NOTE 10

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CHANGE IN ACCOUNTING PRINCIPLE

During the third quarter of 2015, the Company changed its accounting policy for tires. Prior to this change, the cost of the replacement tires placed in service was reported as prepaid tires and amortized based on estimated usage of the tires. Under the new policy, the cost of tires mounted on purchased revenue equipment is capitalized as part of the total equipment cost and is depreciated over the useful life of the related equipment. Subsequent replacement tires are expensed at the time those tires are placed in service. Management believes this new policy is preferable under the circumstances because it provides a more precise method for recognizing expenses related to tires consistent with industry practice. Comparative financial statements for all prior periods have been recast to apply the new policy retrospectively, and are reflected under columns marked “Recast”.

The following tables present the line items on the statements of operations, balance sheets and statements of cash flows that were impacted by the accounting change at December 31, 2014, and for the three and nine month periods ended September 30, 2014 (in thousands, except per share amounts).

	December 31, 2014
	Prior to Change in Accounting Principle			Effect of Change			Recast
Balance Sheet:
Prepaid expenses and other current assets	$	17,318		$	(12,121	)	$	5,197
Deferred income taxes		46,688			(3,917	)		42,771
Property and equipment		16,648			2,164			18,812
Accumulated depreciation and amortization		(182,724	)		(240	)		(182,964	)
Retained earnings		61,082			(6,280	)		54,802

	Three Months Ended September 30, 2014							Nine Months Ended September 30, 2014
	Prior to Change in Accounting Principle		Effect of Change			Recast		Prior to Change in Accounting Principle		Effect of Change			Recast
Statement of Operations:
Operations and maintenance	$	12,863	$	(2,214	)	$	10,649	$	37,554	$	(1,555	)	$	35,999
Depreciation and amortization		10,671		121			10,792		33,274		121			33,395
Operating income		5,419		2,093			7,512		8,633		1,434			10,067
Income before income taxes		4,534		2,093			6,627		3,717		1,434			5,151
Income tax expense		1,817		804			2,621		1,867		551			2,418
Net income and Comprehensive income		2,717		1,289			4,006		1,850		883			2,733

Average shares outstanding (basic)		10,357		--			--		10,350		--			--
Basic earnings per share		0.26		0.13			0.39		0.18		0.09			0.26

Average shares outstanding (diluted)		10,476		--			--		10,482		--			--
Diluted earnings per share		0.26		0.12			0.38		0.18		0.08			0.26

	September 30, 2014
	Prior to Change in Accounting Principle			Effect of Change			Recast
Cash Flow:
Net income	$	1,850		$	883		$	2,733
Depreciation and amortization		33,274			121			33,395
Deferred income taxes		(4,176	)		551			(3,625	)
Inventories, prepaid expenses and other current assets		(458	)		(1,555	)		(2,013	)

The following is a summary of the adjusted quarterly results of operations through September 30, 2015 (amounts in thousands).

	Three Months Ended March 31, 2015							Three Months Ended June 30, 2015							Six Months Ended June 30, 2015
	Prior to Change in Accounting Principle		Effect of Change			Recast		Prior to Change in Accounting Principle		Effect of Change			Recast		Prior to Change in Accounting Principle		Effect of Change			Recast

Operations and maintenance	$	12,140	$	(1,066	)	$	11,074	$	12,176	$	(700	)	$	11,476	$	24,316	$	(1,766	)	$	22,550
Depreciation and amortization		10,671		131			10,802		10,277		170			10,447		20,948		301			21,249
Operating income		3,591		935			4,526		5,284		530			5,814		8,875		1,465			10,340
Income before income taxes		2,009		935			2,944		4,365		530			4,895		6,374		1,465			7,839
Income tax expense		893		416			1,309		1,905		220			2,125		2,798		636			3,434
Net income and Comprehensive income		1,116		519			1,635		2,460		310			2,770		3,576		829			4,405

Average shares outstanding (basic)		10,395		--			--		10,435		--			--		10,423		--			--
Basic earnings per share		0.11		0.05			0.16		0.24		0.03			0.27		0.34		0.08			0.42

Average shares outstanding (diluted)		10,516		--			--		10,516		--			--		10,524		--			--
Diluted earnings per share		0.11		0.05			0.16		0.23		0.03			0.26		0.34		0.08			0.42

	Three Months Ended March 31, 2014									Three Months Ended June 30, 2014							Six Months Ended June 30, 2014
	Prior to Change in Accounting Principle			Effect of Change			Recast			Prior to Change in Accounting Principle		Effect of Change			Recast		Prior to Change in Accounting Principle			Effect of Change			Recast

Operations and maintenance	$	13,062		$	9		$	13,071		$	11,629	$	650		$	12,279	$	24,691		$	659		$	25,350
Operating income (loss)		(1,043	)		(9	)		(1,052	)		4,257		(650	)		3,607		3,214			(659	)		2,555
Income (loss) before income taxes		(2,183	)		(9	)		(2,192	)		1,366		(650	)		716		(817	)		(659	)		(1,476	)
Income tax expense (benefit)		(594	)		(3	)		(597	)		644		(250	)		394		50			(253	)		(203	)
Net income (loss) and Comprehensive income (loss)		(1,589	)		(6	)		(1,595	)		722		(400	)		322		(867	)		(406	)		(1,273	)

Average shares outstanding (basic)		10,339			--			--			10,346		--			--		10,343			--			--
Basic earnings (loss) per share		(0.15	)		0.00			(0.15	)		0.07		(0.04	)		0.03		(0.08	)		(0.04	)		(0.12	)

Average shares outstanding (diluted)		10,399			--			--			10,478		--			--		10,343			--			--
Diluted earnings (loss) per share		(0.15	)		0.00			(0.15	)		0.07		(0.04	)		0.03		(0.08	)		(0.04	)		(0.12	)

Under ASC 205-45-5, “Accounting Changes and Error Corrections,” the Company is required to report a change in accounting principle by retrospectively applying the new principle to all prior periods presented, unless it is impractical to determine the prior-period effect. Accordingly, the Company has adjusted previously reported financial information for all periods presented.