.with readily determinable fair values. The cost of securities sold is based on the specific identification method, and interest and dividends on securities are included in non-operating ~~income (expense).~~income.

Marketable equity securities are carried at fair value, with ~~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~~fair market 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~~The fair value of marketable equity securities is ~~performed~~determined based on quoted market prices in ~~order to judge whether declines~~active markets, as described 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~~ September 30, 2017, the evaluation resulted in an impairment charge of approximately $15,000 in the Company’s non-operating income (expense) in its statement of operations. For the quarter ended September 30, 2016, the evaluation resulted in an impairment charge of approximately $176,000 in the Company’s non-operating income (expense) in its statement of operations.

~~For the~~ nine-month period ended September 30, 2017, the evaluation resulted in an impairment charge of approximately $42,000 in the Company’s non-operating income (expense) in its statement of operations. For the nine-month period ended September 30, 2016, the evaluation resulted in an impairment charge of approximately $709,000 in the Company’s non-operating income (expense) in its statement of operations.

Note J.

The following table sets forth market value, cost, and unrealized gains on equity securities as of September 30, ~~2017~~ 2020 and December 31, ~~2016.~~2019.

September 30, 2017

December 31, 2016

(in thousands)

Fair market value
$ 24,994 $ 27,621
Cost
16,175 15,569
Unrealized gain
$ 8,819 $ 12,052

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	September 30, 2020			December 31, 2019
	(in thousands)
Fair market value	$	25,157		$	29,521
Cost		26,551			24,156
Unrealized (loss) / gain	$	(1,394	)	$	5,365

The following table sets forth the gross unrealized gains and losses on the ~~Company~~’sCompany’s marketable securities as of September 30, ~~2017~~ 2020 and December 31, ~~2016.~~2019.

	September 30, 2017		December 31, 2016		September 30, 2020			December 31, 2019
	(in thousands)				(in thousands)
Gross unrealized gains	$	9,062	$	12,161	$	5,310		$	7,808
Gross unrealized losses		243		109		6,704			2,443
Net unrealized gains	$	8,819	$	12,052
Net unrealized (loss) / gain					$	(1,394	)	$	5,365

Table of September 30, 2017 and December 31, 2016, the total net unrealized gain, net of deferred income taxes, in accumulated other comprehensive income was approximately $5,471,000 and $7,476,000, respectively.

~~For the~~ nine months ended September 30, 2017, the Company had net unrealized losses in market value on its marketable equity securities of approximately $2,005,000, 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 September 30, 2017, the Company’s investments’ approximate fair value of securities in a loss position and related gross unrealized losses were $2,414,000 and $243,000, 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 September 30, 2017 and December 31, 2016, there were no investments that had been in a continuous unrealized loss position for twelve months or longer.

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The following table shows the ~~Company~~’sCompany’s net realized gains during the ~~first~~ three and nine months ~~of 2017~~ ending on September 30, 2020 and ~~2016~~2019, respectively, on certain marketable equity securities.

Three Months Ended

Nine Months Ended

September 30,

September 30,

2017

2016

2017

2016

(in thousands, except per share data)

Sales proceeds
$ 2,928 $ 1,271 $ 6,007 $ 1,550
Cost of securities sold
405 178 1,338 547
Realized gain
$ 2,523 $ 1,093 $ 4,669 $ 1,003

Realized gain, net of taxes
$ 1,546 $ 676 $ 2,862 $ 621

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2020		2019		2020			2019
	(in thousands, except per share data)
Sales proceeds	$	0	$	883	$	861		$	1,645
Cost of securities sold		0		557		1,466			805
Realized gain / (loss)	$	0	$	326	$	(605	)	$	840

For the quarter ended September 30, ~~2017,~~ 2020, the Company recognized dividends received of approximately ~~$225,000~~$314,000 in non-operating income in its condensed consolidated statements of operations. For the quarter ended September 30, ~~2016,~~ 2019, the Company recognized dividends received of approximately ~~$279,000~~$348,000 in non-operating income in its condensed consolidated statements of operations.

For the nine months ended September 30, ~~2017,~~ 2020, the Company recognized dividends received of approximately ~~$718,000~~$946,000 in non-operating income in its condensed consolidated statements of operations. For the nine months ended September 30, ~~2016,~~ 2019, the Company recognized dividends received of approximately ~~$781,000~~$931,000 in non-operating income in its condensed consolidated statements of operations.

The ~~market value of the Company~~’sCompany’s equity securities are periodically used as collateral against any outstanding margin account borrowings. As of September 30, ~~2017~~ 2020, and December 31, ~~2016,~~ 2019, the Company had outstanding borrowings of approximately ~~$5,707,000~~$12,705,000 and ~~$10,358,000,~~$7,474,000, respectively, under its margin account. Margin account borrowings are used for the purchase of marketable equity securities and as a source of short-term liquidity and are included in ~~Accrued~~accrued expenses and other liabilities on our balance sheets.

Our marketable equity securities portfolio had a net unrealized pre-tax loss in market value of approximately $498,000 during the third quarter of 2020, and a net unrealized pre-tax gain in market value of approximately $133,000 during the third quarter of 2019, which were reported as non-operating income for the respective periods.

NOTE DE: STOCK-BASED COMPENSATION

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

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~~Outstanding nonqualified stock options at~~ September 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~~ In January 2020, the ~~first~~ ~~nine months of 2017, 4,298~~Company granted 7,000 shares of common stock ~~were granted~~ to ~~non-employee directors under the 2014 Plan and 100,000 shares of common~~certain key employees. These stock ~~were granted to the Company’s Chief Executive Officer. The stock awarded to non-employee directors had~~awards have a grant date fair value of ~~$16.29~~$56.45 per share, based on the closing price of the Company’s stock on the date of grant, and vest on the fourth anniversary date in January 2024.

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

In April 2020, the Company granted 242 shares of common stock ~~awarded~~to a new non-employee director upon his election to the ~~Chief Executive Officer had~~board of directors. This stock award has a grant date fair value of ~~$16.38~~$41.40 per share, based on the closing price of the Company’s stock on the date of grant, ~~with 33%~~and vested immediately.

In August 2020, the Company granted 13,332 shares of common stock to certain key employees. These stock awards have a grant date fair value of $30.25 per share, based on the closing price of the ~~award vesting~~Company’s stock on ~~each anniversary of~~ the date of grant, ~~for~~and vests on the ~~next three years.~~fourth anniversary date in August 2024. During August 2020, the Company also granted 40,000 shares of common stock to the Company’s Chief Executive Officer which have a grant date fair value of $35.37 per share, based on the closing price of the Company’s stock on the date of grant. This award will vest in installments of 5,000 shares each in 2022,2023,2024 and 2027, and 10,000 shares each in 2025 and 2026.

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The total grant date fair value of stock ~~and stock options~~ vested during the firstnine months of ~~2017~~2020 was approximately ~~$186,000.~~$636,000. Total pre-tax stock-based compensation expense, recognized in ~~Salaries,~~salaries, wages and benefits during the firstnine months of ~~2017~~2020, was approximately ~~$446,000~~$430,000 and includes approximately ~~$70,000~~$90,000 recognized as a result of the grant of ~~614~~ shares to each non-employee ~~director during the first quarter of 2017.~~director. The recognition of stock-based compensation expense decreased both diluted and basic earnings per common share by approximately ~~$0.02~~$0.06 during the ~~third quarter~~firstnine months of ~~2017. The recognition~~2020. As of ~~stock-based compensation expense decreased both diluted and basic earnings per common share by approximately $0.05 during the nine months ended~~ September 30, ~~2017. As of September 30, 2017,~~ 2020, the Company had stock-based compensation plans with total unvested stock-based compensation expense of approximately ~~$1,501,000~~$2,318,000, which is being amortized on a straight-line basis over the remaining vesting period. As a result, the Company expects to recognize approximately ~~$168,000~~$130,000 in additional compensation expense related to unvested ~~option~~stock awards during the remainder of ~~2017~~2020 and to recognize approximately ~~$644,000, $552,000,~~$513,000, $513,000, $358,000, $271,000, $200,000, $200,000 and ~~$137,000~~$133,000 in additional compensation expense related to unvested ~~option~~stock awards during the years ~~2018, 2019,~~2021,2022,2023,2024,2025,2026 and ~~2020,~~2027, respectively.

The total grant date fair value of stock ~~and stock options~~ vested during the firstnine months of ~~2016~~2019 was approximately ~~$202,000.~~$685,000. Total pre-tax stock-based compensation expense recognized in ~~Salaries,~~salaries, wages and benefits during the ~~third quarter~~firstnine months of ~~2016~~2019 was approximately ~~$56,000. Total pre-tax stock-based compensation expense, recognized in Salaries, wages and benefits during the first nine months of 2016 was approximately $251,000~~$736,000 and includes approximately ~~$70,000~~$100,000 recognized as a result of the grant of ~~325~~ shares to each non-employee director during the first ~~quarter~~nine months of ~~2016.~~2019. The recognition of stock-based compensation expense decreased ~~basic earnings per common share by approximately $0.01 during the third quarter ended September 30, 2016. The recognition of stock-based compensation expense decreased~~both diluted and basic earnings per common share by approximately ~~$0.02 and $0.03, respectively,~~$0.09 during the firstnine months ~~ended~~ of 2019. As of September 30, ~~2016. As of September 30, 2016,~~ 2019, the Company had stock-based compensation plans with total unvested stock-based compensation expense of approximately ~~$290,000~~$1,228,000, which iswas being amortized on a straight-line basis over the remaining vesting period.

~~Information related to stock option activity for the~~ ~~nine months ended September 30, 2017 is as follows:~~

Shares
Under
Options

Weighted-
Average
Exercise Price

Weighted-
Average
Remaining Contractual
Term

Aggregate
Intrinsic
Value*

(per share)

(in years)

Outstanding-January 1, 2017
56,131 $ 10.85
Granted
- -
Exercised
(11,000 ) 11.13
Cancelled/forfeited/expired
- -
Outstanding at September 30, 2017
45,131 $ 10.79 3.1 $ 593,187

Exercisable at September 30, 2017
45,131 $ 10.79 3.1 $ 593,187

* 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 ~~September 29, 2017, was $23.93.~~

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A summary of the status of the ~~Company~~’sCompany’s non-vested ~~options and~~ restricted stock as of September 30, ~~2017~~ 2020 and changes during the nine months ended September 30, ~~2017,~~ 2020, is as follows:

	Stock Options					Restricted Stock					Restricted Stock
	Number of Options			Weighted- Average Grant Date Fair Value		Number of Shares			Weighted- Average Grant Date Fair Value*		Number of Shares			Weighted- Average Grant Date Fair Value
Non-vested at January 1, 2017		12,800		$	6.06		7,050		$	36.35
Non-vested at January 1, 2020												55,459		$	24.35
Granted		-			-		104,298			16.38		63,182			36.46
Canceled/forfeited/expired		-			-		-			-		(11,714	)		41.01
Vested		(12,800	)		6.06		(5,548	)		19.56		(36,184	)		17.58
Non-vested at September 30, 2017		-		$	-		105,800		$	17.54
Non-vested at September 30, 2020												70,743		$	35.86

* 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~~ ~~September 30, 2017 and the number and weighted average exercise price of options exercisable as of September 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 0.4 15,000
$ 10.90 24,600 4.7 24,600
$ 11.22 5,531 3.2 5,531
45,131 3.1 45,131

~~Cash received from option exercises totaled approximately $122,000 and $74,000 during the nine months ended September 30, 2017 and September 30, 2016, respectively. The Company issues new shares upon option exercise.~~

NOTE E:F: SEGMENT INFORMATION

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

																	Three Months Ended September 30,								Nine Months Ended September 30,
	Three Months Ended September 30,								Nine Months Ended September 30,								2020				2019				2020				2019
	2017				2016				2017				2016				Amount		%		Amount		%		Amount		%		Amount		%
	Amount		%		Amount		%		Amount		%		Amount		%		(in thousands, except percentage data)
	(in thousands, except percentage data)
Truckload Services revenue	$	79,736		85.3	$	85,286		88.9	$	244,311		87.2	$	254,262		88.1	$	82,949		75.5	$	92,443		83.9	$	244,217		79.4	$	275,323		82.7
Brokerage and Logistics Services revenue		13,721		14.7		10,640		11.1		35,846		12.8		34,234		11.9		26,905		24.5		17,706		16.1		63,224		20.6		57,523		17.3
Total revenues	$	93,457		100.0	$	95,926		100.0	$	280,157		100.0	$	288,496		100.0	$	109,854		100.0	$	110,149		100.0	$	307,441		100.0	$	332,846		100.0

NOTE FG: TREASURY STOCK

The ~~Company~~’sCompany’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 nine months ended September 30, ~~2017,~~ 2020, the Company repurchased ~~110,316~~49,755 shares of its common stock at an aggregate cost of approximately ~~$1,961,000~~$1,793,134 under this program.

The Company accounts for Treasury stock using the cost ~~method and as~~method. As of September 30, ~~2017, 5,224,376~~2020, 5,957,018 shares were held in the treasury at an aggregate cost of approximately ~~$124,796,000.~~$158,630,000.

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~~NOTE G: ACCUMULATED OTHER COMPREH~~E~~NSIVE INCOME~~

~~The following table summarizes the changes in accumulated balances of other comprehensive income for the three and~~ ~~nine months ended September 30, 2017:~~

Unrealized gains and
losses on available-
for-sale securities

(in thousands)

Balance at June 30, 2017, net of tax of $3,851
$ 6,290

Other comprehensive income before reclassifications, net of tax of $266
437
Amounts reclassified from accumulated other comprehensive income, net of tax of $(768)
(1,256 )
Net current-period other comprehensive income
(819 )

Balance at September 30, 2017, net of tax of $3,349
$ 5,471

Balance at December 31, 2016, net of tax of $4,576
$ 7,476

Other comprehensive income before reclassifications, net of tax benefit of $169
277
Amounts reclassified from accumulated other comprehensive income, net of tax of $(1,396)
(2,282 )
Net current-period other comprehensive income
(2,005 )

Balance at September 30, 2017, net of tax of $3,349
$ 5,471

~~The following table provides details about reclassifications out of accumulated other comprehensive income for the~~ ~~nine months ended September 30, 2017:~~

Amounts Reclassified from
Accumulated
Other Comprehensive
Income (a)

Details about Accumulated Other Comprehensive Income
Component

Nine Months Ended
September 30, 2017

Statement of Operations Classification

(in thousands)

Unrealized gains and losses on available-for-sale securities:

Prior period unrealized gain (loss) on securities sold
$ 3,720
Non-operating income (expense)
Impairment expense
(42 )
Non-operating income (expense)
Total before tax
3,678
Income before income taxes
Tax expense
(1,396 )
Income tax expense
Total after tax
$ 2,282
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.~~restricted stock. The computation of diluted earnings per share does not assume conversion, exercise, or contingent issuance of securities that would have an anti-dilutive effect on earnings per share. The computations of basic and diluted earnings per share were as follows:

Three Months Ended

Nine Months Ended

September 30,

September 30,

2017

2016

2017

2016

(in thousands, except per share data)

Net income
$ 3,446 $ 3,451 $ 7,338 $ 10,378

Basic weighted average common shares outstanding
6,326 6,439 6,368 6,703
Dilutive effect of common stock equivalents
47 19 45 22
Diluted weighted average common shares outstanding
6,373 6,458 6,413 6,725

Basic earnings per share
$ 0.54 $ 0.54 $ 1.15 $ 1.55
Diluted earnings per share
$ 0.54 $ 0.53 $ 1.14 $ 1.54

~~As of~~ ~~September 30, 2017 and September 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.~~

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2020		2019		2020		2019
	(in thousands, except per share data)

Net income	$	6,000	$	4,581	$	3,874	$	21,536

Basic weighted average common shares outstanding		5,763		5,756		5,758		5,859
Dilutive effect of common stock equivalents		5		43		17		48
Diluted weighted average common shares outstanding		5,768		5,799		5,775		5,907

Basic earnings per share	$	1.04	$	0.80	$	0.67	$	3.68
Diluted earnings per share	$	1.04	$	0.79	$	0.67	$	3.65

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NOTE I: INCOME TAXES

The Company and its subsidiaries are subject to U.S. and Canadian federal income tax laws as well as the income tax laws of multiple state jurisdictions. The major tax jurisdictions in which the Company operates generally provide for a deficiency assessment statute of limitation period of three years, and as a result, the Company’s tax years ~~2013~~2016 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,~~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 September 30, ~~2017,~~ 2020, management determined that the future reversals of existing taxable temporary differences and available tax strategies would generate sufficient future taxable income to realize its tax assets and therefore a valuation allowance was not necessary.

TheThe Company recognizes a tax benefit from an uncertain tax position only if it is more likely than not that the position will be sustained on examination by taxing authorities, based on the technical merits of the position. As of September 30, ~~2017,~~ 2020, an adjustment to the Company’s condensed consolidated financial statements for uncertain tax positions has not been required as management believes that the Company’s tax positions taken in income tax returns filed or to be filed are supported by clear and unambiguous income tax laws. The Company recognizes interest and penalties related to uncertain income tax positions, if any, in income tax expense. During the nine months ended September 30, ~~2017~~ 2020 and ~~2016,~~2019, the Company has not recognized or accrued any interest or penalties related to uncertain income tax positions.

The ~~Company~~’sCompany’s effective income tax rates were ~~38.6%~~18.33% and ~~38.4%~~22.9% for the ~~three~~nine months ended September 30, ~~2017~~ 2020 and ~~2016, respectively, and 38.7% and 38.1% for the nine months ended September 30, 2017 and 2016~~2019, respectively. Our effective tax rate for the ~~three and~~ nine months ended September 30, ~~2017 differ~~2020 differs from amounts computed by applying the United States federal statutory rates to pre-tax income primarily due to ~~the impact of~~ state income ~~taxes.~~taxes and the tax benefits related to stock compensation.

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NOTE J:J: FAIR VALUE OF FINANCIAL INSTRUMENTS

The ~~Company~~’sCompany’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 September 30, ~~2017,~~ 2020, the following items are measured at fair value on a recurring basis:

Total

Level 1

Level 2

Level 3

(in thousands)

Marketable equity securities
$ 24,994 $ 24,994 - -

	Total		Level 1		Level 2		Level 3
	(in thousands)

Marketable equity securities	$	25,157	$	25,157		0		0

The ~~Company~~’sCompany’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.

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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~~’sCompany’s current incremental borrowing rates for similar types of borrowing arrangements. The carrying value and estimated fair value of this other long-term debt at September 30, ~~2017~~ 2020 was as follows:

Carrying
Value

Estimated
Fair Value

(in thousands)

Long-term debt
$ 147,376 $ 146,414

	Carrying Value		Estimated Fair Value
	(in thousands)

Long-term debt	$	247,401	$	248,711

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

NOTE K: NOTES PAYABLE

During the firstnine months of ~~2017,~~2020, the Company’s subsidiaries entered into installment obligations totaling approximately ~~$17.6~~$43.9 million for the purpose of purchasing revenue ~~equipment.~~equipment and $17.6 million for the purchase of a terminal. These obligations are payable in monthly ~~installments.~~installments and are recorded in long term debt and current maturities on the condensed consolidated balance sheets. The terms of these obligations vary from 36 months for trucks, to 84 months for trailers, and to 10 years for the terminal.

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NOTE L: OLITIGATIONFF-B~~ALANCE~~ S~~HEET~~ A~~RRANGEME~~NTS

~~As of~~ September 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.

R~~ent expense related to revenue equipment under these leases was as follows:~~

Three Months Ended

Nine Months Ended

September 30,

September 30,

2017

2016

2017

2016

(in thousands)

Rent expense related to revenue equipment
$ 1,502 $ 2,332 $ 4,960 $ 7,401

~~Leases for revenue equipment under non-cancellable operating leases expire at various dates through~~ ~~2017 and 2018. Future minimum lease payments related to non-cancellable leases for revenue equipment at September 30, 2017 are:~~

(in thousands)

2017
$ 316
2018
177
Total future minimum lease payments
$ 493

~~NOTE M: LITIGATION~~

~~Other than the lawsuit discussed below, the~~The Company is not currently 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~~were a defendant in a ~~collective-action~~collective- and class-action lawsuit which was ~~re-filed~~filed on December 9, 2016, in the United States District Court for the Western District of Arkansas. The plaintiffs, who ~~are~~included current and former employee drivers who worked for the Company during the period of December 6,9, 2013, through ~~the date of the filing, allege~~December 31, 2019, alleged violations under the Fair Labor Standards Act and the Arkansas Minimum Wage ~~Law. The plaintiffs, through their attorneys, have filed causes of action alleging “Failure~~Law including “failure to pay minimum wage during orientation, failure to pay minimum wage to team drivers after initial orientation, failure to pay minimum wage to solo-drivers after initial orientation, failure to pay for compensable travel time, Comdata card fees, unlawful deductions, and breach of contract.” The plaintiffs ~~are~~were 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,~~ During July 2020, the ~~possible loss or range~~United States District Court for the Western District of ~~loss, if any, that may arise from this lawsuit.~~ Arkansas granted final approval of a $16.5 million settlement reached with the plaintiffs and the settlement payment was disbursed by the Company during August 2020. Management has determined that ~~any losses~~the loss under this claim will not be covered by existing insurance policies.

~~NOTE~~ N~~: SUBSEQUENT EVENTS~~

In ~~October 2017, our Board~~On March 31, 2020, the United States District Court for the Western District of ~~Directors authorized~~Arkansas dismissed 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~~collective- and ~~legal requirements,~~class-action lawsuit filed against the Company ~~could repurchase up~~on May 29, 2019 by plaintiffs who were independent contractors alleging violations under the Fair Labor Standards Act and the Arkansas Minimum Wage Law. The plaintiffs, through their attorneys, alleged “misclassification as independent contractors, payment on the basis of miles without regard to ~~an additional 2%~~the number of ~~its outstanding shares which totals 126,060 shares.~~hours worked, improper deductions, and failure to pay minimum wage.” The ~~2017 tender offer commenced on October 10, 2017~~dismissal of this lawsuit resulted when the Company and ~~expires on November 7, 2017, unless~~plaintiffs reached a settlement agreement and the ~~offer is extended. Through this tender offer,~~Company paid approximately $421,000, plus legal fees. Legal reserve accruals in excess of the amount outlined in the settlement agreement were reversed during the firstnine months of 2020, resulting in a reduction in accrued expenses and other liabilities in the Company’s ~~shareholders have~~condensed consolidated balance sheets.

The Company’s participation in the ~~opportunity to tender some~~settlements of the above matters does not constitute an admission by the Company of any fault or ~~all of their shares at a price within~~liability, and the ~~range of $27.00 to $30.00 per share.~~Company does not admit any fault or liability.

NOTE M: LEASES

Adoption of ASU 2016-02

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

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

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

The Company leases trucks to owner-operators under our lease-to-own program. We also lease dock space to a related party at our Laredo, Texas terminal. We have reviewed these operating leases and determined that the adoption of ASU 2016-02 did not require a change to our financial statements, as our method of accounting for related assets and lease revenue is consistent with the provisions of the new standard.

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

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Right-of-Use Leases

Following the Company’s adoption of ASU 2016-02 and related amendments on January 1, 2019, the Company entered into operating leases which include initial terms ranging from three to five years and which do not include an option for early cancellation. In accordance with the provisions of ASC Topic 842, these leases resulted in the recognition of right-of-use assets and corresponding operating lease liabilities, respectively, valued at $1.7 million as of September 30, 2020. These assets and liabilities are recognized based on the present value of future minimum lease payments over the lease term at commencement date, using the Company’s incremental borrowing rate as of the respective dates of lease inception, as the rate implicit in each lease is not readily determinable. The right-of-use assets are recorded in other assets, and the lease liability is recorded in accrued expenses and other liabilities and in other long-term liabilities on our condensed consolidated balance sheet. Lease expense is recorded on a straight-line basis over the lease term and is recorded in rent and purchased transportation in our condensed consolidated statements of operations. While these lease agreements may contain provisions to extend after the initial term for an additional five years, the Company is not reasonably certain these extension options will be exercised. Therefore, potential lease payments that might occur under this extension period are not included in amounts recorded in our condensed consolidated balance sheets as of September 30, 2020.

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

Maturity of Lease Liabilities	(In thousands)
2020 (remaining)	$	155
2021		627
2022		544
2023		340
2024		114
Total undiscounted operating lease payments	$	1,780
Less: Imputed interest		(93	)
Present value of operating lease liabilities	$	1,687

Balance Sheet Classification
Right-of-use assets (recorded in other non-current assets)	$	1,687

Current lease liabilities (recorded in other current liabilities)	$	624
Long-term lease liabilities (recorded in other long-term liabilities)		1,063
Total operating lease liabilities	$	1,687

Other Information
Weighted-average remaining lease term for operating leases (years)		3.04
Weighted-average discount rate for operating leases		3.60	%

Cash Flows

No new right-of-use assets were recognized as a non-cash asset addition that resulted from new operating lease liabilities during the three months ended September 30, 2020. Cash paid for amounts included in the present value of operating lease liabilities was $0.1 million during the three months ended September 30, 2020 and is included in operating cash flows. Cash paid for amounts included in the present value of operating lease liabilities was $0.4 million during the nine months ended September 30, 2020 and is included in operating cash flows.

Operating Lease Costs

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2020		2019		2020		2019
	(in thousands)

Long-term	$	140	$	67	$	412	$	106
Short-term		527		563		1,671		1,649
Total	$	667	$	630	$	2,083	$	1,755

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Lessor Disclosures under ASC Topic 842

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

As of September 30,2020, the gross carrying value of trucks underlying these leases was $53.4 million and accumulated depreciation was $24.6 million. Depreciation is calculated on a straight-line basis over the estimated useful life of the equipment, down to an estimated salvage value. In most cases, the Company has agreements in place with certain manufacturers whereby salvage values are guaranteed by the manufacturer. In other cases, where salvage values are not guaranteed, estimates of salvage value are based on the expected market values of equipment at the time of disposal. During the quarter ended September 30, 2020, the Company incurred $1.4 million of depreciation expense for these assets. During the nine months ended September 30, 2020, the Company incurred $4.9 million of depreciation expense for these assets.

The Company leases dock space to a related party at our Laredo, Texas terminal and warehouse and office space to an unrelated lessee at a second Laredo, Texas terminal. The dock space and the warehouse and office space leased are depreciated in conjunction with the structures and improvements for the entire Laredo terminals on a straight-line basis over the estimated useful life of the assets. Lease income is recorded as a component of non-operating income in our condensed consolidated statements of operations. As of September 30, 2020, the gross carrying value of the buildings underlying these leases was $13.7 million and accumulated depreciation was $1.2 million. During the quarter ended September 30, 2020, the Company incurred $0.1 million of depreciation expense for the portions of these buildings that are subject to lease. During the nine months ended September 30, 2020, the Company incurred $0.2 million of depreciation expense for the portions of these buildings that are subject to lease.

Lease Revenue

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

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2020		2019		2020		2019
	(in thousands)

Leased truck revenue (recorded in revenue, before fuel surcharge)	$	1,322	$	2,244	$	5,302	$	7,024
Leased building space revenue (recorded in non-operating income)		169		39		404		116
Total lease revenue	$	1,491	$	2,283	$	5,706	$	7,140

Lease Receivables

Future minimum operating lease payments receivable at September 30, 2020:

	(in thousands)

2020 (remaining)	$	1,525
2021		5,019
2022		3,912
2023		2,735
2024		1,030
Thereafter		1
Total future minimum lease payments receivable	$	14,222

NOTE N: EFFECT OF COVID-19 PANDEMIC

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

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NOTE O: NONCASH INVESTING AND FINANCING ACTIVITIES

The Company financed approximately $43.9 million in equipment purchases during the firstnine months of 2020 utilizing noncash financing.

Item 2. Management’s Discussion and Analysis of ~~FinancialCondition~~FinancialCondition and Results of ~~Operations~~.Operations.

FORWARD-LOOKING INFORMATION

Certain information included in this Quarterly Report on Form 10-Q constitutes “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements may relate to expected future financial and operating results, prospects, plans or events, and are thus prospective. Such forward-looking statements are subject to risks, uncertainties and other factors which could cause actual results to differ materially from future results expressed or implied by such forward-looking statements. Potential risks and uncertainties include, but are not limited to, ongoing and potential future economic, business and operational disruptions and uncertainties due to the COVID-19 pandemic or other public health crises; excess capacity in the trucking industry; surplus inventories; recessionary economic cycles and downturns in ~~customers~~’customers' business cycles; increases or rapid fluctuations in fuel prices, interest rates, fuel taxes, tolls, and license and registration fees; the resale value of the ~~Company’s~~Company's used equipment and the price of new equipment; increases in compensation for and difficulty in attracting and retaining qualified drivers and owner-operators; increases in insurance premiums and deductible amounts relating to accident, cargo, workers' compensation, health, and other claims; unanticipated increases in the number or amount of claims for which the Company is self-insured; inability of the Company to continue to secure acceptable financing arrangements; seasonal factors such as harsh weather conditions that increase operating costs; competition from trucking, rail, and intermodal competitors including reductions in rates resulting from competitive bidding; the ability to identify acceptable acquisition candidates, consummate acquisitions, and integrate acquired operations; our ability to develop and implement suitable information technology systems and prevent failures in or breaches of such systems; the impact of pending or future litigation; general risks associated with doing business in Mexico, including, without limitation, exchange rate fluctuations, inflation, import duties, tariffs, quotas, political and economic instability and terrorism; the potential impact of new laws, regulations or policy, including, without limitation, tariffs, import/export, trade and immigration regulations or policies; a significant reduction in or termination of the Company's trucking service by a key customer; and other factors, including risk factors, included from time to time in filings made by the Company with the Securities and Exchange ~~Commission (“SEC”).~~Commission. The Company undertakes no obligation to publicly update or ~~clarify~~revise forward-looking statements, whether as a result of new information, future events or otherwise. In light of these risks and uncertainties, the forward-looking events and circumstances discussed above and in company filings might not transpire.

CRITICAL ACCOUNTING POLICIES

There have been no material changes to our critical accounting policies and estimates from the information provided in Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, included in our Form 10-K for the fiscal year ended December 31, ~~2016.~~2019.

BUSINESS OVERVIEW

The ~~Company~~’sCompany’s administrative headquarters are in Tontitown, Arkansas. From this location we manage operations conducted through wholly-owned subsidiaries based in various locations around the United States and in Mexico and Canada. The operations of these subsidiaries can generally be classified into either truckload services or brokerage and logistics services. This designation is based primarily on the ownership of the asset that performed the freight transportation service. Truckload services ~~include those transportation services in which we~~are performed by Company divisions that generally utilize ~~company owned~~Company-owned trucks, long-term contractors, or ~~owner-operator owned trucks. Brokerage~~single-trip contractors to transport loads of freight for customers, while brokerage and logistics services ~~consist~~coordinate or facilitate the transport of ~~services such as transportation scheduling, routing, mode selection, transloading and other value added services related to the transportation~~loads of freight ~~which may or may not~~for customers and generally involve the ~~usage~~utilization of ~~company owned or owner-operator owned equipment.~~single-trip contractors. Both our truckload operations and our ~~brokerage/~~brokerage and logistics operations have similar economic characteristics and are impacted by virtually the same economic factors as discussed elsewhere in this report. ~~All of the Company’s operations are in the motor carrier segment.~~

For both operations, substantially all of our revenue is generated by transporting freight for customers and is predominantly affected by the rates per mile received from our customers, equipment utilization, and our percentage of non-compensated miles. These aspects of our business are carefully managed, and efforts are continuously underway to achieve favorable results. Truckload services revenues, excluding fuel surcharges, represented ~~85.3%~~75.5% and ~~88.9%~~83.9% of total revenues, excluding fuel surcharges, for the three months ended September 30, ~~2017~~2020 and ~~2016,~~2019, respectively. Truckload services revenues, excluding fuel surcharges, represented ~~87.2%~~79.4% and ~~88.1%~~82.7% of total revenues, excluding fuel surcharges, for the nine months ended September 30, ~~2017~~2020 and ~~2016,~~2019, respectively. The remaining revenues, excluding fuel surcharges, were generated from brokerage and logistics services.

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

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In discussing our results of operations,, we use revenue, before fuel surcharge (and fuel expense, net of fuel surcharge), because management believes that eliminating the impact of this sometimes volatile source of revenue allows a more consistent basis for comparing our results of operations from period to period. During the three months ended September 30, ~~2017~~2020 and ~~2016,~~2019, approximately ~~$15.4~~$12.1 million and ~~$13.5~~$18.8 million, respectively, of the Company’s total revenue was generated from fuel surcharges. During the nine months ended September 30, ~~2017~~2020 and ~~2016,~~2019, approximately ~~$46.8~~$36.6 million and ~~$36.0~~$57.8 million, respectively, of the Company’s total revenue was generated from fuel surcharges. We may also discuss certain changes in our expenses as a percentage of revenue, before fuel surcharge, rather than absolute dollar changes. We do this because we believe the variable cost nature of certain expenses makes a comparison of changes in expenses as a percentage of revenue more meaningful than absolute dollar changes.

~~Table~~

IMPACT OF COVID-19

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

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

During the nine months ended September 30, 2020, the Company has experienced the effects of weakening economic conditions, most notably the late March COVID-19 related shutdown of automotive customers, representing approximately 45% of the Company’s revenue. While we vigorously sought to replace lost automotive revenue with freight from other customers, competition for freight increased as industry capacity collectively focused on freight that was considered essential. Our automotive customers resumed operations during the second quarter; however, the extent to which production will return to pre-pandemic levels remains uncertain. Any additional delays or interruptions in automotive production and other consumer activity affecting our customers, as well as any future wave of the virus or other similar outbreaks could further adversely affect our business. The ultimate magnitude of COVID-19, including the extent of its impact on the Company’s financial and operating results, will be determined by the length of time the pandemic continues, its continued severity, government regulations imposed in response to the pandemic, and its general effect on the economy and transportation demand.

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

RESULTS OF OPERATIONS – TRUCKLOAD SERVICES

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

													Three Months Ended						Nine Months Ended
	Three Months Ended						Nine Months Ended						September 30,						September 30,
	September 30,						September 30,						2020			2019			2020			2019
	2017			2016			2017			2016			(percentages)
	(percentages)
Operating revenues, before fuel surcharge		100.0			100.0			100.0			100.0			100.0			100.0			100.0			100.0

Operating expenses:
Salaries, wages and benefits		30.1			32.4			30.3			32.2			35.4			34.5			35.9			33.2
Operating supplies and expenses		5.1			9.0			5.1			10.0			10.5			7.1			10.7			5.6
Rent and purchased transportation		39.8			35.3			40.3			34.1			21.3			27.3			24.1			28.8
Depreciation		12.7			11.9			12.8			11.4			16.1			15.2			17.1			14.8
Insurance and claims		5.3			4.2			5.5			4.8			3.8			4.0			2.3			4.3
Other		2.8			2.2			2.6			2.3			2.8			3.8			3.9			3.4
Loss (gain) on sale or disposal of property		0.2			(1.1	)		0.1			(1.6	)
(Gain) loss on sale or disposal of property														(0.2	)		0.7			0.0			0.1
Total operating expenses		96.0			93.9			96.7			93.2			89.7			92.6			94.0			90.2
Operating income		4.0			6.1			3.3			6.8			10.3			7.4			6.0			9.8
Non-operating income		3.2			1.3			2.1			0.5
Non-operating (expense) income														(0.1	)		0.5			(2.2	)		1.2
Interest expense		(1.1	)		(1.0	)		(1.1	)		(1.0	)		(2.3	)		(2.2	)		(2.4	)		(2.0	)
Income before income taxes		6.1			6.4			4.3			6.3			7.9			5.7			1.4			9.0

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THREE MONTHS ENDED SEPTEMBER 30, ~~201~~20720 VS. THREE MONTHS ENDED SEPTEMBER ~~30, 2016~~30, 2019

During the third quarter of ~~2017,~~2020, truckload services revenue, before fuel surcharges, decreased ~~6.5%~~10.3% to ~~$79.7~~$82.9 million as compared to ~~$85.3~~$92.4 million during the third quarter of ~~2016.~~2019. The decrease in revenue was primarily the ~~net~~ result of approximately 10% fewer trucks operating within our fleet, primarily due to a ~~1% increase~~reduction in our ~~rate per total mile combined with an 8% decrease in~~independent contractor fleet, and of less favorable market conditions caused by the ~~number~~impact of ~~miles traveled from 60.8 million miles during~~ the third quarter of 2016 to 56.4 million during the third quarter of 2017. The decrease in miles resulted from decreases in the number of trucks operated, equipment utilization and work days. The average number of trucks operating in the fleet decreased from 1,882 trucks during the third quarter of 2016 to 1,808 trucks during the third quarter of 2017, while the average miles traveled per truck each workday decreased from 505 miles during the third quarter of 2016 to 495 miles during the third quarter of 2017. The decreases in truck count and average daily utilization resulted in a 3.5 million decrease in the total number of miles traveled during the third quarter of 2017 compared to the third quarter of 2016. One less revenue day in the third quarter of 2017 compared to the third quarter of 2016 accounted for an approximate 0.9 million reduction in miles.pandemic on general economic activity.

Salaries, wages and benefits ~~decreased~~increased from ~~32.4%~~ 34.5% of revenues, before fuel surcharges, in the third quarter of ~~2016~~2019 to ~~30.1%~~35.4% of revenues, before fuel surcharges, during the third quarter of ~~2017. The decrease relates~~2020. This percentage-based increase is primarily toa result of the interaction of expenses with fixed-cost characteristics, such as general and administrative wages, maintenance wages, and operations wages with a decrease in ~~company driver~~revenues for the periods compared. On a dollar basis, salaries, wages ~~paid~~and benefits decreased from $31.9 million during the third quarter 2019 to $29.3 million during the third quarter of 2017 as compared to company driver wages paid during the third quarter of 2016. Our driver pool consists of both company drivers and third-party owner operator drivers. Company drivers are employees of the Company and perform services in company-owned equipment while owner-operator drivers provide services, under contract, using their own equipment. While each group is generally compensated on a per-mile basis, owner-operator payments are classified in the Company’s financial statements under Rent and purchased transportation. The decrease in Salaries, wages and benefits primarily resulted from a decrease in the proportion of total miles driven by company drivers during the third quarter of 2017 in comparison to the proportion of total miles driven by company drivers during the third quarter of 2016. This proportional decrease was the result of an increase in the average number of owner-operators under contract from 567 during the third quarter of 2016 to 648 during the third quarter of 2017. Also contributing to the decrease was a decrease in group health insurance claims expensed under the Company’s self-insured health plan during the third quarter of 2017 as compared to the third quarter of 2016.2020.

Operating supplies and expenses ~~decreased~~increased from 9.0%7.1% of revenues, before fuel surcharges, during the third quarter of ~~2016~~2019 to ~~5.1%~~10.5% of revenues, before fuel surcharges, during the third quarter of ~~2017.~~2020. The ~~decrease~~increase relates primarily to ~~a decrease~~an increase in the average surcharge-adjusted fuel price paid per gallon of diesel ~~fuel. The average surcharge-adjusted~~ fuel, ~~price paid per gallon of diesel fuel decreased as~~which was a result of ~~increased~~decreased fuel surcharge collections from ~~customers and to an increase in the number of owner-operators in our fleet from 567 during the third quarter of 2016 to 648 during the third quarter of 2017.~~customers. Fuel surcharge collections can fluctuate significantly from period to period as they are generally based on changes in fuel prices from period to period so that, during periods of rising fuel prices, fuel surcharge collections increase, while fuel surcharge collections decrease during periods of falling fuel prices. ~~Fuel~~Also contributing to the increase was an increase in the proportion of total miles driven by company drivers during the third quarter of 2020 compared to the third quarter 2019. This increase in miles driven by company drivers has the effect of increasing our net operating supplies and expenses while decreasing the rent and purchased transportation category, as fuel surcharge revenue generated from transportation services performed by owner-operators is reflected as a reduction in net operating supplies and expenses, while fuel surcharges paid to owner-operators for their services is reported along with their base rate of pay in the ~~Rent~~rent and purchased transportation category. These categorizations have the effect of reducing our net operating supplies and expenses while increasing the Rent and purchased transportation category, as discussed below. Also contributing to the decrease was a decrease in amounts paid for driver recruiting and driver training schools during the third quarter of 2017 as compared to amounts paid during third quarter of 2016.

~~Table of Contents~~

Rent and purchased transportation ~~increased~~decreased from ~~35.3%~~27.3% of revenues, before fuel surcharges, during the third quarter of ~~2016~~2019 to ~~39.8%~~21.3% of revenues, before fuel surcharges, during the third quarter of ~~2017.~~2020. The ~~increase~~decrease was primarily due to ~~an increase~~a decrease in ~~driver lease expense as~~ the ~~average~~ number of ~~owner-operators under contract increased from 567~~loads transported by third-party carriers during the third quarter of ~~2016~~2020 compared to ~~648 during~~ the third quarter of 2017. The increase in costs in this category, as it relates to the increase in owner-operators, is partially offset by a decrease in other cost categories, such as repairs and fuel, which are generally borne by the owner-operator. A decrease in amounts paid for equipment leases offset a portion of the increase from owner operators. This decrease resulted from the scheduled expiration of several leases during the third quarter of 2017. The remaining operating leases expire during the fourth quarter 2017 and the first quarter 2018.2019.

Depreciation increased from ~~11.~~9%15.2% of revenues, before fuel surcharges, during the third quarter of ~~2016~~2019 to ~~12.7%~~16.1% of revenues, before fuel surcharges, during the third quarter of ~~2017. The~~2020. This percentage-based increase ~~relates to~~is primarily a result of the interaction of ~~the fixed-cost characteristic of depreciation expense with~~ a decrease in operating revenues ~~for~~with the ~~periods compared.~~fixed-cost nature of depreciation expense. On a dollar basis, depreciation expense decreased from $14.1 million during the third quarter 2019 to $13.3 million during the third quarter of 2020.

~~Gains~~ Insurance and ~~losses on sale or disposal of property~~claims expense decreased from ~~a net gain of 1.1%~~4.0% of revenues, before fuel surcharges, during the third quarter of ~~2016~~2019 to ~~a net loss of 0.2%~~3.8% of revenues, before fuel surcharges, during the third quarter of ~~2017. The~~2020. This decrease ~~relates~~ primarily ~~to fewer trailers being sold~~resulted from a reduction in auto liability insurance premiums, as the Company became self-insured for certain layers of auto liability claims in excess of $1.0 million commencing September 1, 2019. During the third quarter of 2019, the Company paid for auto liability insurance coverage for claims in excess of $1.0 million through various third-party insurance carriers.

Other expense decreased from 3.8% of revenues, before fuel surcharges, during the third quarter 2019 to 2.8% of ~~2017 as compared to~~revenues, before fuel surcharges, during the third quarter ~~of 2016.~~2020. This decrease is primarily attributable to a decrease in legal fees incurred in our defense against certain litigation described in Note L to our condensed consolidated financial statements.

Non-operating income ~~increased~~/ (expense) decreased from ~~1.3%~~income of 0.5% of revenues, before fuel surcharges, during the third quarter of ~~2016~~2019 to ~~3.2%~~expense of 0.1% of revenues, before fuel surcharges, during the third quarter of ~~2017.~~2020. This ~~increase~~decrease primarily resulted from ~~an increase~~the change in ~~gains on sales~~the market values of our portfolio of marketable equity securities. The Company recorded a $0.5 million decrease in the market values of our marketable equity securities ~~from $1.1 million~~in non-operating income / (expense) during the third quarter of ~~2016~~2020, compared to ~~$2.5~~a $0.1 million increase in the market value of our marketable equity securities during the third quarter of ~~2017.~~2019.

The truckload services division operating ratio, which measures the ratio of operating expenses, net of fuel surcharges, to operating revenues, before fuel surcharges, ~~increased~~improved from ~~93.9%~~92.6% for the third quarter of ~~2016~~2019 to ~~96.0%~~89.7% for the third quarter of ~~2017.~~2020.

NINE MONTHS ENDED SEPTEMBER 30, ~~201~~20720 VS. NINE MONTHS ENDED SEPTEMBER 30, ~~30, 201~~20619

For the nine months ended September 30, ~~2017,~~2020, truckload services revenue, before fuel surcharges, decreased ~~3.9%~~11.3% to ~~$244.3~~$244.2 million as compared to ~~$254.3~~$275.3 million for the nine months ended September 30, ~~2016.~~2019. The decrease in revenue was primarily the result of unfavorable market conditions experienced when more than 50% of the Company’s customers imposed COVID-19 related ~~to a decrease~~shutdowns during the second quarter of 2020. This interruption in our regular sources of freight, particularly in the ~~average rate charged~~automotive sector, forced the Company to ~~customers for~~seek alternative revenue sources, much of which was from the spot market. Also contributing to the decrease was a reduction in our ~~services, to a decrease in the number of trucks operated, and to one less work day in the 2017 period. The average rate charged to customers per total mile~~independent contractor fleet during the first nine months of ~~2017 decreased 2.0%~~2020 as compared to the average rate charged during the first nine months of 2016. The average number of trucks operating in the fleet decreased from 1,897 trucks in the 2016 period to 1,869 trucks in the 2017 period and decreased revenue by approximately $3.7 million during the nine months ended September 30, 2017. The loss of one business day in the first nine months of 2017 compared to the first nine months of ~~2016 resulted in an approximate $1.3 million decrease in revenue.~~2019.

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Salaries, wages and benefits ~~decreased~~increased from ~~32.2%~~33.2% of revenues, before fuel surcharges, in the first nine months of ~~2016~~2019 to ~~30.3%~~35.9% of revenues, before fuel surcharges, during the first nine months of ~~2017.~~2020. The ~~decrease relates~~percentage-based increase is primarily toa result of the interaction of expenses with fixed-cost characteristics, such as general and administrative wages, maintenance wages, and operations wages with a decrease in ~~company driver wages paid during~~revenues for the first nine months of 2017 as compared to company driver wages paid during the first nine months of 2016. Our driver pool consists of both company drivers and third-party owner operator drivers. Company drivers are employees of the Company and perform services in company-owned equipment while owner-operator drivers provide services, under contract, using their own equipment. While each group is generally compensated onperiods compared. On a ~~per-mile~~dollar basis, ~~owner-operator payments are classified in the Company’s financial statements under Rent and purchased transportation. The decrease in Salaries,~~salaries, wages and benefits ~~primarily resulted~~decreased from ~~a decrease in the proportion of total miles driven by company drivers~~$91.4 million during the ~~first~~ nine months ~~of 2017 in comparison~~ended September 30, 2019 to ~~the proportion of total miles driven by company drivers~~$87.7 million during the ~~first~~ nine months of 2016. This proportional decrease was the result of an increase in the average number of owner-operators under contract from 546 during the first nine months of 2016 to 650 during the first nine months of 2017. Also contributing to the decrease was a decrease in group health insurance claims expensed under the Company’s self-insured health plan during the first nine months of 2017 as compared to the first nine months of 2016.ended September 30, 2020.

Operating supplies and expenses ~~decreased~~increased from ~~10.0%~~5.6% of revenues, before fuel surcharges, during the first nine months of ~~2016~~2019 to ~~5.1%~~10.7% of revenues, before fuel surcharges, during the first nine months of ~~2017.~~2020. The ~~decrease~~increase relates primarily to ~~a decrease~~an increase in the average surcharge-adjusted fuel price paid per gallon of diesel ~~fuel. The average surcharge-adjusted~~ fuel, ~~price paid per gallon of diesel fuel decreased as~~which was a result of ~~increased~~decreased fuel surcharge collections from ~~customers and to an increase in the number of owner-operators in our fleet from 546 during the first nine months of 2016 to 650 during the first nine months of 2017.~~customers. Fuel surcharge collections can fluctuate significantly from period to period as they are generally based on changes in fuel prices from period to period so that, during periods of rising fuel prices, fuel surcharge collections increase, while fuel surcharge collections decrease during periods of falling fuel prices. ~~Fuel~~Also contributing to the increase was an increase in the proportion of total miles driven by company drivers during the first nine months of 2020 compared to the first nine months of 2019. This increase in miles driven by company drivers has the effect of increasing our net operating supplies and expenses while decreasing the rent and purchased transportation category, as fuel surcharge revenue generated from transportation services performed by owner-operators is reflected as a reduction in net operating supplies and expenses, while fuel surcharges paid to owner-operators for their services is reported along with their base rate of pay in the ~~Rent~~rent and purchased transportation category. These categorizations have the effect of reducing our net operating supplies and expenses while increasing the Rent and purchased transportation category, as discussed below. Also contributing to the decrease was a decrease in amounts paid for driver recruiting and driver training schools during the first nine months of 2017 as compared to amounts paid during first nine months of 2016.

~~Table of Contents~~

Rent and purchased transportation ~~increased~~decreased from ~~34.1%~~28.8% of revenues, before fuel surcharges, during the first nine months of ~~2016~~2019 to ~~40.3%~~24.1% of revenues, before fuel surcharges, during the first nine months of ~~2017.~~2020. The ~~increase~~decrease was primarily due to ~~an increase~~a decrease in ~~driver lease expense as~~ the ~~average~~ number of ~~owner-operators under contract increased from 546~~loads transported by third-party carriers during the first nine months of ~~2016~~2020 compared to ~~650 during~~ the first nine months of 2017. The increase in costs in this category, as it relates to the increase in owner-operators, is partially offset by a decrease in other cost categories, such as repairs and fuel, which are generally borne by the owner-operator. A decrease in amounts paid for equipment leases offset a portion of the increase from owner operators.2019. This decrease ~~resulted from~~occurred as the ~~scheduled expiration~~average number of ~~several leases during~~company-owned trucks increased for the first nine months ~~of 2017. The remaining operating leases expire during the fourth quarter 2017 and~~2020 compared to the first ~~quarter 2018.~~nine months 2019, providing additional company-owned capacity which diminished the need to utilize as many third-party carriers.

Depreciation increased from ~~11.4%~~ 14.8% of revenues, before fuel surcharges, during the first nine months of ~~2016~~2019 to ~~12.8%~~17.1% of revenues, before fuel surcharges, during the first nine months of ~~2017. The~~2020. This increase ~~relates~~is primarily ~~to a change in~~ the ~~estimated residual values~~result of ~~certain equipment and to~~ an increase in ~~equipment purchase costs. During~~ the ~~third quarter~~average number of ~~2016, the Company reduced the expected residual values of certain groups of~~company-owned trucks ~~due to a prolonged depressed used truck market. The reduction in expected residual values resulted in additional depreciation expense of approximately $2.0 million during~~and trailers within our fleet for the first nine months of ~~2017. The Company’s replacement cycle for trucks is between three and five years and its replacement cycle for trailers is seven years. The cost~~2020 compared to the first nine months of ~~new trucks and trailers has increased significantly over~~2019. Due to the ~~previous three to seven-year replacement cycles. Depreciating higher cost equipment over the same length~~fixed nature of ~~time will result~~depreciation, a decrease in ~~an increase~~operating revenues, before fuel surcharge, without a corresponding proportional decrease in depreciation, increases depreciation expense ~~during the respective period.~~as a percentage of operating revenues.

~~Gains~~Insurance and ~~losses on sale or disposal of property~~claims expense decreased from ~~a net gain of 1.6%~~4.3% of revenues, before fuel surcharges, during the first nine months of ~~2016~~2019 to ~~a net loss of 0.1%~~2.3% of revenues before fuel surcharges, during the first nine months of ~~2017. The~~2020. This decrease ~~relates~~ primarily resulted from a reduction in auto liability insurance premiums, as the Company became self-insured for certain layers of auto liability claims in excess of $1.0 million commencing September 1, 2019. During the first eight months of 2019, the Company paid for auto liability insurance coverage for claims in excess of $1.0 million through various third-party insurance carriers. Also contributing to ~~fewer trailers being sold~~the decrease was the settlement of a lawsuit in the first quarter of 2020 for an amount less than the amount reserved by the Company during the ~~first nine months~~fourth quarter of ~~2017 as compared to the first nine months of 2016.~~2019.

Non-operating income ~~increased~~/ (expense) decreased from ~~0.5%~~income of 1.2% of revenues, before fuel surcharges, during the first nine months of ~~2016~~2019 to ~~2.1%~~expense of 2.2% of revenues, before fuel surcharges, during the first nine months of ~~2017.~~2020. This ~~increase~~decrease primarily resulted from ~~an increase~~the change in ~~gains on sales~~the market values of our portfolio of marketable equity securities. The Company recorded a $7.4 million decrease in the market value of our marketable equity securities ~~from $1.0 million~~in non-operating income / (expense) during the first nine months of ~~2016~~2020, compared to ~~$4.7~~a $2.7 million increase in the market value of our marketable equity securities during the first nine months of ~~2017.~~2019.

The truckload services division operating ratio, which measures the ratio of operating expenses, net of fuel surcharges, to operating revenues, before fuel surcharges, increased from ~~93.2%~~90.2% for the first nine months of ~~2016~~2019 to ~~96.7%~~94.0% for the first nine months of ~~2017.~~2020.

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RESULTS OF OPERATIONS – LOGISTICS AND BROKERAGE SERVICES

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

Three Months Ended

Nine Months Ended

September 30,

September 30,

2017

2016

2017

2016

(percentages)

Operating revenues, before fuel surcharge
100.0 100.0 100.0 100.0

Operating expenses:

Salaries, wages and benefits
4.6 5.0 4.9 4.5
Rent and purchased transportation
90.1 93.4 90.6 92.2
Other
1.1 0.6 1.0 0.6
Total operating expenses
95.8 99.0 96.5 97.3
Operating income
4.2 1.0 3.5 2.7
Non-operating income
1.5 0.7 1.1 0.2
Interest expense
(0.5 ) (0.5 ) (0.6 ) (0.5 )
Income before income taxes
5.2 1.2 4.0 2.4

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2020			2019			2020			2019
	(percentages)

Operating revenues, before fuel surcharge		100.0			100.0			100.0			100.0

Operating expenses:
Salaries, wages and benefits		4.7			5.9			5.3			5.6
Rent and purchased transportation		88.8			88.5			89.0			87.0
Other		0.8			1.6			1.3			1.4
Total operating expenses		94.3			96.0			95.6			94.0
Operating income		5.7			4.0			4.4			6.0
Non-operating income (expense)		(0.1	)		0.3			(1.2	)		0.7
Interest expense		(1.2	)		(1.1	)		(1.3	)		(1.1	)
Income before income taxes		4.4			3.2			1.9			5.6

THREE MONTHS ENDED SEPTEMBER 30, ~~201~~20720 VS. THREE MONTHS ENDED SEPTEMBER ~~30, 2~~~~016~~30, 2019

During the third quarter of ~~2017,~~2020, logistics and brokerage services revenue, before fuel surcharges, increased ~~28.9%~~52.0% to ~~$13.7~~$26.9 million as compared to ~~$10.6~~$17.7 million during the third quarter of ~~2016.~~2019. The increase relates to an increase in ~~our average rates charged~~in the number of loads serviced and to an increase in the average ~~length of haul for brokered loads~~rates charged to customers during the third quarter of ~~2017~~2020 as compared to the third quarter of ~~2016.~~2019.

~~Table of Contents~~

Salaries, wages and benefits decreased from ~~5.0%~~5.9% of revenues, before fuel surcharges, in the third quarter of ~~2016~~2019 to ~~4.6%~~4.7% of revenues, before fuel surcharges, during the third quarter of ~~2017.~~2020. The decrease relates primarily to anthe effect of higher revenues without a corresponding increase in brokerage revenue, partially offset by an increase in the amount paid to employees assigned to the logistics and brokerage division during the third quarter of 2017 as compared to the third quarter of 2016. To a lesser extent, the percentage-based decrease relates to the interaction of expensesthose wages with fixed-cost characteristics, such as general and administrative ~~wages, operations wages, and payroll taxes with an increase in revenues for the periods compared.~~

~~Rents and purchased transportation~~ decreased from 93.4% of revenues, before fuel surcharges, during the third quarter of 2016 to 90.1% of revenues, before fuel surcharges, during the third quarter of 2017. The decrease results from paying third party carriers a smaller percentage of customer revenue.

~~The logistics and brokerage services division operating ratio, which measures the ratio of operating expenses, net of fuel surcharges, to operating revenues, before~~ ~~fuel surcharges, improved from 99.0% for the third quarter of 2016 to 95.8% for the third quarter of 2017.~~

~~NINE~~ ~~MONTHS ENDED~~ ~~SEPTEMBER~~ ~~30, 201~~7 ~~VS.~~ ~~NINE~~ ~~MONTHS ENDED~~ ~~SEPTEMBER~~ ~~30, 201~~6

~~During the first~~ nine months of 2017, logistics and brokerage services revenue, before fuel surcharges, increased 4.7% to $35.8 million as compared to $34.2 million during the first nine months of 2016. The increase relates to an increase in our average rates charged and to an increase in the average length of haul for brokered loads during the first nine months of 2017, as compared to the first nine months of 2016.

~~Salaries, wages and benefits~~ increased from 4.5% of revenues, before fuel surcharges, during the first nine months of 2016 to 4.9% of revenues, before fuel surcharges, during the first nine months of 2017. The increase relates to an increase in the number of employees assigned to the logistics and brokerage division during the first nine months of 2017 as compared to the first nine months of 2016.

~~Rents and purchased transportation~~ decreased from 92.2% of revenues, before fuel surcharges, during the first nine months of 2016 to 90.6% of revenues, before fuel surcharges during the first nine months of 2017. The decrease results from paying third party carriers a smaller percentage of customer revenue.wages.

The logistics and brokerage services division operating ratio, which measures the ratio of operating expenses, net of fuel surcharges, to operating revenues, before fuel surcharges, improved from ~~97.3%~~96.0% for the third quarter of 2019 to 94.3% for the third quarter of 2020.

Non-operating income / (expense) decreased from income of 0.3% of revenues, before fuel surcharges, during the third quarter of 2019 to expense of 0.1% of revenues, before fuel surcharges, during the third quarter of 2020. This increase primarily resulted from the change in the market values of our portfolio of marketable equity securities. The Company recorded a $0.5 million decrease in the market values of our marketable equity securities in non-operating income / (expense) during the third quarter of 2020, compared to a $0.1 million increase in the market value of our marketable equity securities during the third quarter of 2019.

NINE MONTHS ENDED SEPTEMBER 30, 2020 VS. NINE MONTHS ENDED SEPTEMBER 30, 2019

During the first nine months of 2020, logistics and brokerage services revenue, before fuel surcharges, increased 9.9% to $63.2 million as compared to $57.5 million during the first nine months of 2019. The increase relates to an increase in the average rates charged to customers during the first nine months of 2020 as compared to the first nine months of 2019.

Salaries, wages and benefits decreased from 5.6% of revenues, before fuel surcharges, in the first nine months of 2019 to 5.3% of revenues, before fuel surcharges, during the first nine months of 2020. The decrease relates primarily to the effect of higher revenues without a corresponding increase in those wages with fixed-cost characteristics, such as general and administrative wages.

Rents and purchased transportation increased from 87.0% of revenues, before fuel surcharges, during the first nine months of 2019 to 89.0% of revenues, before fuel surcharges, during the first nine months of 2020. The increase resulted from paying third-party carriers a larger percentage of customer revenue.

The logistics and brokerage services division operating ratio, which measures the ratio of operating expenses, net of fuel surcharges, to operating revenues, before fuel surcharges, increased from 94.0% for the first nine months of ~~2016~~2019 to ~~96.5%~~95.6% for the first nine months of ~~2017.~~2020.

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Non-operating income / (expense) decreased from income of 0.7% of revenues, before fuel surcharges, during the first nine months of 2019 to expense of 1.2% of revenues, before fuel surcharges, during the first nine months of 2020. This decrease primarily resulted from the change in the market values of our portfolio of marketable equity securities. The Company recorded a $7.4 million decrease in the market value of our marketable equity securities in non-operating income / (expense) during the first nine months of 2020, compared to a $2.7 million increase in the market value of our marketable equity securities during the first nine months of 2019.

RESULTS OF OPERATIONS – COMBINED SERVICES

~~THREE MONTHS ENDED~~ ~~SEPTEMBER~~ ~~30, 201~~7 ~~VS.~~ THREE MONTHS ENDED SEPTEMBER 30, ~~201~~20620 VS. THREE MONTHS ENDED SEPTMEBER 30, 2019

Net income for all divisions was approximately $~~3.4~~$6.0 million, or ~~3.7%~~5.5% of revenues, before fuel surcharges for the third quarter of ~~2017~~2020 as compared to net income of ~~$3.5~~$4.6 million, or ~~3.6%~~4.2% of revenues, before fuel surcharges for the third quarter of ~~2016.~~2019. The ~~decrease~~increase in net income resulted in diluted earnings per share of ~~$0.54~~$1.04 for the third quarter of ~~2017~~2020 as compared to diluted earnings per share of ~~$0.53~~$0.79 for the third quarter of ~~2016.~~2019.

NINE MONTHS ENDED SEPTEMBER 30, ~~201~~20720 VS. NINE MONTHS ENDED SEPTEMBER 30, ~~30, 201~~20619

Net income for all divisions was approximately $~~7.3~~$3.9 million, or ~~2.6%~~1.3% of revenues, before fuel surcharges for the first nine months of ~~2017~~2020 as compared to net income of ~~$10.4~~$21.5 million, or ~~3.6%~~6.5% of revenues, before fuel surcharges for the first nine months of ~~2016.~~2019. The decrease in net income resulted in a diluted earnings per share of ~~$1.14~~$0.67 for the first nine months of ~~2017~~2020 as compared to diluted earnings per share of ~~$1.54~~$3.65 for the first nine months of ~~2016.~~2019.

LIQUIDITY AND CAPITAL RESOURCES

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

During the first nine months of ~~2017,~~2020, we generated ~~$49.2~~$53.1 million in cash from operating activities. Investing activities used ~~$23.6~~$29.4 million in cash in the first nine months of ~~2017.~~2020. Financing activities used ~~$25.5~~$23.7 million in cash in the first nine months of ~~2017.~~2020.

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Our primary use of funds is for the purchase of revenue equipment. We typically use installment notes, our existing line of credit on an interim basis, proceeds from the sale or trade of equipment, and cash flows from operations to finance capital expenditures and repay ~~long-term~~long-term debt. During the first nine months of ~~2017,~~2020, we utilized cash on hand, installment notes, and our ~~lines~~line of credit to finance purchases of revenue equipment and other assets of approximately ~~$38.6~~$83.7 million.

~~Occasionally, we~~We commonly finance the acquisition of revenue equipment through installment notes with fixed interest rates and terms ranging from 36 to ~~60 months~~.84 months. During the first nine months of ~~2017,~~2020, the Company’s subsidiary, P.A.M. Transport, Inc., entered into installment obligations totaling approximately ~~$17.6~~$61.5 million for the purpose of purchasing revenue ~~equipment.~~equipment and other assets. These obligations are payable in monthly installments.

During the remainder of ~~201~~7,2020, we expect to purchase approximately ~~183~~300 new trucks and ~~443~~500 new trailers while continuing to sell or trade older equipment, which we expect to result in net capital expenditures of approximately ~~$27.9~~$38.0 million. In addition, on October 10, 2017, we commenced a Dutch auction tender offer to repurchase of up to 400,000 shares of our common stock at a price within the range of $27.00 to $30.00 per share. Subject to certain limitations and legal requirements, we could repurchase up to an additional 2% of our outstanding shares, which totals 126,060 shares. The offer will expire on November 7, 2017, unless the offer is extended. Assuming that the maximum of 400,000 shares are tendered in the offer at the maximum purchase price of $30.00 per share, the aggregate purchase price will be approximately $12.0 million. Assuming that an additional amount of shares above the maximum 400,000 shares are tendered in the offer at the maximum purchase price of $30.00 per share and we exercise our right to purchase an additional number of shares up to 2% of our outstanding shares (or approximately 126,060 additional shares), the aggregate purchase price will be approximately $15.8 million.

Management believes we will be able to finance our ~~near term~~near-term needs for working capital over the next twelve months, as well as any planned capital expenditures during such period, with cash balances, cash flows from operations, and borrowings believed to be available from financing sources. We will continue to have significant capital requirements over the long-term, which may require us to incur debt or seek additional equity capital. The availability of additional capital will depend upon prevailing market conditions, the market price of our common stock and several other factors over which we have limited control, as well as our financial condition and results of operations. Nevertheless, based on our recent operating results, current cash position, anticipated future cash flows, and sources of financing that we expect will be available to us, we do not expect that we will experience any significant liquidity constraints in the foreseeable future.

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

During the first nine months of ~~2017,~~2020, we maintained a ~~$40.0 million~~ revolving line of credit. Amounts outstanding under the line ~~of credit~~ bear interest at LIBOR (determined as of the first day of each month) plus ~~1.50% (2.74%~~1.25% (1.41% at September 30, ~~2017)~~2020), are secured by our trade accounts receivable and mature on July 1, ~~2019.~~2022. An “unused fee” of 0.25% is charged if average borrowings are less than $18.0 million. At September 30, ~~2017~~2020 outstanding advances on the line of credit were approximately ~~$1.5~~$11.4 million, including approximately ~~$0.7~~$0.3 million in letters of credit, with availability to borrow ~~$38.5~~$48.6 million.

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During the third quarter of 2020, we borrowed $17.6 million under a ten-year term loan to refinance our purchase during the first quarter of 2020 of a terminal in Laredo, Texas, which was initially financed using funds from our line of credit. The term loan bears interest at a fixed rate of 3.021% and is secured by a mortgage and assignment of rents on the Laredo terminal property.

Trade accounts receivable increased from ~~$56.1~~$61.8 million at December 31, ~~2016~~2019 to ~~$58.6~~$70.0 million at September 30, ~~2017.~~2020. The increase ~~relates to a general~~resulted from an increase in freight revenues, which ~~flows~~flow through ~~the~~ accounts receivable, ~~account, at the end of~~during the third quarter of ~~2017~~2020 as compared to the ~~end of the last~~fourth quarter of ~~2016.~~

~~Other accounts receivable increased from $~~5.0 million at December 31, 2016 to $9.5 million at September 30, 2017 primarily due to the timing of proceeds received from the sale of used equipment. These proceeds are held as restricted cash, and will be used to fund future new equipment purchases.2019.

Prepaid expenses and deposits ~~increased~~decreased from ~~$8.8~~$8.7 million at December 31, ~~2016~~2019 to ~~$9.0~~$7.6 million at September 30, ~~2017.~~2020. The ~~increase~~decrease relates to the ~~annual prepayment of insurance premiums for various policies that renew on September 1~~^st ~~each year. This prepayment will be amortized over the life of the insurance policies, which is generally September 2017 to August 2018. The increase in prepaid expenses was partially offset by the~~normal amortization of items ~~that were~~ prepaid as of December 31, ~~2016.~~2019.

Marketable equity securities decreased from ~~$27.6~~$29.5 million at December 31, ~~2016~~2019 to ~~$25.0~~$25.2 million at September 30, ~~2017.~~2020. The ~~$2.6~~$4.3 million decrease was due to a decrease in the market value of held marketable equity securities of $7.4 million, the purchase of marketable equity securities with a combined purchase cost of approximately $3.9 million and the sale of marketable equity securities with a combined market value of ~~approximately $6.0 million, to the purchase of marketable equity securities with a combined market value of approximately $2.0 million, and to a net increase in market value of approximately $1.4~~$0.8 million during the first nine months of ~~2017.~~2020.

The Company’s purchase during the first quarter of 2020 of a 51.6-acre terminal in Laredo, Texas which includes office, shop, and yard space resulted in an increase of $8.8 million in land and $10.9 million in structures and improvements recorded in our condensed consolidated balance sheet as of September 30, 2020.

Accounts payable increased ~~by approximately $13.6~~from $16.6 million~~. The majority of the Company’s insurance policies renew in September each year and there was approximately $4.1~~ at December 31, 2019 to $42.2 million ~~accrued as of~~at September 30, ~~2017 for premiums related~~2020. This increase was primarily attributable to these renewals. There was an increase of approximately $6.0 million for new equipment invoices as of September 30, 2017 compared to December 31, 2016. Bank overdrafts, or outstanding checks, increased by approximately $2.9 million during the first nine months of 2017, and included approximately $1.7 million of new equipment purchases.extended payment terms with certain suppliers.

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Long-term debt and current maturities of long term-debt are reviewed on an aggregate basis,, as the classification of amounts in each category are typically affected merely by the passage of time. Long-term debt and current maturities of long-term debt, on an aggregate basis, ~~decreased~~increased from ~~$167.2~~$241.8 million at December 31, ~~2016~~2019 to ~~$148.2~~$258.5 million at September 30, ~~2017.~~2020. The ~~decrease~~increase was primarily related to the ~~net effect~~financing of ~~installment~~additional revenue equipment during the first nine months of 2020 and to the financing of the Laredo, Texas terminal purchase which occurred earlier this year. Additional financings were partially offset by note payments made during the first nine months of ~~2017 and additional borrowings received during the first nine months of 2017.~~2020.

~~Treasury stock increased from $122.8 million at December 31, 2016 to $124.8 million at September 30, 2017.~~ ~~The increase relates primarily to the repurchase of 110,316 shares of the Company’s common stock under its stock repurchase program during the first nine months of 2017.~~

NEW ACCOUNTING PRONOUNCEMENTS

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

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

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

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

Equity Price Risk

We hold certain actively traded marketable equity securities,, which subjects the Company to fluctuations in the fair market value of its investment portfolio based on the current market price of such securities. The recorded value of marketable equity securities decreased to ~~$25.0~~$25.2 million at September 30, ~~2017~~2020 from ~~$27.6~~$29.5 million at December 31, ~~2016.~~2019. A 10% decrease in the market price of our marketable equity securities would cause a corresponding 10% decrease in the carrying amounts of these securities, or approximately $2.5 million. For additional information with respect to the marketable equity securities, see Note CD to our condensed consolidated financial statements.

Interest Rate Risk

Our line of credit bears interest at a floating rate equal to LIBOR plus a fixed percentage. Accordingly, changes in LIBOR, which are affected by changes in interest rates, will affect the interest rate on, and therefore our costs under, the line of credit. Assuming ~~$1.0~~$12.5 million of variable rate debt was outstanding under our line of credit for a full fiscal year, a hypothetical 100 basis point increase in LIBOR ~~for a one year period~~ would result in approximately ~~$10,000~~$125,000 of additional interest expense.

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Commodity Price Risk

Prices and availability of all petroleum products are subject to political, economic,, and market factors that are generally outside of our control. Accordingly, the price and availability of diesel fuel, as well as other petroleum products, can be unpredictable. Because our operations are dependent upon diesel fuel, significant increases in diesel fuel costs could materially and adversely affect our results of operations and financial condition. Based upon our ~~2016~~2019 fuel consumption, a 10% increase in the average annual price per gallon of diesel fuel would increase our annual fuel expenses by ~~$3.9~~$5.1 million.

Foreign Currency Exchange Rate Risk

We are exposed to foreign currency exchange rate risk related to the activities of our branch office located in Mexico. Currently, we do not hedge our exchange rate exposure through any currency forward contracts, currency options, or currency swaps as all of our revenues, and substantially all of our expenses and capital expenditures, are transacted in U.S. dollars. However, certain operating expenditures and capital purchases related to our Mexico branch office are incurred in or exposed to fluctuations in the exchange rate between the U.S. dollar and the Mexican peso. Based on ~~2016~~2019 expenditures denominated in pesos, a 10% increase in the exchange rate would increase our annual operating expenses by ~~$52,000.~~$860,000.

Item 4. Controls and Procedures.

Evaluation of disclosure controls and procedures. Our management, with the participation of our chief executive officer and chief financial officer, evaluated the effectiveness of our disclosure controls and procedures pursuant to Rule 13a-15 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply its judgment in evaluating the benefits of possible controls and procedures relative to their costs.

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Based on ~~management~~’smanagement’s evaluation, our chief executive officer and chief financial officer concluded that, as of September 30, ~~2017,~~2020, our disclosure controls and procedures are designed at a reasonable assurance level and are effective to provide reasonable assurance that information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms, and that such information is accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate, to allow timely decisions regarding required disclosure.

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

There were no changes in our internal control over financial reporting that occurred during the quarter ended September 30, ~~2017~~2020 that have materially affected, or are reasonably likely to materially affect, the ~~Company's~~Company’s internal control over financial reporting.

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PART II.II. OTHER INFORMATION

Item 1. Legal Proceedings.

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

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

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

Item 2. 1A. Risk Factors.

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

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

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

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

The ~~Company~~’sCompany’s stock repurchase program has been extended and expanded several times, most recently in April 2017, when the Board of Directors reauthorized 500,000 shares of common stock for repurchase under the initial September 2011 authorization. Since the reauthorization, the Company has repurchased ~~110,316~~320,759 shares of its common stock under this repurchase program.

The following table summarizes the ~~Company~~’sCompany’s common stock repurchases during the third quarter of ~~2017 made pursuant to the stock repurchase program.~~2020. No shares were purchased during the quarter other than through this program, and all purchases were made by or on behalf of the Company and not by any “affiliated ~~purchaser”.~~purchaser.”

Issuer Purchases of Equity Securities
Period	Total number of shares purchased		Average price paid per share		Total number of shares purchased as part of publicly announced plans or programs		Maximum number of shares that may yet be purchased under the plans or programs (1)		Total number of shares purchased		Average price paid per share		Total number of shares purchased as part of publicly announced plans or programs		Maximum number of shares that may yet be purchased under the plans or programs ⁽¹⁾
July 1-31, 2017		6,154	$	17.81		6,154		424,074
August 1-31, 2017		19,430		17.39		19,430		404,644
September 1-30, 2017		14,960		21.33		14,960		389,684
July 1-31, 2020										--		--		--		219,821
August 1-31, 2020										23,266	$	35.70		23,266		196,555
September 1-30, 2020										17,314		36.97		17,314		179,241
Total		40,544	$	18.91		40,544				40,580	$	36.24		40,580

(1)

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

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

Exhibit Number		~~Exhibit Description~~

~~3.1~~	~~Amended and Restated Certificate of Incorporation of the Registrant (incorporated by reference to Exhibit 3.1 of the Company's Form 10-Q filed on May 15, 2002.)~~
~~3.2~~	~~Amended and Restated By-Laws of the Registrant (incorporated by reference to Exhibit 3.2 of the Company's Form 8-K filed on December 11, 2007.)~~
~~4.1~~	Amended and Restated Loan Agreement, dated March 28, 2016, by and among P.A.M. Transport, Inc., First Tennessee Bank National Association and the Company (incorporated by reference to Exhibit 4.1 of the Company~~’s Form 8-K filed on April 1, 2016.)~~
~~4.2~~	Fourth Amended and Restated Consolidated Revolving Credit Note, dated March 28, 2016, by P.A.M. Transport, Inc. in favor of First Tennessee Bank National Association (incorporated by reference to Exhibit 4.2 of the Company~~’s Form 8-K filed on April 1, 2016.)~~
~~4.3~~	Amended and Restated Security Agreement, dated March 28, 2016, by and between P.A.M. Transport, Inc. and First Tennessee Bank National Association (incorporated by reference to Exhibit 4.3 of the Company~~’s Form 8-K filed on April 1, 2016.)~~
~~4.4~~	~~Fourth Amended and Restated Guaranty Agreement of the Company, dated March 28, 2016, in favor of First Tennessee Bank National Association (incorporated by reference to Exhibit 4.4 of the Company’s Form 8-K filed on April 1, 2016.)~~
~~31.1~~	~~Rule 13a-14(a) Certification of Principal Executive Officer~~
~~31.2~~	~~Rule 13a-14(a) Certification of Principal Financial Officer~~
~~32.1~~	~~Certification Pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002~~
~~101.INS~~	~~XBRL Instance Document~~
~~101.SCH~~	~~XBRL Taxonomy Extension Schema Document~~
~~101.CAL~~	~~XBRL Taxonomy Extension Calculation Linkbase Document~~
~~101.DEF~~	~~XBRL Taxonomy Extension Definition Linkbase Document~~
~~101.LAB~~	~~XBRL Taxonomy Extension Labels Linkbase Document~~
~~101.PRE~~	~~XBRL Taxonomy Extension Presentation Linkbase Document~~

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~~SIGNATURES~~

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

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


~~Dated: November~~ ~~1, 2017~~	~~By: /s/ Daniel H. Cushman~~
	~~Daniel H. Cushman~~
	~~President and Chief Executive Officer~~
	~~(principal executive officer)~~

~~Dated:~~ ~~November 1, 2017~~	~~By: /s/ Allen W. West~~
	~~Allen W. West~~
	~~Vice President-Finance, Chief Financial~~
	~~Officer, Secretary and Treasurer~~
	~~(principal accounting and financial officer)~~

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

~~Index to Exhibits to Form 10-Q~~

~~Exhibit~~ ~~Number~~		Exhibit Description

3.1		Amended and Restated Certificate of Incorporation of the Registrant (incorporated by reference to Exhibit 3.1 of the Company's Form 10-Q filed on May 15, ~~2002.)~~2002)
3.2		Certificate of Amendment of Amended and Restated Certificate of Incorporation of the Registrant, filed with the Secretary of State of the State of Delaware on April 30, 2020 (incorporated by reference to Exhibit 3.1 of the Company’s Form 8-K filed on May 1, 2020)
3.3		Amended and Restated By-Laws of the Registrant (incorporated by reference to Exhibit 3.2 of the Company's Form 8-K filed on December 11, ~~2007.)~~2007)
~~4.1~~3.4		First Amendment to the Amended and Restated By-Laws of the Registrant (incorporated by reference to Exhibit 3.2 of the Company’s Form 8-K filed on January 7, 2020)
3.5		Second Amendment to the Amended and Restated By-Laws of the Registrant (incorporated by reference to Exhibit 3.3 of the Company’s Form 8-K filed on August 5, 2020)
10.1		Employment Agreement between the Registrant and Joseph A. Vitiritto, dated August 4, 2020 (incorporated by reference to Exhibit 10.1 of the Company’s Form 8-K filed on August 5, 2020)
10.2		Second Amended and Restated Loan Agreement, dated ~~March 28, 2016,~~August 12, 2020, by and among P.A.M. Transport, Inc., First ~~Tennessee~~Horizon Bank ~~National Association and the Company (incorporated by reference to Exhibit 4.1 of the Company’s Form 8-K filed on April 1, 2016.)~~
~~4.2~~		~~Fourth Amended and Restated Consolidated Revolving Credit Note, dated March 28, 2016, by P.A.M. Transport, Inc. in favor of~~(formerly First Tennessee Bank National ~~Association (incorporated by reference to Exhibit 4.2 of~~Association) and the Company~~’s Form 8-K filed on April 1, 2016.)~~
~~4.3~~		Amended and Restated Security Agreement, dated March 28, 2016, by and between P.A.M. Transport, Inc. and First Tennessee Bank National Association (incorporated by reference to Exhibit 4.3 of the Company~~’s Form 8-K filed on April 1, 2016.)~~
~~4.4~~		~~Fourth Amended and Restated Guaranty Agreement of the Company, dated March 28, 2016, in favor of First Tennessee Bank National Association (incorporated by reference to Exhibit 4.4 of the Company’s Form 8-K filed on April 1, 2016.)~~
31.1		Rule 13a-14(a) Certification of Principal Executive Officer
31.2		Rule 13a-14(a) Certification of Principal Financial Officer
32.1		Certification Pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS		Inline XBRL Instance Document
101.SCH		Inline XBRL Taxonomy Extension Schema Document
101.CAL		Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF		Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB		Inline XBRL Taxonomy Extension Labels Linkbase Document
101.PRE		Inline XBRL Taxonomy Extension Presentation Linkbase Document
104		Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

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SIGNATURES

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

		P.A.M. TRANSPORTATION SERVICES, INC.


Dated: November 5, 2020		By: /s/ Joseph A. Vitiritto
		Joseph A. Vitiritto
		President and Chief Executive Officer
		(principal executive officer)

Dated: November 5, 2020		By: /s/ Allen W. West
		Allen W. West
		Vice President-Finance, Chief Financial
		Officer, Secretary and Treasurer
		(principal accounting and financial officer)

	Nine Months Ended
	September 30,
	2017			2016
OPERATING ACTIVITIES:
Net income	$	7,338		$	10,378
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation		31,333			29,011
Bad debt expense		186			354
Sale leaseback deferred gain amortization		-			(131	)
Stock compensation-net of excess tax benefits		446			251
Provision for deferred income taxes		4,378			6,233
Reclassification of unrealized loss on marketable equity securities		42			709
Recognized gain on marketable equity securities		(4,669	)		(1,003	)
Loss (gain) on sale or disposition of equipment		261			(3,951	)
Changes in operating assets and liabilities:
Accounts receivable		(1,683	)		(10,354	)
Prepaid expenses, deposits, inventories, and other assets		70			100
Income taxes refundable		99			2,308
Trade accounts payable		9,086			10,195
Accrued expenses and other liabilities		2,296			(1,917	)
Net cash provided by operating activities		49,183			42,183

INVESTING ACTIVITIES:
Purchases of property and equipment		(38,578	)		(55,948	)
Proceeds from disposition of equipment		16,485			24,479
Change in restricted cash		(5,508	)		(5,461	)
Sales of marketable equity securities		6,007			1,550
Purchases of marketable equity securities, net of return of capital		(1,988	)		(836	)
Net cash used in investing activities		(23,582	)		(36,216	)

FINANCING ACTIVITIES:
Borrowings under line of credit		341,106			375,930
Repayments under line of credit		(342,190	)		(379,043	)
Borrowings of long-term debt		17,598			52,224
Repayments of long-term debt		(35,554	)		(33,092	)
Borrowings under margin account		2,133			1,040
Repayments under margin account		(6,785	)		(2,392	)
Repurchases of common stock		(1,961	)		(20,726	)
Exercise of stock options		122			74
Net cash used in financing activities		(25,531	)		(5,985	)

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		70			(18	)

CASH AND CASH EQUIVALENTS-Beginning of period		137			157

CASH AND CASH EQUIVALENTS-End of period	$	207		$	139

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION-
Cash paid during the period for:
Interest	$	2,860		$	2,643
Income taxes	$	151		$	260

NONCASH INVESTING AND FINANCING ACTIVITIES-
Purchases of property and equipment included in accounts payable	$	7,819		$	2,788


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

Balance at January 1, 2017		6,397		$	115	$	80,822	$	7,476		$	(122,835	)	$	128,580	$	94,158

Net Income															7,338		7,338

Other comprehensive income, net of tax of $(1,228)									(2,005	)							(2,005	)

Exercise of stock options and stock awards-shares issued including tax benefits		16			-		122										122

Treasury stock repurchases		(110	)									(1,961	)				(1,961	)

Share-based compensation							446										446

Cumulative effect adjustment – ASU 2016-09															190		190

Balance at September 30, 2017		6,303		$	115	$	81,390	$	5,471		$	(124,796	)	$	136,108	$	98,288

	Shares Under Options			Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term		Aggregate Intrinsic Value*
				(per share)		(in years)
Outstanding-January 1, 2017		56,131		$	10.85
Granted		-			-
Exercised		(11,000	)		11.13
Cancelled/forfeited/expired		-			-
Outstanding at September 30, 2017		45,131		$	10.79		3.1	$	593,187

Exercisable at September 30, 2017		45,131		$	10.79		3.1	$	593,187

Exercise Price		Shares Under Outstanding Options		Weighted-Average Remaining Contractual Term		Shares Under Exercisable Options
				(in years)
$	10.44		15,000		0.4		15,000
$	10.90		24,600		4.7		24,600
$	11.22		5,531		3.2		5,531
			45,131		3.1		45,131

	Unrealized gains and losses on available- for-sale securities
	(in thousands)
Balance at June 30, 2017, net of tax of $3,851	$	6,290

Other comprehensive income before reclassifications, net of tax of $266		437
Amounts reclassified from accumulated other comprehensive income, net of tax of $(768)		(1,256	)
Net current-period other comprehensive income		(819	)

Balance at September 30, 2017, net of tax of $3,349	$	5,471

Balance at December 31, 2016, net of tax of $4,576	$	7,476

Other comprehensive income before reclassifications, net of tax benefit of $169		277
Amounts reclassified from accumulated other comprehensive income, net of tax of $(1,396)		(2,282	)
Net current-period other comprehensive income		(2,005	)

Balance at September 30, 2017, net of tax of $3,349	$	5,471

	Amounts Reclassified from Accumulated Other Comprehensive Income (a)
Details about Accumulated Other Comprehensive Income Component	Nine Months Ended September 30, 2017			Statement of Operations Classification
	(in thousands)
Unrealized gains and losses on available-for-sale securities:
Prior period unrealized gain (loss) on securities sold	$	3,720		Non-operating income (expense)
Impairment expense		(42	)	Non-operating income (expense)
Total before tax		3,678		Income before income taxes
Tax expense		(1,396	)	Income tax expense
Total after tax	$	2,282		Net income

	(in thousands)
2017	$	316
2018		177
Total future minimum lease payments	$	493