UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.20549

FORM 10-Q

☒Quarterly Report Pursuant ~~QUARTERLY REPORT PURSUANT TO SECTION~~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, 2019~~March 31, 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’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~~

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 ~~(§232.405 of this chapter)~~ during the preceding 12 months (or for such shorter period that the registrant was required to submit such ~~files).~~

files.) Yes ☑ No ☐

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

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

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

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☑

~~Yes ☐ No ☑~~

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

Class		Outstanding at ~~October 25, 2019~~April 23, 2020
Common Stock, $.01 Par Value		~~5,753,982~~5,742,330

P.A.M. TRANSPORTATION SERVICES, INC.

Form 10-Q

For ~~The~~the Quarter Ended ~~September 30, 2019~~March 31, 2020

Table of Contents

Part I. Financial Information

Item 1.	Financial Statements (unaudited).	3

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

	Condensed Consolidated Statements of Operations for the Three ~~and Nine~~ Months Ended ~~September 30,~~March 31, 2020 and 2019 ~~and 2018~~	4

	Condensed Consolidated Statements of Cash Flows for the ~~Nine~~Three Months Ended ~~September 30,~~March 31, 2020 and 2019 ~~and 2018~~	5

	Condensed Consolidated ~~Statement~~Statements of ~~Stockholders’~~Shareholders’ Equity for the ~~Nine~~Three Months Ended ~~September 30,~~March 31, 2020 and 2019 ~~and 2018~~	6

	Notes to Condensed Consolidated Financial Statements as of ~~September 30, 2019~~March 31, 2020	87

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations.	1715

Item 3.	Quantitative and Qualitative Disclosures about Market Risk.	2220

Item 4.	Controls and Procedures.	2320


Part II. Other Information

Item 1.	Legal Proceedings.	24

~~Item 1A.~~	~~Risk Factors~~	2421

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds.	2522

Item 6.	Exhibits.	2623

Signatures		2724

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,			March 31,			December 31,
	2019			2018			2020			2019
	(unaudited)			(audited)			(unaudited)			(audited)
ASSETS
Current assets:
Cash and cash equivalents	$	305		$	282		$	325		$	318
Accounts receivable-net:
Trade, less allowance of $2,918 and $2,224, respectively		60,584			63,350
Trade, less current estimated credit loss of $3,191 and $2,952, respectively								66,090			61,784
Other		3,576			3,814			4,278			3,769
Inventories		1,446			1,461			1,220			1,327
Prepaid expenses and deposits		8,250			10,393			9,093			8,669
Marketable equity securities		28,759			27,549			23,207			29,521
Income taxes refundable		2,178			1,876			807			504
Total current assets		105,098			108,725			105,020			105,892

Property and equipment:
Land		7,246			5,596			16,086			7,246
Structures and improvements		20,095			19,547			31,198			20,204
Revenue equipment		514,497			457,142			528,410			524,527
Office furniture and equipment		10,823			10,040			11,470			11,185
Total property and equipment		552,661			492,325			587,164			563,162
Accumulated depreciation		(163,950	)		(137,738	)		(184,316	)		(175,887	)
Net property and equipment		388,711			354,587			402,848			387,275

Other assets		4,142			2,754			4,617			4,842

TOTAL ASSETS	$	497,951		$	466,066		$	512,485		$	498,009

LIABILITIES AND STOCKHOLDERS’ EQUITY
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	27,334		$	20,002		$	24,220		$	16,597
Accrued expenses and other liabilities		22,871			23,497			42,042			40,610
Current maturities of long-term debt		61,332			63,908			59,731			67,637
Total current liabilities		111,537			107,407			125,993			124,844

Long-term debt-less current portion		169,254			157,315			189,469			174,187
Deferred income taxes		67,978			61,897			63,024			63,522
Other long-term liabilities		1,078			-			1,344			1,481
Total liabilities		349,847			326,619			379,830			364,034

STOCKHOLDERS' EQUITY
SHAREHOLDERS' EQUITY
Preferred stock, $.01 par value, 10,000,000 shares authorized; none issued		-			-			-			-
Common stock, $.01 par value, 40,000,000 shares authorized; 11,648,785 and 11,612,144 shares issued; 5,753,982 and 5,956,558 shares outstanding at September 30, 2019 and December 31, 2018, respectively		116			116
Common stock, $.01 par value, 40,000,000 shares authorized; 11,658,768 and 11,656,160 shares issued; 5,742,330 and 5,748,897 shares outstanding at March 31, 2020 and December 31, 2019, respectively								117			117
Additional paid-in capital		83,512			82,776			83,993			83,688
Treasury stock, at cost; 5,894,803 and 5,655,586 shares at September 30, 2019 and December 31, 2018, respectively		(156,167	)		(142,552	)
Treasury stock, at cost; 5,916,438 and 5,907,263 shares at March 31, 2020 and December 31, 2019, respectively								(157,158	)		(156,837	)
Retained earnings		220,643			199,107			205,703			207,007
Total stockholders’ equity		148,104			139,447
Total shareholders’ equity								132,655			133,975

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	497,951		$	466,066
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY							$	512,485		$	498,009

Table of Contents

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

Condensed Consolidated Statements of Operations

(unaudited)

(in thousands, except per share data)

	Three Months Ended						Nine Months Ended						Three Months Ended
	September 30,						September 30,						March 31,
	2019			2018			2019			2018			2020			2019
OPERATING REVENUES:
Revenue, before fuel surcharge	$	110,149		$	117,259		$	332,846		$	329,244		$	111,822		$	110,345
Fuel surcharge		18,845			23,066			57,834			65,842			17,333			18,341
Total operating revenues		128,994			140,325			390,680			395,086			129,155			128,686

OPERATING EXPENSES AND COSTS:
Salaries, wages and benefits		32,920			30,389			94,586			88,999			32,798			31,063
Operating supplies and expenses		25,455			24,026			73,487			70,203			23,715			23,512
Rent and purchased transportation		40,740			53,108			128,647			151,100			42,927			44,554
Depreciation		14,173			12,168			40,974			36,526			14,295			13,187
Insurance and claims		3,697			4,310			11,872			13,029			42			4,114
Other		3,788			3,262			10,321			8,910			5,844			2,994
Loss (gain) on sale or disposition of equipment		688			(91	)		362			(607	)
Loss/(gain) on disposition of equipment														48			(425	)
Total operating expenses and costs		121,461			127,172			360,249			368,160			119,669			118,999

OPERATING INCOME		7,533			13,153			30,431			26,926			9,486			9,687

NON-OPERATING INCOME		490			935			3,765			688
NON-OPERATING (EXPENSE)/INCOME														(9,076	)		3,472
INTEREST EXPENSE		(2,178	)		(1,711	)		(6,277	)		(4,226	)		(2,212	)		(2,040	)

INCOME BEFORE INCOME TAXES		5,845			12,377			27,919			23,388
(LOSS)/INCOME BEFORE INCOME TAXES														(1,802	)		11,119

FEDERAL AND STATE INCOME TAX EXPENSE:
FEDERAL AND STATE INCOME TAX (BENEFIT) EXPENSE:
Current		106			142			302			319			-			89
Deferred		1,158			2,987			6,081			5,145			(498	)		2,729
Total federal and state income tax expense		1,264			3,129			6,383			5,464
Total federal and state income tax (benefit) expense														(498	)		2,818

NET INCOME	$	4,581		$	9,248		$	21,536		$	17,924
NET (LOSS)/INCOME													$	(1,304	)	$	8,301

INCOME PER COMMON SHARE:
(LOSS) INCOME PER COMMON SHARE:
Basic	$	0.80		$	1.53		$	3.68		$	2.93		$	(0.23	)	$	1.40
Diluted	$	0.79		$	1.52		$	3.65		$	2.89		$	(0.23	)	$	1.39

AVERAGE COMMON SHARES OUTSTANDING:
Basic		5,756			6,034			5,859			6,120			5,746			5,921
Diluted		5,799			6,088			5,907			6,203			5,746			5,985

~~See notes to Condensed Consolidated Financial Statements.~~

See notes to condensed consolidated financial statements.

Table of Contents

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

Condensed Consolidated Statements of Cash Flows

(unaudited)

(in thousands)

	Nine Months Ended						Three Months Ended
	September 30,						March 31,
	2019			2018			2020			2019
OPERATING ACTIVITIES:
Net income	$	21,536		$	17,924
Adjustments to reconcile net income to net cash provided by operating activities:
Net (loss) income							$	(1,304	)	$	8,301
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Depreciation		40,974			36,526			14,295			13,187
Bad debt expense		694			677			239			69
Stock compensation-net of excess tax benefits		736			557			305			306
Provision for deferred income taxes		6,081			5,145
Recognized (gain) loss on marketable equity securities		(2,728	)		223
Loss (gain) on sale or disposition of equipment		362			(607	)
(Benefit from) provision for deferred income taxes								(498	)		2,729
Recognized loss (gain) on marketable equity securities								9,339			(3,184	)
Loss/(gain) on disposition of equipment								1			(425	)
Changes in operating assets and liabilities:
Accounts receivable		2,312			(18,547	)		(5,053	)		(5,356	)
Prepaid expenses, deposits, inventories, and other assets		2,169			1,020			(530	)		1,269
Income taxes refundable		(299	)		231			-			75
Trade accounts payable		3,218			11,790			8,048			199
Accrued expenses and other liabilities		1,340			2,564			(1,339	)		2,567
Net cash provided by operating activities		76,395			57,503			23,503			19,737

INVESTING ACTIVITIES:
Purchases of property and equipment		(68,046	)		(51,365	)		(23,158	)		(7,926	)
Proceeds from disposition of equipment		12,714			13,043			5,325			5,787
Sales of marketable equity securities		1,645			-
Purchases of marketable equity securities, net of return of capital		(128	)		(2,269	)		(3,026	)		(72	)
Net cash used in investing activities		(53,815	)		(40,591	)		(20,859	)		(2,211	)

FINANCING ACTIVITIES:
Borrowings under line of credit		444,362			447,523			137,243			131,387
Repayments under line of credit		(445,318	)		(429,402	)		(128,657	)		(133,442	)
Borrowings of long-term debt		45,557			35,146			-			5,789
Repayments of long-term debt		(51,253	)		(62,012	)		(13,670	)		(19,480	)
Borrowings under margin account		387			2,512			3,753			166
Repayments under margin account		(2,676	)		(863	)		(985	)		(324	)
Repurchases of common stock		(13,616	)		(10,251	)		(321	)		(1,618	)
Exercise of stock options		-			486
Net cash used in financing activities		(22,557	)		(16,861	)		(2,637	)		(17,522	)

NET INCREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH		23			51			7			4

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

CASH, CASH EQUIVALENTS AND RESTRICTED CASH -End of period	$	305		$	275		$	325		$	286

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION-
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest	$	6,258		$	4,104		$	2,185		$	2,037
Income taxes	$	601		$	88		$	-		$	15

NONCASH INVESTING AND FINANCING ACTIVITIES-
NONCASH INVESTING AND FINANCING ACTIVITIES:
Purchases of property and equipment included in accounts payable	$	5,711		$	13,680		$	2,239		$	4,025

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

Table of Contents

Common Stock
Shares / Amount

Additional
Paid-In Capital

Accumulated
Other
Comprehensive
Income

Treasury
Stock

Retained
Earnings

Total

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

Net Income
- - - - - 1,387 1,387

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

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

Stock based compensation (1)
- - 162 - - - 162

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

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

Net Income
- - - - - 7,289 7,289

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

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

Stock based compensation
- - 233 - - - 233

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

Net Income
- - - - - 9,248 9,248

Exercise of stock options and vesting of stock awards-shares issued including tax benefits
1 - 18 - - - 18

Treasury stock repurchases
(43 ) - - - (2,720 ) - (2,720 )

Stock based compensation
- - 162 - - - 162

Balance at September 30, 2018
6,012 $ 116 $ 82,601 - $ (139,434 ) $ 193,037 $ 136,320

~~(1)~~

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

~~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~~March 31, ~~30, 2019~~20

NOTE A: BASIS OF PRESENTATION

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

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In management’s opinion, all adjustments (consisting of normal recurring adjustments) necessary for a fair presentation have been included. The consolidated balance sheet at December 31, ~~2018~~2019 has been derived from the audited financial statements at that date, but does not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. Operating results for the ~~three and nine-month~~three-month period ended ~~September 30, 2019~~March 31, 2020 are not necessarily indicative of the results that may be expected for the year ending December 31, ~~2019.~~2020. For further information, refer to the consolidated financial statements and the footnotes thereto included in the Company’s annual report on Form 10-K for the year ended December 31, ~~2018.~~2019.

NOTE B: RECENT ACCOUNTING PRONOUNCEMENTS

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

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

In June 2016, the FASB issued ASU No. 2016-13, (“ASU 2016-13”), Accounting for Credit Losses (Topic 326). ASU 2016-13 requires the use of an “expected loss” model on certain types of financial instruments. The standard also amends the impairment model for available-for-sale debt securities and requires estimated credit losses to be recorded as allowances instead of reductions to the amortized cost of the securities. ASU 2016-13 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2019, with early adoption permitted. The ~~Company 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.~~

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

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

~~Table of Contents~~

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

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

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

●

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

●

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

●

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

●

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

●

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

●

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

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

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

NOTE C: REVENUE RECOGNITION

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

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

In fulfilling the Company’s obligation to transport freight from a specified origin to a specified destination, control of freight is transferred to us at the point it has been loaded into the driver’s trailer, the doors are sealed and the driver has signed a bill of lading, which is the basic transportation agreement that establishes the nature, quantity and condition of the freight loaded, responsibility for invoice payment, and pickup and delivery locations. Our revenue is generated, and our customer receives benefit, as the freight progresses towards delivery locations. In the event our customer cancels the shipment at some point prior to the final delivery location and re-consigns the shipment to an alternate delivery location, we are entitled to receive payment for services performed for the partial shipment. Shipments are generally conducted over a relatively short time span, generally one to three days; however, freight is sometimes stored temporarily in our trailer at one of our drop yard locations or at a location designated by a customer. Our revenue is categorized as either Freight Revenue or Fuel Surcharge Revenue, and both are earned by performing the same freight transportation services, as discussed further below.

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

Fuel Surcharge Revenue – revenue designed to adjust freight revenue rates to an agreed upon base cost for diesel fuel. Diesel fuel prices can fluctuate widely during the term of a contract with a customer. At the point that freight revenue rates are negotiated with customers, a sliding scale is agreed upon that approximately adjusts diesel fuel costs to an agreed upon base amount. In general, as fuel prices increase, revenue from fuel surcharge increases, so that diesel fuel cost is adjusted to the approximate base amount agreed upon.

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

NOTE D:D: MARKETABLE EQUITY SECURITIES

The Company’s investments in marketable securities consist of equity securities with readily determinable fair values. The cost of securities sold is based on the specific identification method, and interest and dividends on securities are included in ~~Non-operating~~non-operating (expense) income.

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

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

	September 30, 2019		December 31, 2018		March 31, 2020			December 31, 2019
	(in thousands)				(in thousands)
Fair market value	$	28,759	$	27,549	$	23,207		$	29,521
Cost		25,198		25,602		26,624			24,156
Unrealized gain	$	3,561	$	1,947
Unrealized (loss) / gain					$	( 3,417	)	$	5,365

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

	September 30, 2019		December 31, 2018		March 31, 2020			December 31, 2019
	(in thousands)				(in thousands)
Gross unrealized gains	$	7,023	$	5,668	$	3,352		$	7,808
Gross unrealized losses		3,462		3,721		6,769			2,443
Net unrealized gains	$	3,561	$	1,947
Net unrealized (loss) / gain					$	(3,417	)	$	5,365

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

	Three Months Ended				Nine Months Ended				Three Months Ended
	September 30,				September 30,				March 31,
	2019		2018		2019		2018		2020			2019
	(in thousands, except per share data)								(in thousands)
Sales proceeds	$	883	$	-	$	1,645	$	-	$	677		$	-
Cost of securities sold		557		-		805		-		1,211			-
Realized gain	$	326	$	-	$	840	$	-

Realized gain, net of taxes	$	252	$	-	$	651	$	-
Realized loss									$	(534	)	$	-

There were no sales of marketable equity securities during the first three months of 2019.

For the quarter ended ~~September 30, 2019,~~March 31, 2020, the Company recognized dividends received of approximately ~~$348,000~~$305,000 in non-operating income in its statements of operations. For the quarter ended ~~September 30, 2018,~~March 31, 2019, the Company recognized dividends ~~received~~ of approximately ~~$308,000~~$277,000 in non-operating income in its statements of operations.

For the nine months ended September 30, 2019, the Company recognized dividends received of approximately $931,000 in non-operating income in its statements of operations. For the nine months ended September 30, 2018, the Company recognized dividends received of approximately $780,000 in non-operating income in its statements of operations.

The market value of the Company’s equity securities are periodically used as collateral against any outstanding margin account borrowings. As of ~~September 30, 2019~~March 31, 2020 and December 31, ~~2018,~~2019, the Company had outstanding borrowings of approximately ~~$8,992,000~~$10,242,000 and ~~$11,281,000,~~$7,474,000, respectively, under its margin account. Margin account borrowings are used for the purchase of marketable equity securities and as a source of short-term liquidity and are included in Accrued expenses and other liabilities on our balance sheets.

Our marketable equity securities portfolio had a net unrealized pre-tax ~~gain~~loss in market value of approximately ~~$133,000~~$8,805,000 during the ~~third~~first quarter of ~~2019,~~2020, and a net unrealized pre-tax gain in market value of approximately ~~$586,000~~$3,184,000 during the ~~third~~first quarter of ~~2018,~~2019, which were reported as Non-operating income for the respective periods.

NOTE E: STOCK BASED COMPENSATION

The Company maintains a stock incentive plan (the “Plan”) under which incentive and nonqualified stock options and other stock awards may be granted. Under the Plan, 750,000 shares are reserved for the issuance of stock awards to directors, officers, key employees, and others. The stock option exercise price and the restricted stock ~~value~~purchase price under the Plan shall not be less than 85% of the fair market value of the Company’s common stock on the date the award is granted. The fair market value is determined by the closing price of the Company’s common stock, on its primary exchange, on the same date that the option or award is granted.

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

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

The total grant date fair value of stock vested during the first ~~nine~~three months of ~~2019~~2020 was approximately ~~$685,000.~~$80,000. Total pre-tax ~~stock based~~stock-based compensation expense, recognized in Salaries, wages and benefits during the first ~~nine~~three months of ~~2019~~2020 was approximately ~~$736,000~~$305,000 and includes approximately ~~$100,000~~$80,000 recognized as a result of ~~the~~ grant of 326 shares to each non-employee director during the first ~~nine months~~quarter of ~~2019.~~2020. The recognition of stock-based compensation expense decreased both diluted and basic earnings per common share by approximately ~~$0.09~~$0.04 during the first ~~nine months~~quarter of ~~2019.~~2020. As of ~~September 30, 2019,~~March 31, 2020, the Company had ~~stock based~~stock-based compensation plans with total unvested stock-based compensation expense of approximately ~~$1,228,000~~$1,074,000 which is being amortized on a straight-line basis over the remaining vesting period. As a result, the Company expects to recognize approximately ~~$210,000~~$266,000 in additional compensation expense related to unvested option awards during the remainder of ~~2019~~2020 and to recognize approximately ~~$430,000, $294,000~~$354,000, $354,000, $92,000 and ~~$294,000~~$8,000 in additional compensation expense related to unvested option awards during the years ~~2020,~~ 2021, 2022, 2023 and ~~2022,~~2024, respectively.

The total grant date fair value of stock and stock options vested during the first ~~nine~~three months of ~~2018~~2019 was approximately ~~$655,000.~~$39,000. Total pre-tax stock-based compensation expense, recognized in Salaries, wages and benefits during the first ~~nine~~three months of ~~2018~~2019 was approximately ~~$557,000,~~$306,000, and included approximately ~~$70,000~~$90,000 recognized as a result of the ~~grant~~accrual of ~~276~~205 shares to each non-employee director during the first ~~nine months~~quarter of ~~2018.~~2019. The recognition of stock-based compensation expense decreased both diluted and basic earnings per common share by approximately ~~$0.07~~$0.04 during the first ~~nine months 2018.~~quarter 2019. As of ~~September 30, 2018,~~March 31, 2019, the Company had stock-based compensation plans with total unvested stock-based compensation expense of approximately ~~$846,000~~$1,648,000 which was being amortized on a straight-line basis over the remaining vesting period.

A summary of the status of the Company’s non-vested restricted stock as of ~~September 30, 2019~~March 31, 2020 and changes during the ~~nine~~three months ended ~~September 30, 2019,~~March 31, 2020, is as follows:

Restricted Stock

Number of
Shares

Weighted-
Average Grant
Date Fair Value

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

~~Cash received from option exercises totaled approximately $0 and $486,000 during the nine months ended September 30, 2019 and September 30, 2018, respectively.~~

	Restricted Stock
	Number of Shares			Weighted- Average Grant Date Fair Value
Non-vested at January 1, 2020		55,459		$	24.35
Granted		9,608			49.47
Canceled/forfeited/expired		(357	)		56.45
Vested		(2,608	)		30.75
Non-vested at March 31, 2020		62,102		$	27.78

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NOTE J:J: FAIR VALUE OF FINANCIAL INSTRUMENTS

The Company’s financial instruments consist of cash and cash equivalents, marketable equity securities, accounts receivable, trade accounts payable, and borrowings.

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

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

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

	Level 3:		Unobservable inputs that are supported by little or no market activity.

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

At ~~September 30, 2019,~~March 31, 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
$ 28,759 $ 28,759 - -

	Total		Level 1		Level 2		Level 3
	(in thousands)

Marketable equity securities	$	23,207	$	23,207		-		-

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

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

For long-term debt other than the lines of credit, the fair values are estimated using discounted cash flow analyses, based on the Company’s current incremental borrowing rates for similar types of borrowing arrangements. The carrying value and estimated fair value of this other long-term debt at ~~September 30, 2019~~March 31, 2020 was as follows:

Carrying
Value

Estimated
Fair Value

(in thousands)

Long-term debt
$ 221,350 $ 225,329

	Carrying Value		Estimated Fair Value
	(in thousands)

Long-term debt	$	223,567	$	226,746

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

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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~~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~~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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~~2019~~Right-of-Use Leases

~~During~~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 ~~of approximately~~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 ~~lease~~leases resulted in the recognition of right-of-use assets and corresponding ~~operating~~right-of-use lease ~~liability,~~liabilities, respectively, valued at ~~$1.4~~$2.0 million as of ~~September 30, 2019.~~March 31, 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 the lease agreements 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, 2019.~~March 31, 2020.

Scheduled amounts and timing of cash flows arising from future right-of-use operating lease payments at ~~September 30, 2019,~~March 31, 2020, are:

	(In thousands)
Maturity of Lease Liabilities
2019 (remaining)	$	80
2020		325
Maturity of Right-of-Use Lease Liabilities				(in thousands)
2020 (remaining)				$	464
2021		330			627
2022		335			544
2023		340			340
Thereafter		114
2024					114
Total undiscounted operating lease payments	$	1,524		$	2,089
Less: Imputed interest		(122	)		(126	)
Present value of operating lease liabilities	$	1,402		$	1,963

Balance Sheet Classification
Right-of-use assets (recorded in other non-current assets)	$	1,402		$	1,963

Current lease liabilities (recorded in other current liabilities)	$	324		$	619
Long-term lease liabilities (recorded in other long-term liabilities)		1,078			1,344
Total operating lease liabilities	$	1,402		$	1,963

Other Information
Weighted-average remaining lease term for operating leases (years)	4.58				3.5
Weighted-average discount rate for operating leases		3.74	%		3.59	%

ANo new right-of-use ~~asset of $0.2 million was~~assets were recognized as a non-cash asset ~~addition~~additions that resulted from new operating lease liabilities during the three months ended ~~September 30, 2019.~~March 31, 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, 2019~~March 31, 2020 and is included in operating cash flows.

The Company leases trucks to ~~owner-operators~~independent contractors 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.

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As of ~~September 30, 2019,~~March 31, 2020, the gross carrying value of trucks underlying these leases was ~~$53.8~~$60.8 million and accumulated depreciation was ~~$25.4~~$28.2 million. Depreciation is calculated on a straight-line basis over the estimated useful life of the equipment, down to an estimated salvage value. In most cases, the Company has agreements in place with certain manufacturers whereby salvage values are guaranteed by the manufacturer. In other cases, where salvage values are not guaranteed, estimates of salvage value are based on the expected market values of equipment at the time of disposal. During the quarter ended ~~September 30, 2019,~~March 31, 2020, the Company incurred ~~$1.6~~$1.9 million of depreciation expense for these assets.

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

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

Future minimum operating lease payments receivable at ~~September 30, 2019:~~March 31, 2020:

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

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

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

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

For both operations, substantially all of our revenue is generated by transporting freight for customers and is predominantly affected by the rates per mile received from our customers, equipment utilization, and our percentage of non-compensated miles. These aspects of our business are carefully managed, and efforts are continuously underway to achieve favorable results. Truckload services revenues, excluding fuel surcharges, represented ~~83.9% and 79.2%~~81.7% of total revenues, excluding fuel surcharges, for the three months ended ~~September 30, 2019~~March 31, 2020 and ~~2018, respectively. Truckload services revenues, excluding fuel surcharges, represented 79.2% and 79.7% of total revenues, excluding fuel surcharges,~~81.6% for the ~~nine~~three months ended ~~September 30, 2019 and 2018, respectively.~~March 31, 2019. The remaining revenues, excluding fuel surcharges, were generated from brokerage and logistics services.

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

In discussing our results of operations, we use revenue, before fuel surcharge (and fuel expense, net of fuel surcharge), because management believes that eliminating the impact of this sometimes volatile source of revenue allows a more consistent basis for comparing our results of operations from period to period. During the three months ended ~~September 30,~~March 31, 2020 and 2019, ~~and 2018,~~ approximately ~~$18.8~~$17.3 million and ~~$23.1~~$18.3 million, respectively, of the Company’s ~~total revenue was generated from fuel surcharges. During the nine months ended September 30, 2019 and 2018, approximately $57.8 million and $65.8 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.

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

As the escalation of the COVID-19 pandemic has extended into the second quarter, the Company has experienced the increasing effects of weakening economic conditions, most notably the late March COVID-19 related shutdown of automotive customers, representing approximately 45% of the Company’s revenue. While we have vigorously sought to replace lost automotive revenue with freight from customers supporting the effort to supply essential goods to the nation, competition for this freight has increased as industry capacity has collectively focused on freight that has continued to move during this time. Based on reports from the auto industry, we are optimistic that production will resume soon, returning a large portion of our lost revenue. However, the ultimate magnitude of COVID-19, including the extent of its impact on the Company’s financial and operating results, which could be material, will be determined by the length of time the pandemic continues, its continued severity, government regulations imposed in response to the pandemic, and to 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.

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 ~~SEPTEMBER~~MARCH 31, 20 ~~30, 2019~~20 VS. THREE MONTHS ENDED ~~SEPTEMBER~~MARCH 31, 2030, ~~2018~~19

During the ~~third~~first quarter of ~~2019,~~2020, truckload services revenue, before fuel surcharges, ~~decreased 0.4%~~increased 1.4% to ~~$92.4~~$91.3 million as compared to ~~$92.8~~$90.0 million during the ~~third~~first quarter of ~~2018.~~2019. The ~~decrease~~increase in revenue was primarily the result of a decrease in miles driven during the third quarter of 2019 compared to the third quarter of 2018, primarily resulting from a labor strike during the period by the United Auto Workers against General Motors, who is the Company’s largest customer. The decrease in miles was partially offset by an increaseincreases in our average fleet size and average rate per mile charged to our customers during the ~~third~~first quarter ~~2019~~2020 compared to the ~~third~~first quarter ~~2018.~~2019. These increases were partially offset by a decrease in the total number of miles driven per truck for the first quarter of 2020 compared to the first quarter of 2019.

Salaries, wages and benefits increased from ~~31.5%~~33.3% of revenues, before fuel surcharges, in the ~~third~~first quarter of ~~2018~~2019 to ~~34.5%~~34.7% of revenues, before fuel surcharges, during the ~~third~~first quarter of ~~2019. This~~2020. The increase isrelates primarily ~~attributable~~ to an increase in ~~the average number of~~ company ~~drivers employed~~driver wages paid during ~~the third quarter of 2019~~2020 compared to ~~the third quarter of 2018 and~~2019. The increase in driver wages relates primarily to ~~a corresponding increase~~route specific pay increases that were phased in throughout 2019. In addition, the proportion of total miles driven by company drivers ~~for~~increased as the ~~periods compared. Also contributing to the increase are increases in the average rate per mile paid to~~number of company drivers ~~on certain freight lanes.~~increased year-over-year.

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Operating supplies and expenses increased from ~~1.0%~~5.7% of revenues, before fuel surcharges, during the ~~third~~first quarter of ~~2018~~2019 to ~~7.1%~~6.9% of revenues, before fuel surcharges, during the ~~third~~first quarter of ~~2019.~~2020. The increase relates primarily to an increase in the average surcharge-adjusted fuel price paid per gallon of diesel fuel, and to an increase in the average number of company owned trucks during the third quarter 2019 compared to the third quarter 2018. The average surcharge-adjusted fuel price paid per gallon of diesel fuel increased aswhich was a result of ~~lower~~decreased fuel surcharge collections from customers. Fuel surcharge collections can fluctuate significantly from period to period as they are generally based on changes in fuel prices from period to period so that, during periods of rising fuel prices, fuel surcharge collections increase, while fuel surcharge collections decrease during periods of falling fuel prices.

Rent and purchased transportation decreased from 34.1% of revenues, before fuel surcharges, during the third quarter of 2018 to 27.3% of revenues, before fuel surcharges, during the third quarter of 2019. The decrease was primarily due to a decrease in the number of loads transported by third party carriers during the third quarter 2019 compared to the third quarter 2018. This decrease occurred as the average number of company owned trucks increased for the third quarter 2019 compared to the third quarter 2018, providing additional company-owned capacity and diminishing some of the need to utilize third party carriers.

Depreciation increased from 13.0% of revenues, before fuel surcharges, during the third quarter of 2018 to 15.2% of revenues, before fuel surcharges, during the third quarter of 2019. This increase is primarily the result of an increase in the average number of trucks and trailers within our fleet for the third quarter of 2019 compared to the third quarter of 2018.

Insurance and claims expense decreased from 4.6% of revenues, before fuel surcharges, during the third quarter of 2018 to 4.0% of revenues before fuel surcharges, during the third quarter of 2019. This decrease primarily resulted from our decision to become self-insured for property damage on company owned trucks. The Company was insured for property damage insurance coverage for company owned trucks through a third party insurance carrier through August 31, 2018. Effective September 1, 2018, the Company became self-insured for property damage. Also contributing to the ~~decrease~~increase was a reduction of auto-liability premiums paid for September 2019 compared to September 2018. Beginning September 1, 2019 the Company became self-insured for certain layers of auto-liability claims exposure, resulting in a reduction of insurance premiums expense, but with the potential for increased claims expense in future periods.

Interest expense increased from 1.6% of revenues, before fuel surcharges, during the third quarter 2018 to 2.2% of revenues, before fuel surcharges during the third quarter 2019. This increase is attributable to market increases in interest rates and to an ~~increase in amounts financed under equipment installment notes.~~

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 87.4% for the third quarter of 2018 to 92.6% for the third quarter of 2019.

~~NINE MONTHS ENDED SEPTEMBER~~ ~~30, 2019~~ ~~VS. NINE MONTHS ENDED SEPTEMBER 30,~~ ~~2018~~

For the nine months ended September 30, 2019, truckload services revenue, before fuel surcharges, increased 4.9% to $275.3 million as compared to $262.5 million for the nine months ended September 30, 2018. The increase in revenue was primarily the result of increases in our average fleet size and average rate per mile charged to our customers during the nine months ended September 30, 2019 compared to the nine months ended September 30, 2018. These increases were partially offset by a decrease in the total number of miles driven during the first nine months of 2019 compared to the first nine months of 2018.

Salaries, wages and benefits increased from 32.8% of revenues, before fuel surcharges, in the first nine months of 2018 to 33.2% of revenues, before fuel surcharges, during the first nine months of 2019. This increase is primarily attributable to an increase in the average number of company drivers employed during the nine months ended September 30, 2019 compared to the nine months ended September 30, 2018 and to a corresponding increase in the proportion of total miles driven by company drivers for the ~~periods compared. Also contributing~~quarter ended March 31, 2020 compared to ~~the~~March 31, 2019. This increase ~~are increases~~ in ~~the average rate per mile paid to~~miles driven by company drivers ~~on certain freight lanes.~~

~~Operating~~has the effect of increasing our net operating supplies and expenses ~~increased~~while decreasing the Rent and purchased transportation category, as fuel surcharge revenue generated from ~~1.6%~~transportation services performed by owner-operators is reflected as a reduction in net operating supplies and expenses, while fuel surcharges paid to owner-operators for their services is reported along with their base rate of pay in the Rent and purchased transportation category.

Rent and purchased transportation decreased from 30.3% of revenues, before fuel surcharges, during the first ~~nine months~~quarter of ~~2018~~2019 to ~~5.6%~~26.9% of revenues, before fuel surcharges, during the first ~~nine months~~quarter of 2019. The increase relates primarily to an increase in the average surcharge-adjusted fuel price paid per gallon of diesel fuel and to an increase in the average number of company owned trucks during the first nine months of 2019 compared to the first nine months of 2018. The average surcharge-adjusted fuel price paid per gallon of diesel fuel increased as a result of lower fuel surcharge collections from customers. Fuel surcharge collections can fluctuate significantly from period to period as they are generally based on changes in fuel prices from period to period so that, during periods of rising fuel prices, fuel surcharge collections increase, while fuel surcharge collections decrease during periods of falling fuel prices.

Rent and purchased transportation decreased from 35.0% of revenues, before fuel surcharges, during the first nine months of 2018 to 28.8% of revenues, before fuel surcharges, during the first nine months of 2019.2020. The decrease was primarily due to a decrease in the number of loads transported by third party carriers during the first ~~nine months 2019~~quarter 2020 compared to the first ~~nine months 2018.~~quarter 2019. This decrease occurred as the average number of ~~company owned~~company-owned trucks increased for the first ~~nine months 2019~~quarter 2020 compared to the first ~~nine months 2018,~~quarter 2019, providing additional company-owned capacity and diminishing ~~some of~~ the need to utilize third party carriers.

Depreciation increased from ~~13.9%~~14.5% of revenues, before fuel surcharges, during the first ~~nine months~~quarter of ~~2018~~2019 to ~~14.8%~~15.6% of revenues, before fuel surcharges, during the first ~~nine months~~quarter of ~~2019.~~2020. This increase is primarily the result of an increase in the average number of trucks and trailers ~~within~~in our fleet for the first ~~nine months~~quarter of ~~2019~~2020 compared to the first ~~nine months~~quarter of ~~2018.~~2019.

Insurance and claims expense decreased from ~~4.9%~~4.5% of revenues, before fuel surcharges, during the first ~~nine months~~quarter of ~~2018~~2019 to ~~4.3%~~0.0% of revenues before fuel surcharges, during the first ~~nine months~~quarter of ~~2019.~~2020. This decrease primarily resulted from ~~our decision to become self-insured for property damage on company owned trucks. The Company was insured for property damage insurance coverage for company owned trucks through~~the settlement during the quarter ended March 31, 2020 of a ~~third party insurance carrier through August 31, 2018. Effective September 1, 2018,~~lawsuit brought against the Company ~~became self-insured~~by individuals who asserted they were misclassified as owner-operators. The amount of the settlement was less than the amount previously reserved for ~~property damage.~~the suit. Also contributing to the decrease was a reduction ~~of auto-liability~~in auto liability insurance premiums, ~~paid for September 2019 compared to September 2018. Beginning September 1, 2019~~as the Company became self-insured for certain layers of ~~auto-liability~~auto liability claims ~~exposure, resulting~~ in ~~a reduction~~excess of $1.0 million commencing September 1, 2019. During the first three months of 2019, the Company paid for auto liability insurance ~~premiums expense, but with the potential~~coverage for ~~increased~~ claims ~~expense~~ in ~~future periods.~~excess of $1.0 million through various third-party insurance carriers.

~~Non-operating income~~Other expenses increased from ~~0.3%~~3.1% of revenues, before fuel surcharges, during the first ~~nine months~~quarter of ~~2018~~2019 to ~~1.2%~~6.0% of revenues, before fuel surcharges, during the first ~~nine months~~quarter of ~~2019.~~2020. This increase ~~primarily resulted from an increase in income~~ related to the change in market values of equity securities. An approximate $2.7 million increase in the market value of our marketable equity securities was recorded in non-operating income during the first nine months of 2019, compared to an approximate $0.3 million decrease in the market value of our equity securities recorded in non-operating income during the first nine months of 2018.

Interest expense increased from 1.5% of revenues, before fuel surcharges, during the first nine months of 2018 to 2.0% of revenues, before fuel surcharges during the first nine months of 2019. This increase is attributable to market increases in interest rates andprimarily to an increase in amounts ~~financed under equipment installment notes.~~expensed for legal fees incurred during the quarter related to the exploration of a potential acquisition and certain litigation described in Note L to our Condensed Consolidated Financial Statements.

The truckload services division operating ratio, which measures the ratio of operating expenses, net of fuel surcharges, to operating revenues, before fuel surcharges, improved from ~~91.1%~~91.0% for the first ~~nine months~~quarter of ~~2018~~2019 to 90.2% for the first ~~nine months~~quarter of 2020.

Non-operating (expense)/income decreased from 3.5% of revenues, before fuel surcharges, during the first quarter of 2019 to (8.7%) of revenues, before fuel surcharges, during the first quarter of 2020. This decrease primarily resulted from a decrease in the market value of the Company’s portfolio of marketable equity securities during the quarter ended March 31, 2020 compared to an increase in market value for the portfolio during the same period in 2019. The Company recorded a loss in market value of approximately $8.8 million in non-operating income during the first quarter of 2020, compared to a $3.2 million gain in the market value of our equity securities during the first quarter of 2019.

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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 ~~SEPTEMBER~~MARCH 31, 20 ~~30, 2019~~20 VS. THREE MONTHS ENDED ~~SEPTEMBER~~MARCH 31, 2030, ~~2018~~19

During the ~~third~~first quarter of ~~2019,~~2020, logistics and brokerage services revenue, before fuel surcharges, ~~decreased 27.5%~~increased 0.9% to ~~$17.7~~$20.5 million as compared to ~~$24.4~~$20.3 million during the ~~third~~first quarter of ~~2018.~~2019. The ~~decrease~~increase relates to ~~a decrease~~an increase in the number of loads ~~and to a decrease in average rates charged~~ during the ~~third~~first quarter of ~~2019~~2020 as compared to the ~~third~~first quarter of ~~2018.~~2019.

~~Salaries, wages~~Rents and ~~benefits~~purchased transportation increased from ~~4.6% of revenues, before fuel surcharges, in the third quarter of 2018 to 5.9%~~84.9% of revenues, before fuel surcharges, during the ~~third~~first quarter of ~~2019. The increase relates primarily~~2019 to ~~the effect of lower revenues without a corresponding decrease in those wages with fixed cost characteristics, such as general and administrative wages.~~

~~Other operating expenses increased from 1.1% of revenues, before fuel surcharges, in the third quarter of 2018 to 1.6%~~89.4% of revenues, before fuel surcharges, during the ~~third~~first quarter of ~~2019.~~2020. The increase ~~related primarily to the effect~~results from paying third party carriers a larger percentage of ~~lower revenues without a corresponding decrease in operating expenses with fixed cost characteristics, such as depreciation and software subscriptions.~~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 ~~94.1%~~92.4% for the ~~third~~first quarter of ~~2018~~2019 to ~~96.0%~~97.5% for the ~~third~~first quarter of ~~2019.~~2020.

~~NINE MONTHS ENDED SEPTEMBER~~ ~~30, 2019~~ ~~VS. NINE MONTHS ENDED SEPTEMBER 30,~~ ~~2018~~

~~During the first nine months of 2019, logistics and brokerage services revenue, before fuel surcharges,~~Non-operating income/(expense) decreased 13.8% to $57.5 million as compared to $66.7 million during the first nine months of 2018. The decrease relates to a decrease in average rates charged during the first nine months of 2019 as compared to the first nine months of 2018.

~~Salaries, wages and benefits increased~~ from ~~4.3% of revenues, before fuel surcharges, in the first nine months of 2018 to 5.6%~~1.7% of revenues, before fuel surcharges, during the first ~~nine months~~quarter of ~~2019. The increase relates primarily~~2019 to an increase in the average number of employees utilized by logistics and brokerage service operations and to the effect of lower revenues without a corresponding decrease in those wages with fixed cost characteristics, such as general and administrative wages.

~~Rents and purchased transportation decreased from 89.3%~~(5.2%) of revenues, before fuel surcharges, during the first ~~nine months~~quarter of ~~2018 to 87.0% of revenues, before fuel surcharges, during the first nine months of 2019. The~~2020. This decrease ~~results from paying third party carriers a smaller percentage of customer revenue.~~

Non-operating income increased from 0.1% of revenues, before fuel surcharges, during the first nine months of 2018 to 0.7% of revenues, before fuel surcharges, during the first nine months of 2019. This increase primarily resulted from ~~an increase in income related to the change in market values of equity securities. An approximate $2.7 million increase~~a decrease in the market value of ~~our~~the Company’s portfolio of marketable equity securities ~~was~~during the quarter ended March 31, 2020 compared to an increase in market value for the portfolio during the same period in 2019. The Company recorded a loss in market value of approximately $8.8 million in non-operating income during the first ~~nine months~~quarter of ~~2019,~~2020, compared to ~~an approximate $0.3~~a $3.2 million ~~decrease~~gain in the market value of our equity securities ~~recorded in non-operating income~~ during the first ~~nine months of 2018.~~

Interest expense increased from 0.6% of revenues, before fuel surcharges, during the first nine months of 2018 to 1.1% of revenues, before fuel surcharges during the first nine months of 2019. This increase is attributable to market increases in interest rates.

The logistics and brokerage services division operating ratio, which measures the ratio of operating expenses, net of fuel surcharges, to operating revenues, before fuel surcharges, improved from 94.6% for the first nine months of 2018 to 94.0% for the first nine monthsquarter of 2019.

THREE MONTHS ENDED ~~SEPTEMBER~~MARCH 31, 20 ~~30, 2019~~20 VS. THREE MONTHS ENDED ~~SEPTEMBER~~MARCH 31, 20 30, ~~2018~~19

~~Net~~Operating income for all divisions was approximately ~~$4.6~~$9.5 million, or ~~4.2%~~8.5% of revenues, before fuel surcharges, for the ~~third~~first quarter of ~~2019~~2020 as compared to ~~net~~operating income of ~~$9.2~~approximately $9.7 million, or ~~7.9%~~8.8% of revenues, before fuel surcharges, for the ~~third~~first quarter of ~~2018.~~2019. Net loss for all divisions was approximately $1.3 million, or 1.2% of revenues, before fuel surcharges for the first quarter of 2020 as compared to net income of $8.3 million, or 7.5% of revenues, before fuel surcharges for the first quarter of 2019. The decrease in net income resulted in a diluted ~~earnings~~loss per share of ~~$0.79~~$(0.23) for the ~~third~~first quarter of ~~2019~~2020 as compared to diluted earnings per share of ~~$1.52 for the third quarter of 2018.~~

~~NINE MONTHS ENDED SEPTEMBER~~ ~~30, 2019~~ ~~VS.~~ ~~NINE MONTHS ENDED SEPTEMBER~~ ~~30,~~ ~~2018~~

~~Net income for all divisions was approximately $21.5 million, or 6.5% of revenues, before fuel surcharges~~$1.39 for the first ~~nine months~~quarter of 2019 as compared to net income of $17.9 million, or 5.4% of revenues, before fuel surcharges for the first nine months of 2018. The increase in net income resulted in diluted earnings per share of $3.65 for the first nine months of 2019 as compared to diluted earnings per share of $2.89 for the first nine months of 2018.2019.

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, installment notes, and our investment margin account.

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During the first ~~nine~~three months of ~~2019,~~2020, we generated ~~$76.4~~$23.6 million in cash from operating activities. Investing activities used ~~$53.8~~$20.9 million in cash in the first ~~nine~~three months of ~~2019.~~2020. Financing activities used ~~$22.6~~$2.6 million in cash in the first ~~nine~~three months of ~~2019.~~2020.

Our primary use of funds is for the purchase of revenue equipment. We typically use installment notes, our existing line of credit on an interim basis, proceeds from the sale or trade of equipment, and cash flows from operations to finance capital expenditures and repay long-term debt. During the first ~~nine~~three months of ~~2019,~~2020, we utilized cash on hand, installment notes, and our ~~line~~lines of credit to finance purchases of revenue equipment and other assets of approximately ~~$84.1~~$35.6 million.

We commonly finance the acquisition of revenue equipment through installment notes with fixed interest rates and terms ranging from 36 to 84 months. During the first ~~nine~~three months of ~~2019,~~2020, the Company’s subsidiary, P.A.M. Transport, Inc., entered into installment obligations totaling approximately ~~$61.6~~$12.5 million for the purpose of purchasing revenue equipment. These obligations are payable in 60 monthly installments.

During the remainder of ~~2019,~~2020, we expect to purchase approximately ~~125~~450 new trucks ~~and 60 new trailers~~ while continuing to sell or trade older equipment, which we expect to result in net capital expenditures of approximately ~~$13.0~~$33.5 million. We have not altered our equipment replenishment cycle or planned capital expenditure in reaction to the COVID-19 pandemic. Management 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. 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~~three months of ~~2019,~~2020, we maintained a revolving line of credit. On January 25, 2019, certain terms of this revolving line of credit were amended to increase the borrowing limit from $40.0 million to $60.0 million, extend the term by one year, reduce the interest rate by 25 basis points and make certain other changes. See “Item 8. Financial Statements and Supplementary Data, Note 1 to the Consolidated Financial Statements – Subsequent Events” in our Annual Report on Form 10K for the year ended December 31, 2018, for additional information. Under the amended credit facility, amountsAmounts outstanding under the line bear interest at LIBOR (determined as of the first day of each month) plus 1.25% ~~(3.35%~~(2.83% at ~~September 30, 2019)~~March 31, 2020), are secured by our trade accounts receivable and mature on July 1, 2022. ~~The amended credit facility also establishes an~~An “unused fee” of 0.25% is charged if average borrowings are less than $18.0 million. At ~~September 30, 2019~~March 31, 2020 outstanding advances on the line of credit were approximately ~~$9.8~~$26.1 million, including approximately ~~$0.5~~$0.4 million in letters of credit, with availability to borrow ~~$50.2~~$33.9 million.

Trade accounts receivable ~~decreased~~increased from ~~$63.4~~$61.8 million at December 31, ~~2018~~2019 to ~~$60.6~~$66.1 million at ~~September 30, 2019.~~March 31, 2020. The ~~decrease resulted from~~increase relates to a ~~decrease~~general increase in freight revenues, which ~~flow~~flows through the accounts receivable ~~during~~account, at the ~~third~~end of the first quarter of ~~2019~~2020 as compared to the ~~fourth~~end of the last quarter of ~~2018.~~

~~Prepaid expenses and deposits decreased from $10.4 million at December 31, 2018 to $8.3 million at September 30,~~ 2019. ~~The decrease relates to the normal amortization of items prepaid as of December 31, 2018, partially offset by the annual prepayment of insurance premiums for various policies that renew on September 1~~^st ~~each year. Insurance prepayments will be amortized over the life of the insurance policies, which is generally September 2019 to August 2020.~~

Marketable equity securities ~~increased~~decreased from ~~$27.6~~$29.5 million at December 31, ~~2018~~2019 to ~~$28.8~~$23.2 million at ~~September 30, 2019.~~March 31, 2020. The ~~$1.2~~$6.3 million ~~increase~~decrease in market value was ~~due to~~primarily the result of an ~~increase~~approximate $8.8 million decrease in the ~~market~~ value of marketable securities held at the end of the quarter and sales of marketable equity securities with a cost basis of ~~$2.7 million,~~approximately $1.2 million. These decreases were partially offset by the purchase of marketable equity securities with a combined market value of approximately ~~$0.1 million partially offset by sales of marketable equity securities with a combined market value of $1.6~~$3.7 million during the first ~~nine months of 2019.~~quarter 2020.

~~Accounts payable increased from $20.0 million at December~~The Company purchased a 51.6 acre terminal in Laredo, TX which includes office, shop, and yard space during the quarter ended March 31, ~~2018 to $27.3 million at September 30, 2019.~~2020. This ~~increase was primarily attributable to~~transaction resulted in an increase of $8.8 million in ~~accrued equipment purchases from $1.6~~Land and $10.9 million ~~at December~~in Structures and improvements recorded in our Condensed Consolidated Balance Sheet as of March 31, ~~2018 to $5.7 million at September 30, 2019 and to an increase in bank overdrafts from $3.7 million at December 31, 2018 to $5.8 million at September 30, 2019.~~2020.

Long-term debt and current maturities of long term-debt are reviewed on an aggregate basis, as the classification of amounts in each category are typically affected merely by the passage of time. Long-term debt and current maturities of long-term debt, on an aggregate basis, increased from ~~$221.2~~$241.8 million at December 31, ~~2018~~2019 to ~~$230.6~~$249.2 million at ~~September 30, 2019.~~March 31, 2020. The increase was primarily related to the ~~addition~~net effect of ~~$61.6 million in equipment installment notes,~~additional borrowings received during the first three months of 2020, partially offset by installment note payments made during the ~~first nine months of 2019.~~quarter.

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.

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

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

We hold certain actively traded marketable equity securities, which subjects the Company to fluctuations in the fair market value of its investment portfolio based on the current market price of such securities. The recorded value of marketable equity securities ~~increased~~decreased to ~~$28.8~~$23.2 million at ~~September 30, 2019~~March 31, 2020 from ~~$27.5~~$29.5 million at December 31, ~~2018.~~2019. A 10% decrease in the market price of our marketable equity securities would cause a corresponding 10% decrease in the carrying amounts of these securities, or approximately ~~$2.9~~$2.3 million. For additional information with respect to the marketable equity securities, see Note D to our Condensed Consolidated Financial Statements.

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 ~~$9.2~~$25.6 million of variable rate debt was outstanding under our line of credit for a full fiscal year; a hypothetical 100 basis point increase in LIBOR would result in approximately ~~$92,000~~$256,000 of additional interest expense.

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

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

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

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

Based on management’s evaluation, our chief executive officer and chief financial officer concluded that, as of ~~September 30, 2019,~~March 31, 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, 2019~~March 31, 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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The nature of our business routinely results in litigation, primarily involving claims for personal injuries and property damage incurred in the transportation of freight. We believe that all such routine litigation is adequately covered by insurance and that adverse results in one or more of those cases would not have a material adverse effect on our financial condition.

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

~~We are a defendant in a collective-action lawsuit which was filed on May 29, 2019, in~~On March 31, 2020, the United States District Court for the Western District of ~~Arkansas. The~~Arkansas dismissed the collective- and class-action lawsuit filed against the company on May 29, 2019 by plaintiffs, who ~~are~~were independent contractors ~~who have been under contract with the Company during the period of May 29, 2016, through the date of filing, allege~~alleging violations under the Fair Labor Standards Act and the Arkansas Minimum Wage Law. The plaintiffs, through their attorneys, ~~have filed causes of action alleging~~alleged “misclassification as independent contractors, payment on the basis of miles without regard to the number of hours worked, improper deductions, and failure to pay minimum wage.” The dismissal of this lawsuit resulted when the Company and plaintiffs ~~are seeking actual and liquidated damages to include court costs and~~reached a settlement agreement for approximately $421,000, plus legal fees. Legal reserve accruals in excess of the amount outlined in the settlement agreement were reversed during the quarter ended March 31, 2020, resulting in a reduction in accrued expenses and other liabilities in the Company’s consolidated balance sheets.

The ~~lawsuit is~~Company’s participation in ~~preliminary stages~~the settlements of the above matters does not constitute an admission by the Company of any fault or liability, and ~~we cannot reasonably estimate, at this time,~~ the ~~possible loss~~Company does not admit any fault or ~~range of loss, if any, that may arise from this lawsuit. Management has determined that any losses under this claim will not be covered by existing insurance policies.~~liability.

~~Other than the risk factors set forth~~Except as noted below, there ~~were~~have been no material changes ~~during~~to the ~~period ended September 30, 2019 from the~~Company’s risk factors as previously ~~discussed~~disclosed in Item ~~1A. Risk Factors in our~~1A to Part I of the Company’s Annual Report on Form 10-K for the year ended December 31, 2019.

~~We are highly dependent~~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 ~~major~~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 ~~loss~~automotive industry, our freight volumes and revenues have been significantly affected by the closure of North American automotive manufacturing facilities beginning in late March. Although we expect our automotive customers to begin resuming operations in the coming weeks, the extent to which production will return to pre-pandemic levels remains uncertain. Any further delays in resumption of automotive production and other consumer activity affecting our customers and 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 materially adverse effect on our operating results. Further, negative financial results, an economic downturn or uncertainty, or a ~~reduction in services from one~~tightening of credit markets caused by COVID-19 or ~~more of which~~other similar outbreaks could have a material adverse effect on our ~~business.~~

~~A significant portion of our revenue is generated from our major customers. For 2018, our top five customers, based on revenue, accounted for approximately 42% of our revenue,~~liquidity and our ~~three largest customers, Fiat Chrysler Automobiles, General Motors Company,~~ability to effectively meet our short- and Ford Motor Company, accounted for approximately 16%, 13% and 8% of our revenue, respectively. We also provide transportation services to other manufacturers who are suppliers for automobile manufacturers. As a result, the concentration of our business within the automobile industry is greater than the concentration in a single customer. Approximately 46% of our revenues for 2018 were derived from transportation services provided to the automobile industry.

~~Generally, we do not have~~ long-term contractual relationships with our major customers, and we cannot assure that our customer relationships will continue as presently in effect. A reduction in or termination of our services by our major customers could have a material adverse effect on our business and operating results. Further, a continuation of the recent labor strike affecting General Motors or a labor strike affecting another major customer could significantly disrupt our business from that customer and adversely impact our operations and profitability.

~~A determination by regulators or judicial process that independent contractors are employees could expose us to various liabilities and additional costs.~~

Tax and other regulatory authorities, as well as independent contractors themselves, have increasingly asserted that independent contractors in the transportation service industry are employees rather than independent contractors. There can be no assurance that interpretations and laws that support the independent contractor status will not change or that regulatory authorities or independent contractors will not successfully assert a position that re-classifies independent contractors to be employees. If our independent contractors are determined to be our employees, that determination could materially increase our exposure under a variety of federal and state tax, workers’ compensation, unemployment benefits, labor, employment and tort laws, as well as our potential liability for employee benefits. In addition, such changes may be applied retroactively, and if so, we may be required to pay additional amounts to compensate for prior periods. Any of the above increased costs would adversely affect our business and operating results.financial obligations.

Table of Contents

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

The following table summarizes the Company’s common stock repurchases during the ~~third~~first quarter of ~~2019.~~2020 made pursuant to the stock repurchase program. 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.”

Table of Contents

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.

	Three Months Ended September 30,								Nine Months ended September 30,								Three Months Ended March 31,
	2019				2018				2019				2018				2020				2019
	Amount		%		Amount		%		Amount		%		Amount		%		Amount		%		Amount		%
	(in thousands, except percentage data)																(in thousands, except percentage data)

Truckload Services revenue	$	92,443		83.9	$	92,842		79.2	$	275,322		82.7	$	262,497		79.7	$	91,311		81.7	$	90,013		81.6
Brokerage and Logistics Services revenue		17,706		16.1		24,417		20.8		57,523		17.3		66,747		20.3		20,511		18.3		20,332		18.4
Total revenues	$	110,149		100.0	$	117,259		100.0	$	332,845		100.0	$	329,244		100.0	$	111,822		100.0	$	110,345		100.0

	Three Months Ended				Nine months Ended
	September 30,				September 30,					Three Months Ended
	2019		2018		2019		2018			March 31,
	(in thousands)									2020		2019
									(in thousands)
Long term	$	67	$	-	$	106	$	-		$	134	$	-
Short term		563		572		1,649		1,579			580		502
Total	$	630	$	572	$	1,755	$	1,579		$	714	$	502

	Three Months Ended				Nine months Ended
	September 30,				September 30,					Three Months Ended
	2019		2018		2019		2018			March 31,
	(in thousands)									2020		2019
									(in thousands)
Leased truck revenue (recorded in revenue, before fuel surcharge)	$	2,244	$	1,936	$	7,024	$	5,563		$	2,394	$	2,448
Leased dock space revenue (recorded in non-operating income)		39		39		116		116
Leased facility space revenue (recorded in non-operating income)											67		39
Total lease revenue	$	2,283	$	1,975	$	7,140	$	5,679		$	2,461	$	2,487

	(in thousands)		(in thousands)

2019 (remaining)	$	2,479
2020		6,879
2020 (remaining)			$	5,370
2021		3,042		4,660
2022		2,657		3,951
2023		1,645		2,864
2024				1,128
Thereafter		-		1
Total future minimum lease payments receivable	$	16,702	$	17,974

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, 2019		--		--		--		244,792
August 1-31, 2019		1,911	$	50.71		1,911		242,881
September 1-30, 2019		1,425		54.42		1,425		241,456
January 1-31, 2020										2,447	$	54.26		2,447		226,549
February 1-29, 2020										-		-		-		226,549
March 1-31, 2020										6,728		27.96		6,728		219,821
Total		3,336	$	52.30		3,336				9,175	$	34.97		9,175

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

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

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

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

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

Stock compensation							305								305

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

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

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

Net Income		-			-		-		-			-			1,387		1,387

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

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

Stock based compensation (1)		-			-		162		-			-			-		162

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

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

Net Income		-			-		-		-			-			7,289		7,289

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

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

Stock based compensation		-			-		233		-			-			-		233

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

Net Income		-			-		-		-			-			9,248		9,248

Exercise of stock options and vesting of stock awards-shares issued including tax benefits		1			-		18		-			-			-		18

Treasury stock repurchases		(43	)		-		-		-			(2,720	)		-		(2,720	)

Stock based compensation		-			-		162		-			-			-		162

Balance at September 30, 2018		6,012		$	116	$	82,601		-		$	(139,434	)	$	193,037	$	136,320

	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~~3.3		First Amendment to the Amended and Restated ~~Loan Agreement, dated March 28, 2016, by and among P.A.M. Transport, Inc., First Tennessee Bank National Association and~~By-Laws of the ~~Company~~Registrant (incorporated by reference to Exhibit ~~4.1 of the Company’s Form 8-K filed on April 1, 2016.)~~
~~4.2~~		Amendment to Amended and Restated Loan Agreement, dated July 27, 2017, by and among P.A.M. Transport, Inc., First Tennessee Bank National Association and the Company (incorporated by reference to Exhibit 4.23.2 of the Company’s Form 8-K filed on January ~~31, 2019.~~7, 2020.)
~~4.3~~		Second Amendment to Amended and Restated Loan Agreement, dated January 25, 2019 by and among P.A.M. Transport, Inc., First Tennessee Bank National Association and the Company (incorporated by reference to Exhibit 4.3 of the Company’s Form 8-K filed on January 31, 2019.)
~~4.4~~		Fifth Amended and Restated Consolidated Revolving Credit Note, dated January 25, 2019, by P.A.M. Transport, Inc. in favor of First Tennessee Bank National Association (incorporated by reference to Exhibit 4.4 of the Company’s Form 8-K filed on January 31, 2019.)
~~4.5~~		Amended and Restated Security Agreement, dated March 28, 2016, by and between P.A.M. Transport, Inc. and First Tennessee Bank National Association (incorporated by reference to Exhibit 4.3 of the Company’s Form 8-K filed on April 1, 2016.)
~~4.6~~		First Amendment to Amended and Restated Security Agreement, dated January 25, 2019, by and between P.A.M. Transport, Inc. and First Tennessee Bank National Association (incorporated by reference to Exhibit 4.6 of the Company’s Form 8-k filed on January 31, 2019.)
~~4.7~~		Fifth Amended and Restated Guaranty Agreement of the Company, dated January 25, 2019, in favor of First Tennessee Bank National Association (incorporated by reference to Exhibit 4.7 of the Company’s Form 8-K filed on January 31, 2019.)
31.1		Rule 13a-14(a) Certification of Principal Executive Officer
31.2		Rule 13a-14(a) Certification of Principal Financial Officer
32.1		Certification Pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS		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

	P.A.M. TRANSPORTATION SERVICES, INC.


Dated: ~~November~~May 1, ~~2019~~2020	By: /s/ Daniel H. Cushman
	Daniel H. Cushman
	President and Chief Executive Officer
	(principal executive officer)

Dated: ~~November~~May 1, ~~2019~~2020	By: /s/ Allen W. West
	Allen W. West
	Vice President-Finance, Chief Financial
	Officer, Secretary and Treasurer
	(principal accounting and financial officer)