USA TRUCK INC - Quarter Report: 2016 March (Form 10-Q)

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		March 31,				December 31,
		2016				2015
Assets
Current assets:
Cash		$	1,403			$	87
Accounts receivable, net of allowance for doubtful accounts of $870 and $608, respectively			56,260				53,324
Other receivables			3,678				5,094
Inventories			457				748
Assets held for sale			5,229				7,979
Income taxes receivable			8,485				6,159
Prepaid expenses and other current assets			5,745				4,876
Total current assets			81,257				78,267
Property and equipment:
Land and structures			33,480				32,910
Revenue equipment			286,020				289,045
Service, office and other equipment			22,628				22,156
Property and equipment, at cost			342,128				344,111
Accumulated depreciation and amortization			(136,894	)			(137,327	)
Property and equipment, net			205,234				206,784
Other assets			1,350				1,405
Total assets		$	287,841			$	286,456
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable		$	25,220			$	24,473
Current portion of insurance and claims accruals			10,589				10,706
Accrued expenses			13,997				8,836
Current maturities of capital leases			16,375				12,190
Total current liabilities			66,181				56,205
Deferred gain			660				701
Long-term debt, less current maturities			75,900				70,400
Capital leases, less current maturities			13,003				18,845
Deferred income taxes			38,962				37,943
Insurance and claims accruals, less current portion			8,585				8,585
Total liabilities			203,291				192,679
Commitments and contingencies
Stockholders’ equity:
Preferred Stock, $.01 par value; 1,000,000 shares authorized			—				—
Common Stock, $.01 par value; 30,000,000 shares authorized; issued 12,125,170 shares, and 11,946,253 shares, respectively			121				119
Additional paid-in capital			67,443				67,370
Retained earnings			64,064				65,871
Less treasury stock, at cost (2,727,664 shares, and 2,268,608 shares, respectively)			(47,078	)			(39,583	)
Total stockholders’ equity			84,550				93,777
Total liabilities and stockholders’ equity		$	287,841			$	286,456

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		Three Months Ended
		March 31,
Revenue:		2016				2015
Operating revenue		$	110,618			$	132,887
Operating expenses:
Salaries, wages and employee benefits			32,573				37,872
Fuel and fuel taxes			10,189				17,978
Depreciation and amortization			7,272				10,802
Insurance and claims			4,768				6,194
Equipment rents			1,860				783
Operations and maintenance			9,213				10,291
Purchased transportation			36,403				38,770
Operating taxes and licenses			1,122				1,320
Communications and utilities			880				863
Gain on disposal of assets, net			(396	)			(503	)
Restructuring, impairment and other costs			5,264				—
Other			3,833				3,991
Total operating expenses			112,981				128,361
Operating (loss) income			(2,363	)			4,526
Other expenses (income):
Interest expense, net			565				630
Loss on extinguishment of debt			—				750
Other, net			203				202
Total other expenses, net			768				1,582
(Loss) income before income taxes			(3,131	)			2,944
Income tax (benefit) expense			(1,324	)			1,309
Net (loss) income and comprehensive (loss) income		$	(1,807	)		$	1,635
Net (loss) income per share:
Average shares outstanding (basic)			9,381				10,395
Basic (loss) earnings per share		$	(0.19	)		$	0.16
Average shares outstanding (diluted)			9,381				10,516
Diluted (loss) earnings per share		$	(0.19	)		$	0.16

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		Common
		Stock								Additional
						Par				Paid-in				Retained				Treasury
		Shares				Value				Capital				Earnings				Stock				Total
Balance at December 31, 2015			11,946			$	119			$	67,370			$	65,871			$	(39,583	)		$	93,777
Exercise of stock options			1				—				2				—				—				2
Excess tax benefit from exercise of stock options			—				—				(23	)			—				—				(23	)
Purchase of treasury stock			—				—				—				—				(7,495	)			(7,495	)
Share-based compensation			—				—				131				—				—				131
Restricted stock award grant			203				2				(1	)			—				—				1
Forfeited restricted stock			(23	)			—				—				—				—				—
Net share settlement related to restricted stock vesting			(2	)			—				(36	)			—				—				(36	)
Net loss			—				—				—				(1,807	)			—				(1,807	)
Balance at March 31, 2016			12,125			$	121			$	67,443			$	64,064			$	(47,078	)		$	84,550

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		Three Months Ended
		March 31,
Operating activities:		2016				2015
Net (loss) income		$	(1,807	)		$	1,635
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Depreciation and amortization			7,272				10,802
Provision for doubtful accounts			319				17
Deferred income taxes, net			1,020				510
Share-based compensation			131				226
Gain on disposal of assets, net			(396	)			(503	)
Loss on extinguishment of debt			—				750
Impairment of property and equipment			1,070				—
Other			(41	)			(2	)
Changes in operating assets and liabilities:
Accounts receivable			(4,164	)			6,739
Inventories and prepaid expenses			(581	)			(2,841	)
Accounts payable and accrued liabilities			3,927				2,167
Insurance and claims accruals			(376	)			550
Other long-term assets and liabilities			56				294
Net cash provided by operating activities			6,430				20,344
Investing activities:
Capital expenditures			(2,220	)			(11,678	)
Proceeds from sale of property and equipment			2,913				6,196
Net cash provided by (used in) investing activities			693				(5,482	)
Financing activities:
Borrowings under long-term debt			12,424				108,736
Payments on long-term debt			(6,923	)			(112,236	)
Payments on capitalized lease obligations			(1,657	)			(7,507	)
Net change in bank drafts payable			(2,100	)			(2,409	)
Excess tax (benefit) payments from exercise of stock options			(23	)			433
Principal payments on note payable			—				(335	)
Purchase of common stock			(7,495	)			—
Net payments on stock-based awards			(33	)			(160	)
Net cash used in financing activities			(5,807	)			(13,478	)
Increase in cash			1,316				1,384
Cash:
Beginning of period			87				205
End of period		$	1,403			$	1,589
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest		$	606			$	570
Income taxes			121				55
Supplemental disclosure of non-cash investing activities:
Purchases of revenue equipment included in accounts payable			5,358				238

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Note 1 – Basis of Presentation

 

In the opinion of the management of USA Truck, Inc., the accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information. Certain information and footnote disclosures normally included in financial statements required by GAAP have been condensed or omitted. All normal recurring adjustments considered necessary for a fair presentation have been included. Operating results for the three month period ended March 31, 2016 are not necessarily indicative of the results that may be expected for the year ending December 31, 2016. These financial statements should be read in conjunction with the financial statements, and footnotes thereto, included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2015.

 

The Company has recast certain prior period amounts to reflect the change in accounting principle for tires as disclosed in its Form 10-Q for the period ending September 30, 2015.

NOTE 2 – NOTE RECEIVABLE

 

During 2010, the Company sold its terminal facility in Shreveport, Louisiana. In connection with this sale, the purchaser gave the Company cash in the amount of $0.2 million and a note receivable in the amount of $2.1 million due November 2015, which was recorded in the line item “Other receivables” in the accompanying condensed consolidated balance sheets. The purchaser-debtor defaulted on the note receivable by not making the principal payment in November 2015, and the Company is undertaking actions to collect. The note receivable is collateralized by a first priority mortgage on the property. The Company believes, based on a recent appraisal, the value of the property exceeds the amount of the note receivable plus collection costs. Accordingly, no valuation allowance has been recorded. The Company had previously deferred $0.7 million of gain on the sale of the property, with gain recognized into earnings only as payments on the note receivable were received.

 

In February 2016, the Company, and the purchaser-debtor modified the original asset sale agreement (hereinafter referred to as the “Original Agreement”) for the property as a result of the default by the purchaser-debtor in November 2015. The modifications to the Original Agreement are as follows:

 

(1)	As of January 1, 2016, the purchaser-debtor will no longer make monthly payments to the Company, as required under the Original Agreement.
(2)	The purchaser-debtor agrees that in addition to the balloon payment of $1.9 million, the Company shall also be entitled to receive 25% of the net sale proceeds from any future sale (including any foreclosure sale) of the property in excess of the balloon payment, closing costs, and realtor commissions.
(3)	At any time, the Company retains the right to enforce its rights as creditor, mortgagee, and holder of vendor’s privilege and declare the unpaid portion of the purchase price, interest, costs, and attorneys’ fees immediately due and payable. The Company’s rights include instituting foreclosure proceedings and/or other legal action.

NOTE 3 – EQUITY COMPENSATION AND EMPLOYEE BENEFIT PLANS

 

The Company adopted the 2014 Omnibus Incentive Plan (the “Incentive Plan”) in May 2014. The Incentive Plan replaced the 2004 Equity Incentive Plan (“the “Prior Plan”) and provides for the granting of equity-based awards covering up to 500,000 shares of common stock to directors, officers and other key employees and consultants, in addition to the shares available under the Prior Plan on the effective date of the “Incentive Plan”. As of March 31, 2016, 158,671 shares remain available for the issuance of future equity-based compensation awards.

 

The components of compensation expense recognized, net of forfeiture recoveries, related to equity-based compensation is reflected in the table below for the years indicated (in thousands):

 

 

 

Compensation expense related to all equity-based compensation awards granted under the Incentive Plan is included in salaries, wages and employee benefits in the accompanying consolidated statements of operations and comprehensive income (loss).

 

Stock options

 

Stock options are the contingent right of award holders to purchase shares of the Company’s common stock at a stated price for a limited time. The fair value of each option award is estimated on the date of grant using the Black-Scholes-Merton option-pricing formula, and is recognized over the vesting period of the award. The vesting period of option awards is generally 3 or 4 years and awards may be exercised over a three or ten year term. While the Company did not grant any new stock options in 2016 or 2015, there was a modification to an existing stock option award in the third quarter of 2015 that resulted in a deemed new award being granted.

 

The following assumptions were used to value the stock options granted or deemed to have been granted during the years indicated. No stock options were granted during the three-month period ended March 31, 2016.

 

 

The expected volatility is a measure of the expected fluctuation in the Company’s share price based on the historical volatility of the Company’s stock. Expected life represents the length of time an option contract is anticipated to be outstanding before being exercised. The risk-free interest rate is based on an implied yield on United States zero-coupon treasury bonds with a remaining term equal to the expected life of the outstanding options. In addition to the above, a factor for anticipated forfeitures is also included, which represents the number of shares under options expected to be forfeited over the expected life of the options.

 

The following table summarizes the stock option activity under the Incentive Plan:

 

	(1)	The intrinsic value of a stock option is the amount by which the market value of the underlying stock exceeds the exercise price of the option. The per share market value of the Company’s common stock, as determined by the closing price on March 31, 2016 (last trading day of the quarter), was $18.84.

 

Restricted stock awards

 

Restricted stock awards are shares of the Company’s common stock that are granted subject to defined restrictions.  The estimated fair value of restricted stock awards is based upon the closing price of the Company’s common stock on the date of grant.  Vesting provisions for currently outstanding restricted stock awards to our employees include performance vesting criteria based upon corporate financial metrics, metrics tied to achievement of specific reportable segment performance, personal metrics that drive consolidated performance, and stock price objectives, as well as time vested awards generally vesting over four years.  We also have outstanding restricted stock awards to our directors that are generally granted at each annual meeting of stockholders and vest at the immediately following annual meeting.

 

 

Information related to the restricted stock awarded for the three month period ended March 31, 2016, is as follows:

 

	(1)	The shares were valued at the closing price of the Company’s common stock on the dates of the awards.

 

As of March 31, 2016, approximately $1.8 million of unrecognized compensation cost related to nonvested restricted stock awards is expected to be recognized over a weighted-average period of 3.0 years.

NOTE 4 – REPURCHASE OF EQUITY SECURITIES

 

During 2015, the Company’s board of directors authorized the repurchase of up to one million shares of the Company’s common stock to be made over a three-year period ending July 28, 2018. During January 2016, the Company repurchased a total of 46,262 shares at a weighted average price of $17.69 per share for an aggregate cost of approximately $0.8 million. These shares constituted the remainder of the initial share repurchase authorization.

 

In January 2016, the Company’s board of directors authorized the repurchase of up to an additional two million shares of the Company’s common stock, which will expire in February 2019 unless earlier terminated or extended by the board of directors. During the quarter ended March 31, 2016, the Company, through a Rule 10b5-1 plan, repurchased 399,170 shares under the second stock repurchase authorization at a weighted average price of $16.72 per share for an aggregate cost of approximately $6.7 million.

NOTE 5 – SEGMENT REPORTING

 

The Company’s two reportable segments are Trucking and USAT Logistics. During the first quarter of 2016, the Company rebranded its asset-light business (formerly known as Strategic Capacity Solutions (“SCS”), as USAT Logistics (“Logistics”).

 

Trucking. Trucking is comprised of truckload and dedicated freight services. Truckload provides services as a medium to long-haul common carrier. USA Truck has provided truckload services since its inception, and derives the largest portion of its revenue from these services. Dedicated freight provides truckload services to specific customers for shipments over particular routes at particular times utilizing Company revenue equipment.

 

USAT Logistics. Logistics consists of freight brokerage and rail intermodal services. Both of these service offerings match customer shipments with available equipment of authorized carriers and provide services that complement the Company’s trucking operations.

 

In determining its reportable segments, the Company focuses on financial information, such as operating revenues, operating expense categories, operating ratios, operating income and key operating statistics, which the Company’s management uses to make operating decisions.

 

Assets are not allocated to Logistics, as those operations provide truckload freight services to customers through arrangements with third party carriers who utilize their own equipment. To the extent rail intermodal operations require the use of Company-owned assets, they are obtained from the Company’s trucking segment on an as-needed basis. Depreciation and amortization expense is allocated to Logistics based on the assets specifically utilized to generate revenue. All intercompany transactions between segments reflect rates similar to those that would be negotiated with independent third parties. All other expenses for Logistics are specifically identifiable direct costs or are allocated to Logistics based on relevant drivers.

 

 

A summary of operating revenue by segment is as follows (in thousands):

 

	(1)	Includes foreign revenue of $9.6 million and $11.8 million for the three months ended March 31, 2016 and 2015, respectively.

 

A summary of operating (loss) income by segment is as follows (in thousands):

 

 

 

A summary of depreciation and amortization by segment is as follows (in thousands):

 

 

Note 6 – Accrued Expenses

 

Accrued expenses consisted of the following (in thousands):

 

 

(1)

Refer to Note 13 of the footnotes to the Company’s condensed consolidated financial statements for additional information regarding the restructuring, impairment and other costs.

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Note 7 – LONG-TERM DEBT

 

 

Long-term debt consisted of the following (in thousands):

 

 

CREDIT FACILITY

 

In February 2015, the Company entered into a new senior secured revolving credit facility (the “Credit Facility”) with a group of lenders and Bank of America, N.A., as agent (“Agent”). Contemporaneously with the funding of the Credit Facility, the Company paid off the obligations under its prior credit facility and terminated such facility.

 

The Credit Facility is structured as a $170.0 million revolving credit facility, with an accordion feature that, so long as no event of default exists, allows the Company to request an increase in the revolving credit facility of up to $80.0 million, exercisable in increments of $20.0 million. The Credit Facility is a five-year facility scheduled to terminate on February 5, 2020. Borrowings under the Credit Facility are classified as either “base rate loans” or “LIBOR loans”. Base rate loans accrue interest at a base rate equal to the Agent’s prime rate plus an applicable margin that is set at 0.50% through May 31, 2016 and adjusted quarterly thereafter between 0.25% and 1.00% based on the Company’s consolidated fixed charge coverage ratio. LIBOR loans accrue interest at LIBOR plus an applicable margin that is set at 1.50% through May 31, 2016 and adjusted quarterly thereafter between 1.25% and 2.00% based on the Company’s consolidated fixed charge coverage ratio. The Credit Facility includes, within its $170.0 million revolving credit facility, a letter of credit sub-facility in an aggregate amount of $15.0 million and a swing line sub-facility (the “Swing line”) in an aggregate amount of $20.0 million. An unused line fee of 0.25% is applied to the average daily amount by which the lenders’ aggregate revolving commitments exceed the outstanding principal amount of revolver loans and the aggregate undrawn amount of all outstanding letters of credit issued under the Credit Facility. The Credit Facility is secured by a pledge of substantially all of the Company’s assets, except for any real estate or revenue equipment financed outside the Credit Facility.

 

Borrowings under the Credit Facility are subject to a borrowing base limited to the lesser of (A) $170.0 million; or (B) the sum of (i) 90% of eligible investment grade accounts receivable (reduced to 85% in certain situations), plus (ii) 85% of eligible non-investment grade accounts receivable, plus (iii) the lesser of (a) 85% of eligible unbilled accounts receivable and (b) $10.0 million, plus (iv) the product of 85% multiplied by the net orderly liquidation value percentage applied to the net book value of eligible revenue equipment, plus (v) 85% multiplied the net book value of otherwise eligible newly acquired revenue equipment that has not yet been subject to an appraisal. The Credit Facility contains a single springing financial covenant, which requires the Company to maintain a consolidated fixed charge coverage ratio of at least 1.0 to 1.0. The financial covenant springs only in the event excess availability under the Credit Facility drops below 10% of the lenders’ total commitments under the Credit Facility.

 

The Credit Facility includes usual and customary events of default for a facility of this nature and provides that, upon the occurrence and continuation of an event of default, payment of all amounts payable under the Credit Facility may be accelerated, and the lenders’ commitments may be terminated. The Credit Facility contains certain restrictions and covenants relating to, among other things, dividends, liens, acquisitions and dispositions, affiliate transactions, and other indebtedness.

 

The average interest rate including all borrowings made under the Credit Facility as of March 31, 2016 was 1.98%. As debt is repriced on a monthly basis, the borrowings under the Credit Facility approximate fair value. As of March 31, 2016, the Company had outstanding $4.3 million in letters of credit and had approximately $82.1 million available under the Credit Facility.

 

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Note 8 – LEASES AND Commitments

 

CAPITAL LEASES

 

The Company leases certain equipment under capital leases with terms ranging from 15 to 60 months. Balances related to these capitalized leases are included in property and equipment in the accompanying condensed consolidated balance sheets and are set forth in the table below for the periods indicated (in thousands)

 

The Company has capitalized lease obligations relating to revenue equipment of $29.4 million, of which $16.4 million represents the current portion. Such leases have various termination dates extending through September 2019 and contain renewal or fixed price purchase options. The effective interest rates on the leases range from 1.68% to 3.11% as of March 31, 2016. The lease agreements require payment of property taxes, maintenance and operating expenses. Amortization of capital leases was $1.3 million and $2.7 million for the three months ended March 31, 2016 and 2015, respectively.

 

OPERATING LEASES

 

Rent expense associated with operating leases was $2.5 million and $1.3 million for the three months ended March 31, 2016 and 2015, respectively. Rent expense relating to tractors, trailers and other operating equipment is included in the “Equipment rents” line item, while rent expense relating to office equipment is included in the “Operations and maintenance” line item in the accompanying condensed consolidated statements of operations.

 

As of March 31, 2016, the Company has entered into leases with lessors who do not participate in the Credit Facility. Currently, such leases do not contain cross-default provisions with the Credit Facility.

 

As of March 31, 2016, the future minimum payments, including interest, under capitalized leases with initial terms of one year or more and future rentals under operating leases for certain facilities, office equipment, and revenue equipment with initial terms of one year or more, were as follows for the years indicated (in thousands).

 

 

OTHER COMMITMENTS

 

As of March 31, 2016, the Company had no commitments for purchases of non-revenue equipment and commitments of approximately $50.0 million for purchases of revenue equipment. The Company anticipates taking delivery of these purchases throughout the remainder of 2016.

NOTE 9 – INCOME tAXES

 

During the three months ended March 31, 2016 and 2015, effective tax rates were 42.3% and 44.5%, respectively. Income tax expense varies from the amount computed by applying the statutory federal tax rate to income before income taxes primarily due to state income taxes, net of federal income tax effect, adjusted for permanent differences, the most significant of which is the effect of the per diem pay structure for the Company’s drivers. Drivers may elect to receive non-taxable per diem pay in lieu of a portion of their taxable wages. This per diem program increases the Company’s drivers’ net pay per mile, after taxes, while decreasing gross pay, before taxes. As a result, salaries, wages and employee benefits costs are slightly lower and effective income tax rates are higher than the statutory rate. Generally, as pre-tax income increases, the impact of the driver per diem program on the effective tax rate decreases, because aggregate per diem pay becomes smaller in relation to pre-tax income, while in periods where earnings are at or near breakeven, the impact of the per diem program on the Company’s effective tax rate can be significant. Due to the partially nondeductible effect of per diem pay, the Company’s tax rate will fluctuate in future periods based on fluctuations in earnings and in the number of drivers who elect to receive this pay structure.

 

The Company accounts for any uncertainty in income taxes by determining whether it is more likely than not that a tax position taken in a tax return will be sustained upon examination by the appropriate taxing authority based on the technical merits of the position. In that regard, the Company has analyzed filing positions in its federal and applicable state tax returns as well as in all open tax years. Periods subject to examination for the Company’s federal returns are the 2012 – 2015 tax years. Management believes that the Company’s income tax filing positions and deductions will be sustained on examination and does not anticipate any adjustments that will result in a material change to its consolidated financial position, results of operations and cash flows. In conjunction with the foregoing, the Company’s policy is to recognize interest related to unrecognized tax benefits as interest expense and penalties as operating expenses. No unrecognized tax benefits have been recorded as of March 31, 2016.

 

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Note 10 – EARNINGS (LOSS) Per Share

 

Basic earnings (loss) per share is computed based on the weighted average number of shares of common stock outstanding during the period. Diluted earnings (loss) per share is computed by adjusting the weighted average number of shares of common stock outstanding by common stock equivalents attributable to dilutive stock options and restricted stock. The computation of diluted earnings (loss) per share does not assume conversion, exercise or contingent issuance of securities that would have an antidilutive effect on income (loss) per share.

 

The following table sets forth the computation of basic and diluted earnings (loss) per share (in thousands, except per share amounts):

 

 

NOTE 11 – LEGAL PROCEEDINGS

 

The Company is party to routine litigation incidental to its business, primarily involving claims for personal injury and property damage incurred in the transportation of freight. The Company maintains insurance to cover liabilities in excess of certain self-insured retention levels. Though it is the opinion of management that these claims are immaterial to the Company’s long-term financial position, adverse results related to one or more of these claims could have a material adverse effect on the Company’s condensed consolidated financial statements in any given reporting period.

 

NOTE 12 – NEW ACCOUNTING PRONOUNCEMENTS

 

In May, 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers (“ASU 2014-09”), which supersedes nearly all existing revenue recognition guidance under GAAP. The core principle of ASU 2014-09 is to recognize revenue when promised goods or services are transferred to customers in an amount that reflects the consideration to which an entity expects to be entitled for those goods or services. ASU 2014-09 defines a five-step process to implement this core principle and, in doing so, more judgment and estimates may be required within the revenue recognition process than are required under existing GAAP. The standard provides for using either of the following transition methods: (i) a full retrospective approach reflecting the application of the standard in each prior reporting period with the option to elect certain practical expedients, or (ii) a retrospective approach with the cumulative effect of initially adopting ASU 2014-09 recognized at the date of adoption (which includes additional footnote disclosures). In August 2015, the FASB issued ASU 2015-14, “Revenue From Contracts with Customers – Deferral of the Effective Date”, which delayed the effectiveness of ASU 2014-09 to annual periods beginning after December 15, 2017, and interim periods therein. The adoption of this guidance is not expected to have a material impact on the Company's consolidated financial statements.

 

In February 2016, the FASB issued ASU No. 2016-02, Leases, which requires lessees to recognize a right-to-use asset and a lease obligation for all leases. Lessees are permitted to make an accounting policy election to not recognize an asset and liability for leases with a term of twelve months or less. Lessor accounting under the new standard is substantially unchanged. Additional qualitative and quantitative disclosures, including significant judgments made by management, will be required. The new standard, which will become effective for the Company beginning with the first quarter 2019, requires a modified retrospective transition approach and includes a number of practical expedients. Early adoption of the standard is permitted. The Company is currently evaluating the impacts the adoption of this accounting guidance will have on the consolidated financial statements

 

 

In March 2016, the FASB issued ASU 2016-09, Improvements to Employee Share-Based Payment Accounting, which simplifies several aspects of the accounting for employee share-based payment transactions including the accounting for income taxes, forfeitures, and statutory tax withholding requirements, as well as classification of related amounts within the statement of cash flows. The new standard will become effective for the Company beginning with the first quarter of 2017, with early adoption permitted. The Company is currently evaluating the impacts the adoption of this accounting guidance will have on the consolidated financial statements.

 

NOTE 13 – RESTRUCTURING, IMPAIRMENT AND OTHER COSTS

 

During the quarter ended March 31, 2016, the Company took steps to streamline and simplify its operations to better align the Company’s cost structure. In the Company’s Trucking segment, the Company announced a plan to close its maintenance facilities in Forest Park, Georgia and South Holland, Illinois during the first quarter of 2016. Additionally, in the Company’s Logistics segment, the Company announced a plan to close certain branch offices located at Olathe, Kansas and Salt Lake City, Utah. These closures are expected to improve operating productivity, enhance capacity utilization and increase shareholder value.

 

The head count reduction reflected a total of 47 team members across multiple departments, including 2 contractors. Employees separated or to be separated from the Company as a result of these streamlining initiatives were offered severance benefits and the termination was communicated to them on or prior to March 31, 2016. The agreement with the contractors was cancelled and cancellation penalties will be paid, where required. The expenses recorded during the quarter ended March 31, 2016, included costs related to involuntary terminations and other direct costs associated with implementing these initiatives. Other direct costs included facility lease termination costs; costs associated with the development, communication and administration of these initiatives; and asset write-offs. The company has incurred total pretax expenses of approximately $3.5 million related to these streamlining initiatives, which were recorded in the line item “Restructuring, impairment and other costs” in the accompanying condensed consolidated statements of income.

 

During the quarter ended March 31, 2016, the Company recorded $1.1 million for the impairment of non-operating assets. Of the total expense recorded, approximately $0.5 million related to the impairment of the Company’s bulk fuel assets at all locations, as diesel fuel will no longer be stored or dispensed at any of the Company’s locations, and $0.6 million related to the fair market value impairment of the Company’s Spartanburg terminal.

 

Additionally, during the first quarter of 2016, the Company identified an item requiring an adjustment of an accounts payable liability during 2013. The Company has recorded an adjustment of $0.6 million for this item in the quarter ended March 31, 2016.

 

The following table summarizes the Company’s restructuring liability and cash payments made related to the restructuring plan during the three months ended March 31, 2016, by segment (in thousands):

 

	(1)	Represents accrued costs related to the prior 2015 restructuring event.

(2)

These costs relate to the 2016 restructuring initiatives discussed above.

 

 

 

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