XML 27 R9.htm IDEA: XBRL DOCUMENT
v3.19.1

Note 1 - Summary of Significant Accounting Policies | 12 Months Ended
--- | ---
Dec. 31, 2018
Notes to Financial Statements |
Significant Accounting Policies [Text Block] |
1. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Business and Segments Covenant Transportation Group, Inc., a Nevada holding company, together with its wholly owned subsidiaries offers truckload transportation and brokerage services to customers throughout the continental United States. We have two reportable segments, our truckload services ("Truckload") and Managed Freight which provides freight brokerage and logistics services. The Truckload segment consists of four service offerings that are aggregated because they have similar economic characteristics and meet the aggregation criteria. The four service offerings that comprise our Truckload segment are as follows: (i) Expedited, provided primarily by Covenant Transport, our historical flagship operation; (ii) Dedicated, provided by all of our operating fleets; (iii) Refrigerated, provided primarily through our Southern Refrigerated Transport, Inc. ("SRT") subsidiary; and (iv) over-the-road ("OTR"), provided primarily by our Landair Transport, Inc. subsidiary. In addition, our Managed Freight segment has service offerings ancillary to our Truckload services, including: freight brokerage, transportation management services ("TMS"), and shuttle and switching services. The operations consist of several operating segments, which are aggregated due to similar margins and customers. Included within Managed Freight are our accounts receivable factoring and warehousing businesses, neither of which meets the quantitative or qualitative reporting thresholds individually or in the aggregate. The following table summarizes our revenue by our two reportable segments, Truckload and Managed Freight, disaggregated to the operating fleet level as used by our chief operating decision maker in making decisions regarding allocation of resources, etc., organized first by reportable segment (i.e. Truckload and Managed Freight) and then by operating fleet for the year ended December 31, 2018 :
(in thousands) |  | Twelve Months Ended |
|  | December 31, |
|  | 2018 |  |  | 2017 |  |  | 2016 |
Total Revenues: |  |  |  |  |  |  |  |  |  |  |  |
Truckload Segment: |  |  |  |  |  |  |  |  |  |  |  |
Expedited |  | $ | 334,118 |  |  | $ | 332,930 |  |  | $ | 370,689 |
Dedicated |  |  | 247,877 |  |  |  | 144,845 |  |  |  | 60,154 |
Refrigerated |  |  | 135,189 |  |  |  | 135,059 |  |  |  | 170,383 |
OTR |  |  | 9,862 |  |  |  | - |  |  |  | - |
Truckload Revenues |  |  | 727,046 |  |  |  | 612,834 |  |  |  | 601,226 |
Managed Freight Segment: |  |  |  |  |  |  |  |  |  |  |  |
Brokerage |  |  | 114,827 |  |  |  | 89,042 |  |  |  | 66,867 |
Warehouse |  |  | 16,480 |  |  |  | - |  |  |  | - |
TMS |  |  | 14,940 |  |  |  | - |  |  |  | - |
Shuttle & Switching |  |  | 7,100 |  |  |  | - |  |  |  | - |
Factoring |  |  | 5,062 |  |  |  | 3,131 |  |  |  | 2,558 |
Managed Freight Revenues |  |  | 158,409 |  |  |  | 92,173 |  |  |  | 69,425 |
Total |  | $ | 885,455 |  |  | $ | 705,007 |  |  | $ | 670,651 |
Principles of Consolidation The consolidated financial statements include the accounts of Covenant Transportation Group, Inc., a holding company incorporated in the state of Nevada in 1994, and its wholly owned subsidiaries: Covenant Transport, Inc., a Tennessee corporation; Southern Refrigerated Transport, Inc., an Arkansas corporation; Star Transportation, Inc., a Tennessee corporation, each d/b/a Covenant Transport Services; Covenant Transport Solutions, Inc., a Nevada corporation, d/b/a Transport Financial Services; Covenant Logistics, Inc., a Nevada corporation; Covenant Asset Management, LLC., a Nevada limited liability corporation; CTG Leasing Company, a Nevada corporation; IQS Insurance Risk Retention Group, Inc., a Vermont corporation; Driven Analytic Solutions, LLC, a Nevada limited liability company; Heritage Insurance, Inc., a Tennessee corporation; Landair Holdings, Inc., a Tennessee corporation; Landair Transport, Inc., a Tennessee corporation; Landair Logistics, Inc., a Tennessee corporation; Landair Leasing, Inc., a Tennessee corporation; and Transport Management Services, LLC, a Tennessee limited liability company. References in this report to "it," "we," "us," "our," the "Company," and similar expressions refer to Covenant Transportation Group, Inc. and its subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation. Investment in Transport Enterprise Leasing, LLC Transport Enterprise Leasing, LLC ("TEL") is a tractor and trailer equipment leasing company and used equipment reseller. We evaluated our investment in TEL to determine whether it should be recorded on a consolidated basis. Our percentage of ownership interest ( 49% ), an evaluation of control, and whether a variable interest entity ("VIE") existed were all considered in our consolidation assessment. The analysis provided that we do not control TEL and that TEL is not deemed a VIE. We have accounted for our investment in TEL using the equity method of accounting given our 49% ownership interest and ability to exercise significant influence over operating and financial policies. Under the equity method, the cost of our investment is adjusted for our share of equity in the earnings of TEL and reduced by distributions received and our proportionate share of TEL's net income is included in our earnings. On a periodic basis, we assess whether there are any indicators that the fair value of our investment in TEL may be impaired. The investment is impaired only if the estimate of the fair value of the investment is less than the carrying value of the investment, and such decline in value is deemed to be other than temporary. To the extent impairment has occurred, the loss would be measured as the excess of the carrying amount of the investment over the fair value of the investment. As a result of TEL's earnings, no impairment indicators were noted that would provide for impairment of our investment. Revenue Recognition Revenue, drivers' wages, and other direct operating expenses generated by our Truckload reportable segment are recognized proportionally as the transportation service is performed based on the percentage of miles completed as of the period end, as opposed to recognizing revenue upon the completion of the load, which was our historic practice. Revenue is recognized on a gross basis at amounts charged to our customers because we control and are primarily responsible for the fulfillment of the promised service. Revenue includes transportation revenue, fuel surcharges, loading and unloading activities, equipment detention, and other accessorial services. Revenue generated by our Managed Freight segment is recognized upon completion of the services provided. Revenue is recorded on a gross basis, without deducting third party purchased transportation costs, as we act as a principal with substantial risks as primary obligor, except for transactions whereby equipment from our Truckload segment perform the related services, which we record on a net basis in accordance with the related authoritative guidance. Managed Freight revenue includes $5.0 million , $3.1 million , and $2.6 million of revenue in 2018 , 2017 , and 2016 , respectively, related to an accounts receivable factoring business started in 2013 to supplement several aspects of our non-asset operations, as well as $23.6 million of revenue in 2018 for a warehousing business, which is part of the Landair operation and thus was not part of 2017 or 2016 revenues. Included in Truckload and Managed Freight revenue during the year ended December 31, 2018 is $3.9 million and $0.9 million , respectively, classified as lease revenue resulting from embedded leases for certain tractors and warehouse space. Revenue for the factoring business is recognized on a net basis after giving effect to receivables payments we make to the factoring client, given we are acting as an agent and are not the primary generator of the factored receivables in these transactions. Revenue for the warehousing business is generally recognized as the service is performed, based upon a weekly rate. Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires us to make decisions based upon estimates, assumptions, and factors we consider as relevant to the circumstances. Such decisions include the selection of applicable accounting principles and the use of judgment in their application, the results of which impact reported amounts and disclosures. Changes in future economic conditions or other business circumstances may affect the outcomes of our estimates and assumptions. Accordingly, actual results could differ from those anticipated. Cash and Cash Equivalents We consider all highly liquid investments with a maturity of three months or less at acquisition to be cash equivalents. Additionally, we are also subject to concentrations of credit risk related to deposits in banks in excess of the Federal Deposit Insurance Corporation limits. Accounts Receivable and Concentration of Credit Risk We extend credit to our customers in the normal course of business. We perform ongoing credit evaluations and generally do not require collateral. Trade accounts receivable are recorded at their invoiced amounts, net of allowance for doubtful accounts. We evaluate the adequacy of our allowance for doubtful accounts quarterly. Accounts outstanding longer than contractual payment terms are considered past due and are reviewed individually for collectability. We maintain reserves for potential credit losses based upon its loss history and specific receivables aging analysis. Receivable balances are written off when collection is deemed unlikely. Accounts receivable are comprised of a diversified customer base that results in a lack of concentration of credit risk. During 2018 , 2017 , and 2016 , our top ten customers generated 49% , 49% , and 53% of total revenue, respectively. In 2018 and 2016 , one customer accounted for more than 10% of our consolidated revenue in each year. In 2017 , there were two such customers. The carrying amount reported in the consolidated balance sheet for accounts receivable approximates fair value based on the fact that the receivables collection averaged approximately 32 and 33 days in 2018 and 2017 , respectively. Included in accounts receivable is $53.6 million and $31.9 million of factoring receivables at December 31, 2018 and 2017 , respectively, net of allowances for bad debts of $0.4 million and $0.2 million in those years. We advance approximately 85% to 95% of each receivable factored and retain the remainder as collateral for collection issues that might arise. The retained amounts are returned to the clients after the related receivable has been collected, net of interest and fees on the amount we advanced. At December 31, 2018 , the retained amounts related to factored receivables totaled $1.9 million and were included in accounts payable in the consolidated balance sheet. Our clients are smaller trucking companies that factor their receivables to us for a fee to facilitate faster cash flow. We evaluate each client's customer base under predefined criteria. The carrying value of the factored receivables approximates the fair value, as the receivables are generally repaid directly to us by the client's customer within 30–40 days due to the combination of the short-term nature of the financing transaction and the underlying quality of the receivables. The following table provides a summary (in thousands) of the activity in the accounts for 2018 , 2017 , and 2016 :
Years ended December 31: |  | Beginning balance January 1, |  |  | Additional provisions to (reversal of) allowance |  |  | Write-offs and other adjustments |  |  | Ending balance December 31, |
2018 |  | $ | 1,456 |  |  | $ | 507 |  |  | $ | 22 |  |  | $ | 1,985 |
2017 |  | $ | 1,345 |  |  | $ | 454 |  |  | $ | (343 | ) |  | $ | 1,456 |
2016 |  | $ | 1,857 |  |  | $ | (241 | ) |  | $ | (271 | ) |  | $ | 1,345 |
Inventories and Supplies Inventories and supplies consist of parts, tires, fuel, and supplies. Tires on new revenue equipment are capitalized as a component of the related equipment cost when the tractor or trailer is placed in service and recovered through depreciation over the life of the vehicle. Replacement tires and parts on hand at year end are recorded at the lower of cost or market with cost determined using the first -in, first -out (FIFO) method. Replacement tires are expensed when placed in service. Assets Held for Sale Assets held for sale include property and revenue equipment no longer utilized in continuing operations which are available and held for sale. Assets held for sale are no longer subject to depreciation, and are recorded at the lower of depreciated book value or fair market value less selling costs. We periodically review the carrying value of these assets for possible impairment. We expect to sell these assets within twelve months. Property and Equipment Property and equipment is stated at cost less accumulated depreciation. Depreciation for book purposes is determined using the straight-line method over the estimated useful lives of the assets, while depreciation for tax purposes is generally recorded using an accelerated method. Depreciation of revenue equipment is our largest item of depreciation. We generally depreciate new tractors (excluding day cabs) over five years to salvage values of approximately 15% of their cost. We generally depreciate new trailers over seven years for refrigerated trailers and ten years for dry van trailers to salvage values of approximately 25% of their cost. We annually review the reasonableness of our estimates regarding useful lives and salvage values of our revenue equipment and other long-lived assets based upon, among other things, our experience with similar assets, conditions in the used revenue equipment market, and prevailing industry practice. Changes in the useful life or salvage value estimates, or fluctuations in market values that are not reflected in our estimates, could have a material effect on our results of operations. Gains and losses on the disposal of revenue equipment are included in depreciation expense in the consolidated statements of operations. We lease certain revenue equipment under capital leases with terms of approximately 60 to 84 months. Amortization of leased assets is included in depreciation and amortization expense. Although a portion of our tractors are protected by non-binding indicative trade-in values or binding trade-back agreements with the manufacturers, substantially all of our owned trailers are subject to fluctuations in market prices for used revenue equipment. Moreover, our trade-back agreements are contingent upon reaching acceptable terms for the purchase of new equipment. Declines in the price of used revenue equipment or failure to reach agreement for the purchase of new tractors with the manufacturers issuing trade-back agreements could result in impairment of, or losses on the sale of, revenue equipment. Impairment of Long-Lived Assets Pursuant to applicable accounting standards, revenue equipment and other long-lived assets are tested for impairment whenever an event occurs that indicates an impairment may exist. Expected future cash flows are used to analyze whether an impairment has occurred. If the sum of expected undiscounted cash flows is less than the carrying value of the long-lived asset, then an impairment loss is recognized. We measure the impairment loss by comparing the fair value of the asset to its carrying value. Fair value is determined based on a discounted cash flow analysis or the appraised value of the assets, as appropriate. Goodwill and Other Intangible Assets We classify intangible assets into two categories: (i) intangible assets with definite lives subject to amortization and (ii) goodwill. As a result of the Landair Acquisition, we have goodwill of $41.6 million on our consolidated balance sheet for the year ended December 31, 2018 , while we had none for the year ended December 31, 2017 . We test goodwill for impairment annually and whenever events or changes in circumstances indicate that impairment may have occurred. We test intangible assets with definite lives for impairment if conditions exist that indicate the carrying value may not be recoverable. Such conditions may include an economic downturn in a geographic market or a change in the assessment of future operations. We record an impairment charge when the carrying value of the definite lived intangible asset is not recoverable by the cash flows generated from the use of the asset. We determine the useful lives of our identifiable intangible assets after considering the specific facts and circumstances related to each intangible asset. Factors we consider when determining useful lives include the contractual term of any agreement, the history of the asset, our long-term strategy for the use of the asset, any laws or other local regulations which could impact the useful life of the asset, and other economic factors, including competition and specific market conditions. Intangible assets that are deemed to have definite lives are amortized, generally on a straight-line basis, over their useful lives, ranging from 5 to 15 years . We have $32.5 million of identifiable intangible assets on our consolidated balance sheets at December 31, 2018 , net of accumulated amortization, and none for the year ended December 31, 2017 . Insurance and Other Claims The primary claims arising against us consist of auto liability (personal injury and property damage), workers' compensation, cargo, commercial liability, and employee medical expenses. Our insurance program involves self-insurance with the following risk retention levels (before giving effect to any commutation of an auto liability policy):
| ● | auto liability - $1.0 million
| ● | workers' compensation - $1.3 million
| ● | cargo - $0.3 million
| ● | employee medical - $0.4 million
| ● | physical damage - 100%
Due to our significant self-insured retention amounts, we have exposure to fluctuations in the number and severity of claims and to variations between our estimated and actual ultimate payouts. We accrue the estimated cost of the uninsured portion of pending claims and an estimate for allocated loss adjustment expenses including legal and other direct costs associated with a claim. Estimates require judgments concerning the nature and severity of the claim, historical trends, advice from third -party administrators and insurers, the size of any potential damage award based on factors such as the specific facts of individual cases, the jurisdictions involved, the prospect of punitive damages, future medical costs, and inflation estimates of future claims development, and the legal and other costs to settle or defend the claims. We have significant exposure to fluctuations in the number and severity of claims. If there is an increase in the frequency and severity of claims, or we are required to accrue or pay additional amounts if the claims prove to be more severe than originally assessed, or any of the claims would exceed the limits of our insurance coverage, our profitability could be adversely affected. In addition to estimates within our self-insured retention layers, we also must make judgments concerning claims where we have third party insurance and for claims outside our coverage limits. Upon settling claims and expenses associated with claims where we have third party coverage, we are generally required to initially fund payment to the claimant and seek reimbursement from the insurer. Receivables from insurers for claims and expenses we have paid on behalf of insurers were $3.0 million and $1.1 million at December 31, 2018 and 2017 , respectively, and are included in drivers' advances and other receivables on our consolidated balance sheet. Additionally, we accrue claims above our self-insured retention and record a corresponding receivable for amounts we expect to collect from insurers upon settlement of such claims. We have $5.1 million and $2.1 million at December 31, 2018 and 2017 , respectively, as a receivable in other assets and as a corresponding accrual in the long-term portion of insurance and claims accruals on our consolidated balance sheet for claims above our self-insured retention for which we believe it is reasonably assured that the insurers will provide their portion of such claims. We evaluate collectability of the receivables based on the credit worthiness and surplus of the insurers, along with our prior experience and contractual terms with each. If any claim occurrence were to exceed our aggregate coverage limits, we would have to accrue for the excess amount. Our critical estimates include evaluating whether a claim may exceed such limits and, if so, by how much. If one or more claims were to exceed our then effective coverage limits, our financial condition and results of operations could be materially and adversely affected. We also make judgments regarding the ultimate benefit versus risk of commuting certain periods within our auto liability policy. If we commute a policy, we assume 100% risk for covered claims in exchange for a policy refund. Effective April 2018, we entered into new auto liability policies with a three -year term. The policy includes a limit for a single loss of $9.0 million, an aggregate of $18.0 million for each policy year, and a $30.0 million aggregate for the 36 month term ended March 31, 2021. The policy included a policy release premium refund or commutation option of up to $14.0 million, less any future amounts paid on claims by the insurer. A decision with respect to commutation of the policy could be made before April 1, 2021. Additionally, our prior auto liability policy that ran from October 1, 2014 through March 31, 2018, included a commutation provision if we were to commute the policy for the entire 42 months. Based on claims paid to date the policy premium release refund could range from zero to $4.9 million, depending on actual claims settlements in the future. Management cannot predict whether or not future claims or the development of existing claims will justify a commutation of either policy period, and accordingly, no related amounts were recorded at December 31, 2018 . Interest We capitalize interest on major projects during construction. Interest is capitalized based on the average interest rate on related debt. Capitalized interest was less than $0.1 million in 2018 , 2017 , and 2016 . Fair Value of Financial Instruments Our financial instruments consist primarily of cash and cash equivalents, accounts receiva ble, available-for-sale securities, ac counts payable, debt, and interest rate swaps. The carrying amount of cash and cash equivalents, accounts receivable, accounts payable, and current debt approximates their fair value because of the short-term maturity of these instruments. The carrying value of the factored receivables approximates the fair value, as the receivables are generally repaid directly to us by the client's customer within 30–40 days due to the combination of the short-term nature of the financing transaction and the underlying quality of the receivables. Interest rates that are currently available to us for issuance of long-term debt with similar terms and remaining maturities are used to estimate the fair value of our long-term debt, which primarily consists of revenue equipment installment notes. The fair value of our revenue equipment installment notes approximated the carrying value at December 31, 2018 , as the weighted average interest rate on these notes approximates the market rate for similar debt. Borrowings under our revolving Credit Facility approximate fair value due to the variable interest rate on the facility. Additionally, certain investments intended to serve the purposes of capital preservation and to fund insurance losses are designated as available-for-sale as discussed in Note 14 and are valued based on quoted prices in active markets. The fair value of our interest rate swap agreements is determined using the market-standard methodology of netting the discounted future fixed-cash payments and the discounted expected variable-cash receipts. The variable-cash receipts are based on an expectation of future interest rates (forward curves) derived from observable market interest rate curves. These analyses reflect the contractual terms of the swap, including the period to maturity, and use observable market-based inputs, including interest rate curves and implied volatilities. The fair value calculation also includes an amount for risk of non-performance of our counterparties using "significant unobservable inputs" such as estimates of current credit spreads to evaluate the likelihood of default, which we have determined to be insignificant to the overall fair value of our interest rate swap agreements. Income Taxes Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. We have reflected the net liability after offsetting our deferred tax assets and liabilities in the deferred income taxes line in the accompanying consolidated balance sheets in accordance with our retrospective adoption of Financial Accounting Standards Board ("FASB") Accounting Standards Update ("ASU") No. 2015 - 17, Income Taxes: Balance Sheet Classification of Deferred Taxes , as of December 31, 2015, as discussed below. We believe the future tax deductions will be realized principally through future reversals of existing taxable temporary differences and future taxable income, except for when a valuation allowance has been provided as discussed in Note 8. In the ordinary course of business there is inherent uncertainty in quantifying our income tax positions. We assess our income tax positions and record tax benefits for all years subject to examination based upon management's evaluation of the facts, circumstances, and information available at the reporting dates. For those tax positions where it is more likely than not that a tax benefit will be sustained, we have recorded the largest amount of tax benefit with a greater than 50% likelihood of being realized upon ultimate settlement with a taxing authority that has full knowledge of all relevant information. For those income tax positions where it is not more likely than not that a tax benefit will be sustained, no tax benefit has been recognized in the financial statements. Potential accrued interest and penalties related to unrecognized tax benefits are recognized as a component of income tax expense. Our policy is to recognize income tax benefit arising from the exercise of stock options and restricted share vesting based on the ordering provisions of the tax law as prescribed by the Internal Revenue Code, including indirect tax effects, if any. Lease Accounting and Off-Balance Sheet Transactions We issue residual value guarantees in connection with the operating leases we enter into for certain of our revenue equipment. These leases provide that if we do not purchase the leased equipment from the lessor at the end of the lease term, then we are liable to the lessor for an amount equal to the shortage (if any) between the proceeds from the sale of the equipment and an agreed value. To the extent the expected value at the lease termination date is lower than the residual value guarantee, we would accrue for the difference over the remaining lease term. We believe that proceeds from the sale of equipment under operating leases would equal or exceed the payment obligation on substantially all operating leases. The estimated values at lease termination involve management judgments. As leases are entered into, determination as to the classification as an operating or capital lease involves management judgments on residual values and useful lives. Capital Structure The shares of Class A and B common stock are substantially identical except that the Class B shares are entitled to two votes per share and immediately convert to Class A shares if beneficially owned by anyone other than our Chief Executive Officer or certain members of his immediate family, while Class A shares are entitled to one vote per share. The terms of any future issuances of preferred shares will be set by our Board of Directors. Comprehensive Income Comprehensive income generally includes all changes in equity during a period except those resulting from investments by owners and distributions to owners. Comprehensive income for 2018 , 2017 , and 2016 was comprised of the net income plus the unrealized gain or loss on the cash flow hedges, the reclassified cash flow hedge gains or losses into earnings, and unrealized holding gains or losses on investments classified as available-for-sale. Income Per Share Basic income per share excludes dilution and is computed by dividing earnings available to common stockholders by the weighted-average number of common shares outstanding for the period. Diluted income per share reflects the dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that then shared in our earnings. The calculation of diluted earnings per share includes approximately 0.1 million unvested shares. A de minimis number of unvested shares have been excluded from the calculation of diluted earnings per share since the effect of any assumed exercise of the related awards would be anti-dilutive for the years ended December 31, 2018 , 2017 , and 2016 , respectively. Income per share is the same for both Class A and Class B shares. The following table sets forth the calculation of net income per share included in the consolidated statements of operations for each of the three years ended December 31:
(in thousands except per share data) |  |  |  |  |  |  |  |  |  |  |  |
|  | 2018 |  |  | 2017 |  |  | 2016 |
Numerator: |  |  |  |  |  |  |  |  |  |  |  |
Net income |  | $ | 42,503 |  |  | $ | 55,439 |  |  | $ | 16,835 |
Denominator: |  |  |  |  |  |  |  |  |  |  |  |
Denominator for basic income per share – weighted-average shares |  |  | 18,340 |  |  |  | 18,279 |  |  |  | 18,182 |
Effect of dilutive securities: |  |  |  |  |  |  |  |  |  |  |  |
Equivalent shares issuable upon conversion of unvested restricted shares |  |  | 129 |  |  |  | 93 |  |  |  | 84 |
Denominator for diluted income per share adjusted weighted-average shares and assumed conversions |  |  | 18,469 |  |  |  | 18,372 |  |  |  | 18,266 |
Net income per share: |  |  |  |  |  |  |  |  |  |  |  |
Basic income per share |  | $ | 2.32 |  |  | $ | 3.03 |  |  | $ | 0.93 |
Diluted income per share |  | $ | 2.30 |  |  | $ | 3.02 |  |  | $ | 0.92 |
Stock-Based Employee Compensation We issue several types of stock-based compensation, including awards that vest based on service and performance conditions or a combination of the conditions. Performance-based awards vest contingent upon meeting certain performance criteria established by the Compensation Committee of the Board of Directors. All awards require future service. For performance-based awards, determining the appropriate amount to expense in each period is based on likelihood and timing of achieving the stated targets for performance-based awards and requires judgment, including forecasting future financial results. The estimates are revised periodically based on the probability and timing of achieving the required performance and adjustments are made as appropriate. Awards that are only subject to time vesting provisions are amortized using the straight-line method. Recent Accounting Pronouncements Accounting Standards adopted In May 2014 the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update ("ASU") 2014 - 09, which supersedes virtually all existing revenue guidance. The new standard introduces a five -step model to determine when and how revenue is recognized. The premise of the new model is that an entity recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The guidance also requires enhanced disclosures regarding the nature, timing and uncertainty of revenue and cash flows arising from an entity’s contracts with customers. The new standard became effective for us for our annual and interim reporting periods beginning January 1, 2018. The guidance permits the use of either a full retrospective or modified retrospective adoption approach with a cumulative effect adjustment recorded in either scenario as necessary upon transition. As permitted by the guidance, we elected the modified retrospective approach and thus recognized the cumulative effect of adoption of $0.6 million, net of tax, as a positive adjustment to retained earnings in the first quarter of 2018 as a result of the initial recording of in process revenue and associated direct expenses. Based on our review of our customer shipping arrangements and the related guidance, we have concluded that we will recognize revenue from loads proportionally as the transportation service is performed based on the percentage of miles completed as of the period end, as opposed to recognizing revenue upon the completion of the load, which was our historic practice. Revenue will be recognized on a gross basis at amounts charged to our customers because we control and are primarily responsible for the fulfillment of the promised service. Our recognition of revenue under the new standard approximates our recognition of revenue under the prior standard, as there will generally be a consistent amount of freight in process at the beginning and end of the period; however, seasonality and the day on which the period ends may cause minor differences. The following table summarizes the impacts of adopting ASU 606 on the Company’s consolidated financial statements for the year ended December 31, 2018.
|  | Twelve Months Ended December 31, 2018 |
|  |  |  |  |  |  |  |  |  | Balances without
|  |  |  |  |  |  |  |  |  | adoption of Topic
Financial Statement Line Item (in thousands) |  | As reported |  |  | Adjustments |  |  |  | 606 |
Consolidated Balance Sheet |  |  |  |  |  |  |  |  |  |  |  |
Accounts receivable, net of allowances |  | $ | 151,093 |  |  | $ | (1,244 | ) |  | $ | 149,849 |
Total assets |  |  | 773,524 |  |  |  | (1,244 | ) |  |  | 772,280 |
Accrued expenses |  |  | 49,503 |  |  |  | (277 | ) |  |  | 49,226 |
Deferred income taxes |  |  | 77,467 |  |  |  | (266 | ) |  |  | 77,201 |
Total liabilities |  |  | 430,382 |  |  |  | (543 | ) |  |  | 429,839 |
Retained earnings |  |  | 200,566 |  |  |  | (701 | ) |  |  | 199,865 |
Total stockholders’ equity |  |  | 343,142 |  |  |  | (701 | ) |  |  | 342,441 |
Total liabilities and stockholders’ equity |  |  | 773,524 |  |  |  | (1,244 | ) |  |  | 772,280 |
Consolidated Statement of Operations |  |  |  |  |  |  |  |  |  |  |  |
Freight revenue |  |  | 779,729 |  |  |  | (234 | ) |  |  | 779,495 |
Total revenue |  |  | 885,455 |  |  |  | (234 | ) |  |  | 885,221 |
Salaries, wages and related expenses |  |  | 304,447 |  |  |  | 13 |  |  |  | 304,460 |
Revenue equipment rentals and purchased transportation |  |  | 183,645 |  |  |  | (95 | ) |  |  | 183,550 |
Total operating expenses |  |  | 826,469 |  |  |  | (82 | ) |  |  | 826,387 |
Income tax expense (benefit) |  |  | 15,507 |  |  |  | (41 | ) |  |  | 15,466 |
Net income |  |  | 42,503 |  |  |  | (111 | ) |  |  | 42,392 |
Consolidated Statement of Comprehensive Income |  |  |  |  |  |  |  |  |  |  |  |
Net income |  |  | 42,503 |  |  |  | (111 | ) |  |  | 42,392 |
Comprehensive income |  |  | 42,414 |  |  |  | (111 | ) |  |  | 42,303 |
Consolidated Statement of Cash Flows |  |  |  |  |  |  |  |  |  |  |  |
Operating Cash Flows |  |  |  |  |  |  |  |  |  |  |  |
Net income |  |  | 42,503 |  |  |  | (111 | ) |  |  | 42,392 |
Deferred income tax expense (benefit) |  |  | 13,840 |  |  |  | (41 | ) |  |  | 13,799 |
Change in: Receivables and advances |  |  | (27,199 | ) |  |  | 234 |  |  |  | (26,965 | )
Change in: Accounts payable and accrued expenses |  |  | 19,232 |  |  |  | (82 | ) |  |  | 19,150 |
Net cash flows provided by operating activities |  |  | 124,800 |  |  |  | - |  |  |  | 124,800 |
Accounting Standards not yet adopted In February 2016, FASB issued ASU 2016 - 02, 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. This new standard will become effective for us in our annual reporting period beginning January 1, 2019, including interim periods within that reporting period and requires a modified retrospective transition approach. We believe the adoption will not have a material impact to net income and will add approximately $43.0 million to our assets and liabilities for the related right-to-use asset and lease obligation for our existing operating leases. We plan to finalize our evaluation during the first quarter of 2019, including an assessment of the new expanded disclosure requirements and a final determination of the impact to adoption and related changes required to internal controls.

X
- References No definition available. + Details
Name: | us-gaap_DisclosureTextBlockAbstract
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration

X
- Definition The entire disclosure for all significant accounting policies of the reporting entity. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -URI http://asc.fasb.org/topic&trid=2122369 + Details
Name: | us-gaap_SignificantAccountingPoliciesTextBlock
Namespace Prefix: | us-gaap_
Data Type: | nonnum:textBlockItemType
Balance Type: | na
Period Type: | duration