UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2005
[ _ ] TRANSITION REPORT PURSUANT TO SECTION 13 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 71-0633135
-------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
297 West Henri De Tonti Blvd, Tontitown, Arkansas 72770
-------------------------------------------------------
(Address of principal executive offices)(Zip Code)
Registrants telephone number, including area code: (479) 361-9111
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 such filing
requirements for the past 90 days.
Yes [ X ] No [ _ ]
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act).
Yes [ X ] 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 July 29, 2005
----- ----------------------------
Common Stock, $.01 Par Value 10,896,407
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
P.A.M. TRANSPORTATION SERVICES, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
June 30, December 31,
2005 2004
---- ----
(unaudited) (see note)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 3,256 $ 19,659
Accounts receivable-net:
Trade 60,459 47,926
Other 1,376 1,110
Inventories 749 913
Prepaid expenses and deposits 8,539 14,862
Marketable equity securities available-for-sale 9,611 8,792
Income taxes refundable 632 754
--------- ---------
Total current assets 84,622 94,016
PROPERTY AND EQUIPMENT:
Land 2,674 2,674
Structures and improvements 9,308 9,299
Revenue equipment 252,494 238,750
Office furniture and equipment 6,449 6,449
--------- ---------
Total property and equipment 270,925 257,172
Accumulated depreciation (88,848) (83,029)
--------- ---------
Net property and equipment 182,077 174,143
OTHER ASSETS:
Goodwill 15,413 15,413
Non-compete agreements 517 654
Other 1,111 1,123
--------- ---------
Total other assets 17,041 17,190
--------- ---------
TOTAL ASSETS $ 283,740 $ 285,349
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 22,343 $ 28,702
Accrued expenses and other liabilities 11,434 9,828
Current maturities of long-term debt 853 2,080
Deferred income taxes-current 7,316 7,162
--------- ---------
Total current liabilities 41,946 47,772
Long-term debt-less current portion 24,076 23,225
Deferred income taxes-less current portion 49,125 45,375
Other 334 434
--------- ---------
Total liabilities 115,481 116,806
--------- ---------
SHAREHOLDERS' EQUITY:
Preferred stock, $.01 par value:
10,000,000 shares authorized; none issued
Common stock, $.01 par value:
40,000,000 shares authorized; issued and
outstanding- 10,896,407 at June 30, 2005,
11,303,207 at December 31, 2004 113 113
Additional paid-in capital 76,412 76,050
Accumulated other comprehensive income 1,382 1,151
Treasury stock, at cost; 445,800 shares (7,460) -
Retained earnings 97,812 91,229
--------- ---------
Total shareholders' equity 168,259 168,543
--------- ---------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 283,740 $ 285,349
========= =========
Note: The balance sheet at December 31, 2004 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. See notes to condensed consolidated financial statements.
P.A.M. TRANSPORTATION SERVICES, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
(in thousands, except per share data)
Three Months Ended Six Months Ended
June 30, June 30,
2005 2004 2005 2004
---- ---- ---- ----
OPERATING REVENUES:
Revenue, before fuel surcharge $ 83,321 $ 79,071 $ 163,430 $ 156,744
Fuel surcharge 7,706 3,213 13,789 5,660
--------- --------- --------- ---------
91,027 82,284 177,219 162,404
--------- --------- --------- ---------
OPERATING EXPENSES AND COSTS:
Salaries, wages, and benefits 31,645 29,640 62,650 60,038
Operating supplies and expenses 25,114 18,588 47,768 36,964
Rents and purchased transportation 9,424 10,010 19,256 19,772
Depreciation and amortization 7,656 7,416 15,122 14,885
Operating taxes and licenses 4,050 3,945 8,004 7,956
Insurance and claims 4,532 3,904 8,631 7,892
Communications and utilities 643 658 1,342 1,366
Other 1,359 1,555 2,667 2,904
Loss on sale or disposal of equipment 56 18 74 278
--------- --------- --------- ---------
Total operating expenses and costs 84,479 75,734 165,514 152,055
--------- --------- --------- ---------
NET OPERATING INCOME 6,548 6,550 11,705 10,349
NON-OPERATING INCOME 108 93 299 155
INTEREST EXPENSE (474) (442) (918) (854)
--------- --------- --------- ---------
NET INCOME BEFORE INCOME TAXES 6,182 6,201 11,086 9,650
FEDERAL AND STATE INCOME TAXES:
Current 498 319 750 637
Deferred 2,004 2,235 3,753 3,335
--------- --------- --------- ---------
Total federal and state income taxes 2,502 2,554 4,503 3,972
--------- --------- --------- ---------
NET INCOME $ 3,680 $ 3,647 $ 6,583 $ 5,678
========= ========= ========= =========
EARNINGS PER COMMON SHARE:
Basic $ 0.33 $ 0.32 $ 0.59 $ 0.50
========= ========= ========= =========
Diluted $ 0.33 $ 0.32 $ 0.59 $ 0.50
========= ========= ========= =========
AVERAGE COMMON SHARES OUTSTANDING:
Basic 11,114 11,296 11,209 11,296
========= ========= ========= =========
Diluted 11,130 11,322 11,227 11,322
========= ========= ========= =========
See notes to condensed consolidated financial statements.
P.A.M. TRANSPORTATION SERVICES, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
(in thousands)
Six Months Ended
June 30,
2005 2004
---- ----
OPERATING ACTIVITIES:
Net income $ 6,583 $ 5,678
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 15,122 14,885
Bad debt expense 257 79
Non-compete agreement amortization-net of payments 38 -
Provision for deferred income taxes 3,753 3,335
Loss on sale or disposal of equipment 74 278
Changes in operating assets and liabilities:
Accounts receivable (13,035) (6,367)
Prepaid expenses, inventories, and other assets 6,499 (3,563)
Income taxes refundable 122 534
Trade accounts payable (6,208) (186)
Accrued expenses 1,607 740
--------- ---------
Net cash provided by operating activities 14,812 15,413
--------- ---------
INVESTING ACTIVITIES:
Purchases of property and equipment (30,436) (19,109)
Proceeds from sale or disposal of equipment 7,448 16,900
Purchase of marketable equity securities (733) (153)
Other (20) 35
--------- ---------
Net cash used in investing activities (23,741) (2,327)
--------- ---------
FINANCING ACTIVITIES:
Borrowings under line of credit 201,856 171,463
Repayments under line of credit (200,644) (174,331)
Borrowings of long-term debt - 2,304
Repayments of long-term debt (1,587) (2,585)
Repurchases of common stock (7,460) -
Other 361 17
--------- ---------
Net cash used in financing activities (7,474) (3,132)
--------- ---------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (16,403) 9,954
CASH AND CASH EQUIVALENTS-Beginning of period 19,659 3,064
--------- ---------
CASH AND CASH EQUIVALENTS-End of period $ 3,256 $ 13,018
========= =========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION-
Cash paid during the period for:
Interest $ 969 $ 873
========= =========
Income taxes $ 750 $ 518
========= =========
See notes to condensed consolidated financial statements.
P.A.M. TRANSPORTATION SERVICES, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(unaudited)
(in thousands)
- ------------------------------------------------------------------------------------------------------------------------------------
Accumulated
Additional Other Other
Common Stock Paid-In Comprehensive Comprehensive Treasury Retained
Shares Amount Capital Income(Loss) Income(Loss) Stock Earnings Total
- ------------------------------------------------------------------------------------------------------------------------------------
BALANCE AT DECEMBER 31, 2004 11,303 $113 $76,050 $1,151 $91,229 $168,543
Components of comprehensive income:
Net income $ 6,583 6,583 6,583
Other comprehensive income (loss)-
Unrealized gain on hedge,
net of tax of $120 175 175 175
Unrealized gain on marketable
securities, net of tax of $30 56 56 56
--------
Total comprehensive income $ 6,814
========
Treasury stock repurchases (446) $(7,460) (7,460)
Exercise of stock options-
shares issued including tax
benefits 39 362 362
- ------------------------------------------------------------------------------------------------------------------------------------
BALANCE AT JUNE 30, 2005 10,896 $113 $76,412 $1,382 $(7,460) $97,812 $168,259
====================================================================================================================================
See notes to condensed consolidated financial statements.
P.A.M. TRANSPORTATION SERVICES, INC.
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
JUNE 30, 2005
NOTE A: BASIS OF PRESENTATION
- --------------------------------
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles 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 accruals) necessary for a fair presentation have been included.
Operating results for the six-month period ended June 30, 2005 are not
necessarily indicative of the results that may be expected for the year ending
December 31, 2005. 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, 2004.
NOTE B: DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES
- ----------------------------------------------------------------
Effective February 28, 2001, the Company entered into an interest rate swap
agreement on a notional amount of $15,000,000. The pay fixed rate under the swap
is 5.08%, while the receive floating rate is "1-month" LIBOR. This interest rate
swap agreement terminates on March 2, 2006. Effective May 31, 2001, the Company
entered into an interest rate swap agreement on a notional amount of $5,000,000.
The pay fixed rate under the swap is 4.83%, while the receive floating rate is
"1-month" LIBOR. This interest rate swap agreement terminates on June 2, 2006.
The Company designates both of these interest rate swaps as cash flow hedges of
its exposure to variability in future cash flows resulting from interest
payments indexed to "1-month" LIBOR. Changes in future cash flows from the
interest rate swaps will offset changes in interest rate payments on the first
$20,000,000 of the Company's current revolving credit facility or future
"1-month" LIBOR based borrowings that reset on the last London Business Day
prior to the start of the next interest period. The hedge locks the interest
rate at 5.08% or 4.83% plus the pricing spread (currently 1.15%) for the
notional amounts of $15,000,000 and $5,000,000, respectively.
These interest rate swap agreements meet the specific hedge accounting criteria.
The measurement of hedge effectiveness is based upon a comparison of the
floating-rate leg of the swap and the hedged floating-rate cash flows on the
underlying liability. The effective portion of the cumulative gain or loss has
been reported as a component of accumulated other comprehensive income in
shareholders' equity and will be reclassified into current earnings by June 2,
2006, the latest termination date for all current swap agreements. The December
31, 2004 balance of the net after tax deferred hedging loss in accumulated other
comprehensive income ("AOCI") related to these swap agreements was approximately
$301,000 and the ending balance as of June 30, 2005 was approximately $126,000.
The change in AOCI related to these swap agreements during the current year was
approximately $175,000. As of June 30, 2005 the fair value of approximately
$213,000 is included in accrued liabilities in the accompanying consolidated
financial statements. Ineffectiveness related to these hedges was not
significant.
In July 2001, the Company entered into an agreement to obtain price protection
and reduce a portion of our exposure to fuel price fluctuations. Under
this agreement, we were obligated to purchase a minimum amount of diesel fuel
per month, with a price protection component, for the six month period ended
February 28, 2002. The agreement also provided that if during the twelve-month
period commencing January 2005, the average NY MX HO is below $.58 per gallon,
we will be obligated to pay the contract holder the difference between $.58 and
the average NY MX HO price for such month, multiplied by 1,000,000 gallons.
During June 2005, the average NY MX HO price was $1.62. The value of the
agreement is periodically adjusted to fair value, as determined by obtaining an
offer from the contract holder of the dollar amount required to terminate
all future liability under the contract, and as of June 30, 2005 the
estimated fair value of $250,000 is included in accrued liabilities in the
accompanying consolidated financial statements. For the three and six month
period ended June 30, 2005 an adjustment of $125,000 and $250,000,
respectively was made to reflect the decline in fair value of the agreement
which had the effect of reducing operating supplies expense and other current
liabilities each by $125,000 and $250,000 during each respective period in the
accompanying consolidated financial statements.
NOTE C: RECENT ACCOUNTING PRONOUNCEMENTS
- -----------------------------------------
In December 2004, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 123(R) , Share-Based Payment,
("SFAS No. 123(R)") which replaces SFAS No. 123, Accounting for Stock-Based
Compensation, and supersedes APB Opinion No. 25, Accounting for Stock Issued to
Employees. SFAS No. 123(R) requires compensation costs relating to share-based
payment transactions be recognized in financial statements. The pro forma
disclosure previously permitted under SFAS No. 123 will no longer be an
acceptable alternative to recognition of expenses in the financial statements.
SFAS No. 123(R) was originally to be effective as of the beginning of the first
interim or annual reporting period that begins after June 15, 2005, with early
adoption encouraged. In April 2005, the Securities and Exchange Commission
announced the adoption of a new rule that amends the effective date of SFAS No.
123(R). The effective date of the new standard under these new rules for our
consolidated financial statements is January 1, 2006. Management is currently
evaluating the possible future impact on the Company's financial position and
results of operations.
In December 2004, the FASB issued Statement of Financial Accounting Standards
No. 153, Exchanges of Nonmonetary Assets-an amendment to APB Opinion No. 29
("SFAS No. 153"). This statement amends Accounting Principles Board Opinion No.
29 ("APB No. 29") to eliminate the exception for nonmonetary exchanges of
similar productive assets and replaces it with a general exception for exchanges
of nonmonetary assets that do not have commercial substance. A nonmonetary
exchange has commercial substance if the future cash flows of the entity are
expected to change significantly as a result of the exchange. SFAS No. 153 is
effective for nonmonetary exchanges occurring in fiscal periods beginning after
June 15, 2005. Adoption of this statement did not have a material effect on the
Company's consolidated financial statements.
NOTE D: MARKETABLE SECURITIES
- ------------------------------
The Company accounts for its marketable securities in accordance with Statement
of Financial Accounting Standards No. 115, Accounting for Certain Investments in
Debt and Equity Securities ("SFAS No. 115"). SFAS No. 115 requires companies to
classify their investments as either trading, available-for-sale or
held-to-maturity. The Company's investments in marketable securities are
classified as available-for-sale and consist of equity securities. Management
determines the appropriate classification of these securities at the time of
purchase and re-evaluates such designation as of each balance sheet date. During
the first six months of 2005 there were no sales or reclassifications of
marketable securities. These securities are carried at fair value, with the
unrealized gains and losses, net of tax, included as a component of accumulated
other comprehensive income in shareholders' equity. The cost of securities sold
is based on the specific identification method. Interest and dividends on
securities classified as available-for-sale are included in non-operating
income. Realized gains and losses, and declines in value judged to be
other-than-temporary on available-for-sale securities, if any, are included in
the determination of net income as gains (losses) on the sale of securities.
As of June 30, 2005, these equity securities had a combined original cost of
approximately $7,071,000 and a combined fair market value of approximately
$9,611,000. For the six months ended June 30, 2005, the Company had net
unrealized gains in market value of approximately $56,000, net of deferred
income taxes. These securities had gross unrealized gains of approximately
$2,680,000 and gross unrealized losses of approximately $140,000. As of June 30,
2005, the total unrealized gain, net of deferred income taxes, in accumulated
other comprehensive income was approximately $1,508,000.
NOTE E: STOCK BASED COMPENSATION
- ---------------------------------
The Company adopted the disclosure-only provisions of Statement of Financial
Accounting Standards No. 123, Accounting for Stock-Based Compensation (SFAS No.
123). The following table illustrates the effect on net income and earnings per
share if the Company had applied the fair value recognition provisions of SFAS
No. 123 to stock-based employee compensation:
Three Months Ended Six Months Ended
June 30, June 30,
2005 2004 2005 2004
------- ------- ------- -------
(in thousands, except per share data)
Net income $ 3,680 $ 3,647 $ 6,583 $ 5,678
Total stock-based employee compensation
expense determined under fair value based
method for all awards, net of related tax effects (74) (74) (148) (148)
------- ------- ------- -------
Pro forma net income $ 3,606 $ 3,573 $ 6,435 $ 5,530
======= ======= ======= =======
Earnings per share:
Basic - as reported $ .33 $ .32 $ .59 $ .50
Basic - pro forma $ .32 $ .32 $ .57 $ .49
Diluted - as reported $ .33 $ .32 $ .59 $ .50
Diluted - pro forma $ .32 $ .32 $ .57 $ .49
NOTE F: SEGMENT INFORMATION
- ----------------------------
The Company considers the guidance provided by Statement of Financial Accounting
Standards No. 131, Disclosures about Segments of an Enterprise and Related
Information ("SFAS No. 131"), in its identification of operating segments. The
Company has determined that it has a total of eight operating segments whose
primary operations can be characterized as either Truckload Services or
Brokerage and Logistics Services, however in accordance with the aggregation
criteria provided by SFAS No. 131 the Company has determined that the operations
of the eight operating segments can be aggregated into a single reporting
segment, motor carrier operations. Truckload Services revenues and Brokerage and
Logistics Services revenues, each before fuel surcharges, for the three and six
months ending June 30, 2005 and 2004 were as follows:
Three Months Ended June 30, Six Months Ended June 30,
2005 2004 2005 2004
----------------- ----------------- ------------------ ------------------
Amount % Amount % Amount % Amount %
---------- ----- ---------- ----- ----------- ----- ----------- -----
Truckload Services revenues (1) $73,433,867 88.1 $68,197,240 86.2 $143,514,242 87.8 $135,326,616 86.3
Brokerage and Logistics
Services revenues (1) 9,887,573 11.9 10,873,483 13.8 19,915,673 12.2 21,417,542 13.7
---------- ----- ---------- ----- ----------- ----- ----------- -----
Total revenues (1) $83,321,440 100.0 $79,070,723 100.0 $163,429,915 100.0 $156,744,158 100.0
========== ===== ========== ===== =========== ===== =========== =====
- ------------------------------
(1) Before fuel surcharges.
NOTE G: TREASURY STOCK
- -----------------------
On April 11, 2005, the Company announced that its Board of Directors had
authorized the Company to repurchase up to 600,000 shares of its common stock
during the six month period ending October 11, 2005. During the three months
ended June 30, 2005, the Company repurchased 445,800 shares of its common stock.
The Company accounts for Treasury stock using the cost method and as of June 30,
2005, 445,800 shares were held in the treasury at an aggregate cost of
$7,459,938.
NOTE H: COMPREHENSIVE INCOME
- -----------------------------
Comprehensive income was comprised of net income plus or minus market value
adjustments related to our interest rate swap agreements and marketable
securities. The components of comprehensive income were as follows:
Three Months Ended Six Months Ended
June 30, June 30,
2005 2004 2005 2004
---- ---- ---- ----
Net income $ 3,680 $ 3,647 $ 6,583 $ 5,678
Other comprehensive income (loss):
Reclassification adjustment for losses (gains) on
derivative instruments included in net income
accounted for as hedges, net of income taxes 65 120 143 238
Change in fair value of interest rate
swap agreements, net of income taxes (13) 206 32 74
Change in fair value of marketable
securities, net of income taxes 184 (17) 56 (9)
------- ------- ------- -------
Total comprehensive income $ 3,916 $ 3,956 $ 6,814 $ 5,981
======= ======= ======= =======
PART I - FINANCIAL INFORMATION
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
FORWARD-LOOKING INFORMATION
- ----------------------------
Certain information included in this Quarterly Report on Form 10-Q constitutes
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995. Such forward-looking statements may relate to
expected future financial and operating results 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, excess
capacity in the trucking industry; surplus inventories; recessionary economic
cycles and downturns in customers' business cycles; increases or rapid
fluctuations in fuel prices, interest rates, fuel taxes, tolls, license and
registration fees; the resale value of the 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; a significant reduction in or termination of the Company's trucking
service by a key customer; and other factors, including risk factors, referred
to from time to time in filings made by the Company with the Securities and
Exchange Commission. The Company undertakes no obligation to update or clarify
forward-looking statements, whether as a result of new information, future
events or otherwise.
CRITICAL ACCOUNTING POLICIES
- ----------------------------
The Company's management makes estimates and assumptions in preparing the
consolidated financial statements that affect reported amounts and disclosures
therein. In the opinion of management, the accounting policies that generally
have the most significant impact on the financial position and results of
operations of the Company include:
Accounts Receivable. We continuously monitor collections and payments from our
customers, third parties and vendors and maintain a provision for estimated
credit losses based upon our historical experience and any specific collection
issues that we have identified. While such credit losses have historically been
within our expectations and the provisions established, we cannot guarantee that
we will continue to experience the same credit loss rates that we have in the
past.
Property and equipment. Management must use its judgment in the selection of
estimated useful lives and salvage values for purposes of depreciating tractors
and trailers which in some cases do not have guaranteed residual values.
Estimates of salvage value at the expected date of trade-in or sale are based on
the expected market values of equipment at the time of disposal which, in many
cases include guaranteed residual values by the manufacturers.
Self Insurance. The Company is self-insured for health and workers'
compensation benefits up to certain stop-loss limits. Such costs are accrued
based on known claims and an estimate of incurred, but not reported (IBNR)
claims. IBNR claims are estimated using historical lag information and other
data either provided by outside claims administrators or developed internally.
This estimation process is subjective, and to the extent that future actual
results differ from original estimates, adjustments to recorded accruals may be
necessary.
Revenue Recognition. Revenue is recognized in full upon completion of delivery
to the receiver's location. For freight in transit at the end of a reporting
period, the Company recognizes revenue prorata based on relative transit miles
completed as a portion of the estimated total transit miles. Expenses are
recognized as incurred.
Prepaid Tires. Tires purchased with revenue equipment are capitalized as a cost
of the related equipment. Replacement tires are included in prepaid expenses and
deposits and are amortized over a 24-month period. Costs related to tire
recapping are expensed when incurred.
Income Taxes. Significant management judgment is required to determine the
provision for income taxes and to determine whether deferred income taxes
will be realized in full or in part. Deferred income 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. When it is more likely that all or some portion
of specific deferred income tax assets will not be realized, a valuation
allowance must be established for the amount of deferred income tax assets
that are determined not to be realizable. A valuation allowance for
deferred income tax assets has not been deemed to be necessary due to the
Company's profitable operations. Accordingly, if the facts or financial
circumstances were to change, thereby impacting the likelihood of realizing
the deferred income tax assets, judgment would need to be applied to
determine the amount of valuation allowance required in any given period.
Business Segment and Concentrations of Credit Risk. The Company operates in one
reporting segment, motor carrier operations. The Company provides transportation
services to customers throughout the United States and portions of Canada and
Mexico. The Company performs ongoing credit evaluations and generally does not
require collateral from its customers. The Company maintains reserves for
potential credit losses. In view of the concentration of the Company's revenues
and accounts receivable among a limited number of customers within the
automobile industry, the financial health of this industry is a factor in the
Company's overall evaluation of accounts receivable.
Business Combinations and Goodwill. Upon acquisition of an entity, the cost of
the acquired entity must be allocated to assets and liabilities acquired.
Identification of intangible assets, if any, that meet certain recognition
criteria is necessary. This identification and subsequent valuation requires
significant judgments. The carrying value of goodwill was tested for impairment
on December 31, 2004 and the Company determined that there was no impairment.
BUSINESS OVERVIEW
- -----------------
The Company's administrative headquarters are in Tontitown, Arkansas. From this
location, we manage operations conducted through wholly owned subsidiaries based
in various locations around the United States and Canada. The operations of
these subsidiaries can generally be classified into either truckload services or
brokerage and logistics services. Truckload services include those
transportation services in which we utilize company owned tractors or
owner-operator owned tractors. Brokerage and logistics services consist of
services such as transportation and other value added services related to the
transportation of freight which may or may not involve the usage of company
owned or owner-operator owned equipment. Both our truckload operations and our
brokerage/logistics operations have similar economic characteristics and are
impacted by virtually the same economic factors as discussed elsewhere in this
Report. All of the Company's operations are in the motor carrier reporting
segment.
For both operations, substantially all of our revenue is generated by
transporting freight for customers and is predominantly affected by the rates
per mile received from our customers, equipment utilization, and our percentage
of non-compensated miles. These aspects of our business are carefully managed
and efforts are continuously underway to achieve favorable results. For the
three and six month period ended June 30, 2005, truckload services revenues,
excluding fuel surcharges, represented 88.1% and 87.8% of total revenues,
excluding fuel surcharges, with remaining revenues, excluding fuel surcharges,
being generated by our brokerage and logistics services. For the three and six
month period ended June 30, 2004, truckload services revenues, excluding fuel
surcharges, represented 86.2% and 86.3% of total revenues, excluding fuel
surcharges, with remaining revenues, excluding fuel surcharges, being generated
by our 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 benefit
costs, independent broker costs (which we record as purchased transportation),
insurance, and maintenance and capital equipment costs.
In discussing our results of operations we use revenue, before fuel surcharge,
(and fuel expense, net of 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 and six months ending June 30, 2005, approximately $7.7
million and $13.8 million, respectively, of the Company's total revenue was
generated from fuel surcharges. For the three and six months ending June 30,
2004, approximately $3.2 million and $5.7 million, respectively, of the
Company's total revenue was generated from fuel surcharges.
We 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 high variable cost nature of certain expenses makes a comparison
of changes in expenses as a percentage of revenue more meaningful than absolute
dollar changes.
RESULTS OF OPERATIONS - TRUCKLOAD SERVICES
- ------------------------------------------
The following table sets forth, for truckload services, the percentage
relationship of expense items to operating revenues, before fuel surcharges, for
the periods indicated. Operating supplies expense, which includes fuel costs,
are shown net of fuel surcharges.
Three Months Ended Six Months Ended
June 30, June 30,
2005 2004 2005 2004
---- ---- ---- ----
Operating revenues, before fuel surcharge 100.0% 100.0% 100.0% 100.0%
------ ------ ------ ------
Operating expenses:
Salaries, wages, and benefits 42.4 42.6 42.9 43.5
Operating supplies (1) 24.0 22.7 24.0 23.3
Rent and purchased transportation 0.8 0.4 0.9 0.5
Depreciation and amortization 10.4 10.8 10.5 11.0
Operating taxes and licenses 5.5 5.8 5.6 5.9
Insurance and claims 6.2 5.7 6.0 5.8
Communications and utilities 0.8 0.9 0.9 0.9
Other 1.6 2.1 1.6 1.9
Loss on sale or disposal of property 0.1 0.0 0.1 0.2
------ ------ ------ ------
Total operating expenses 91.8 91.0 92.5 93.0
------ ------ ------ ------
Operating income 8.2 9.0 7.5 7.0
Non-operating income 0.1 0.1 0.2 0.1
Interest expense (0.6) (0.5) (0.6) (0.5)
------ ------ ------ ------
Income before income taxes 7.7 8.6 7.1 6.6
------ ------ ------ ------
- -----------------------------
(1) Net of fuel surcharges.
THREE MONTHS ENDED JUNE 30, 2005 VS. THREE MONTHS ENDED JUNE 30, 2004
For the quarter ended June 30, 2005, truckload services revenues, before fuel
surcharges, increased 7.7% to $73.4 million as compared to $68.2 million for the
quarter ended June 30, 2004. The increase was due to a 10.0% increase in the
average rate per total mile from $1.11 during the second quarter of 2004 to
$1.23 during the second quarter of 2005. The revenue growth attributable to the
increase in average rate per mile was partially offset by a 2.1% reduction in
total miles traveled from 61,235,656 during the second quarter of 2004 to
59,929,150 miles during the second quarter 2005.
Salaries, wages and benefits decreased from 42.6% of revenues, before fuel
surcharges, in the second quarter of 2004 to 42.4% of revenues, before fuel
surcharges, in the second quarter of 2005. The decrease relates primarily to a
decrease in driver lease expense as the average number of owner operators under
contract decreased from 94 in the second quarter of 2004 to 70 in the second
quarter of 2005. The decrease associated with driver lease expense was partially
offset by an increase in amounts paid to the corresponding company driver
replacement, and in other costs normally absorbed by the owner operator such as
repairs and fuel.
Operating supplies and expenses increased from 22.7% of revenues, before fuel
surcharges, in the second quarter of 2004 to 24.0% of revenues, before fuel
surcharges in the second quarter of 2005. The increase relates to an increase in
fuel costs resulting from a 34.5% increase in the average price per gallon paid
by the Company during the second quarter of 2005 as compared to the second
quarter of 2004. During periods of rising fuel prices the Company is often able
to recoup at least a portion of the increase through fuel surcharges passed
along to its customers. Fuel costs, net of fuel surcharges, increased to $11.9
million in the second quarter of 2005 from $10.1 million in the second quarter
of 2004. The Company collected approximately $7.5 million in fuel surcharges
during the second quarter of 2005 and $3.1 million during the second quarter of
2004. Fuel costs were also affected by the replacement of owner operators with
company drivers as discussed above.
Rent and purchased transportation increased from 0.4% of revenues, before fuel
surcharges, in the second quarter of 2004 to 0.8% of revenues, before fuel
surcharges in the second quarter of 2005. The increase relates primarily to an
increase in amounts paid to third party transportation companies for intermodal
services.
Depreciation and amortization decreased from 10.8% of revenues, before fuel
surcharges, in the second quarter of 2004 to 10.4% of revenues, before fuel
surcharges, in the second quarter of 2005. This decrease as a percentage of
revenues is the result of the interaction of higher revenues as a result of an
increased rate per mile charged to customers and the fixed cost nature of
depreciation expense.
Insurance and claims increased from 5.7% of revenues, before fuel surcharges, in
the second quarter of 2004 to 6.2% of revenues, before fuel surcharges, in the
second quarter of 2005. The increase was the result of an increase in rates for
auto liability insurance coverage.
The truckload services division operating ratio, which measures the ratio of
operating expenses, net of fuel surcharges, to operating revenues, before fuel
surcharges, increased to 91.8% for the second quarter of 2005 from 91.0% for the
second quarter of 2004.
SIX MONTHS ENDED JUNE 30, 2005 VS. SIX MONTHS ENDED JUNE 30, 2004
For the first six months ended June 30, 2005, truckload services revenues,
before fuel surcharges, increased 6.1% to $143.5 million as compared to $135.3
million for the six months ended June 30, 2004. The increase was due to a 9.9%
increase in the average rate per total mile from $1.11 during the first six
months of 2004 to $1.22 during the first six months of 2005. The revenue growth
attributable to the increase in average rate per mile was partially offset by a
4.0% reduction in total miles traveled from 122,364,021 during the first six
months of 2004 to 117,448,781 miles during the first six months of 2005.
Salaries, wages and benefits decreased from 43.5% of revenues, before fuel
surcharges, in the first six months of 2004 to 42.9% of revenues, before fuel
surcharges, in the first six months of 2005. The decrease relates primarily to a
decrease in driver lease expense as the average number of owner operators under
contract decreased from 96 in the first six months of 2004 to 72 in the first
six months of 2005. The decrease associated with driver lease expense was
partially offset by an increase in amounts paid to the corresponding company
driver replacement, and in other costs normally absorbed by the owner operator
such as repairs and fuel.
Operating supplies and expenses increased from 23.3% of revenues, before fuel
surcharges, in the first six months of 2004 to 24.0% of revenues, before fuel
surcharges, in the first six months of 2005. The primary reason for the increase
relates to an increase in fuel costs resulting from a 31.8% increase in the
average price per gallon paid by the Company during the first six months of 2005
as compared to the first six months of 2004. During periods of rising fuel
prices the Company is often able to recoup at least a portion of the increase
through fuel surcharges passed along to its customers. Fuel costs, net of fuel
surcharges, increased to $23.1 million in the first six months of 2005 from
$20.6 million in the first six months of 2004. The Company collected
approximately $13.4 million in fuel surcharges during the first six months of
2005 and $5.4 million during the first six months of 2004. Fuel costs were also
affected by the replacement of owner operators with company drivers as discussed
above.
Rent and purchased transportation increased from 0.5% of revenues, before fuel
surcharges, in the first six months of 2004 to 0.9% of revenues, before fuel
surcharges in the first six months of 2005. The increase relates primarily to an
increase in amounts paid to third party transportation companies for intermodal
services.
Depreciation and amortization decreased from 11.0% of revenues, before fuel
surcharges, in the first six months of 2004 to 10.5% of revenues, before fuel
surcharges, in the first six months of 2005. This decrease as a percentage of
revenues is the result of the interaction of higher revenues as a result of an
increased rate per mile charged to customers and the fixed cost nature of
depreciation expense.
The truckload services division operating ratio, which measures the ratio of
operating expenses, net of fuel surcharges, to operating revenues, before fuel
surcharges, decreased to 92.5% for the first six months of 2005 from 93.0% for
the first six months of 2004.
RESULTS OF OPERATIONS - LOGISTICS AND BROKERAGE SERVICES
- --------------------------------------------------------
The following table sets forth, for logistics and brokerage services, the
percentage relationship of expense items to operating revenues, before fuel
surcharges, for the periods indicated. Brokerage service operations occur
specifically in certain divisions; however, brokerage operations occur
throughout the Company in similar operations having substantially similar
economic characteristics. Rent and purchased transportation, which includes
costs paid to third party carriers, are shown net of fuel surcharges.
Three Months Ended Six Months Ended
June 30, June 30,
2005 2004 2005 2004
---- ---- ---- ----
Operating revenues, before fuel surcharge 100.0% 100.0% 100.0% 100.0%
------ ------ ------ ------
Operating expenses:
Salaries, wages, and benefits 5.3 5.3 5.1 5.4
Operating supplies 0.0 0.0 0.0 0.0
Rent and purchased transportation (1) 87.4 88.7 87.8 88.0
Depreciation and amortization 0.3 0.3 0.3 0.3
Operating taxes and licenses 0.0 0.0 0.0 0.0
Insurance and claims 0.1 0.1 0.1 0.1
Communications and utilities 0.3 0.3 0.4 0.4
Other 1.5 1.4 1.6 1.5
Loss on sale or disposal of property 0.0 0.0 0.0 0.0
------ ------ ------ ------
Total operating expenses 94.9 96.1 95.3 95.7
------ ------ ------ ------
Operating income 5.1 3.9 4.7 4.3
Non-operating income 0.0 0.0 0.0 0.0
Interest expense (0.6) (0.6) (0.6) (0.6)
------ ------ ------ ------
Income before income taxes 4.5 3.3 4.1 3.7
------ ------ ------ ------
- -----------------------------
(1) Net of fuel surcharges.
THREE MONTHS ENDED JUNE 30, 2005 VS. THREE MONTHS ENDED JUNE 30, 2004
For the quarter ended June 30, 2005, logistics and brokerage services revenues,
before fuel surcharges, decreased 9.1% to $9.9 million as compared to $10.9
million for the quarter ended June 30, 2004. The decrease was primarily due to a
19.0% decrease in the number of loads serviced during the second quarter of 2005
as compared to the second quarter of 2004.
Rent and purchased transportation decreased from 88.7% of revenues, before fuel
surcharges, in the second quarter of 2004 to 87.4% of revenues, before fuel
surcharges, in the second quarter of 2005. The decrease was caused by an
increase in amounts collected from customers for fuel surcharges which helps
offset amounts paid to third party logistics and brokerage service providers.
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, decreased to 94.9% for the second quarter of 2005 from
96.1% for the second quarter of 2004.
SIX MONTHS ENDED JUNE 30, 2005 VS. SIX MONTHS ENDED JUNE 30, 2004
For the six months ended June 30, 2005, logistics and brokerage services
revenues, before fuel surcharges, decreased 7.0% to $19.9 million as compared to
$21.4 million for the six months ended June 30, 2004. The decrease was primarily
due to a 12.5% decrease in the number of loads serviced during the first six
months of 2005 as compared to the first six months of 2004.
Rent and purchased transportation decreased from 88.0% of revenues, before fuel
surcharges, in the first six months of 2004 to 87.8% of revenues, before fuel
surcharges, in the first six months of 2005. The decrease was caused by an
increase in amounts collected from customers for fuel surcharges which helps
offset amounts paid to third party logistics and brokerage service providers.
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, decreased to 95.3% for the first six months of 2005 from
95.7% for the first six months of 2004.
RESULTS OF OPERATIONS - COMBINED SERVICES
- -----------------------------------------
SIX MONTHS ENDED JUNE 30, 2005 VS. SIX MONTHS ENDED JUNE 30, 2004
The increase in the combined income before income taxes to $11.1 million from
$9.7 million, respectively, for the six month period ended June 30, 2005 and
2004 resulted in an increase in the provision for income taxes from $4.0 million
for the first six months of 2004 to $4.5 million for the first six months of
2005.
Net income for all divisions increased to $6.6 million, or 4.0% of revenues,
before fuel surcharge in the first six months of 2005 from $5.7 million, or 3.6%
of revenues, before fuel surcharge in the first six months of 2004. The increase
in net income resulted in an increase in diluted net income per share to $.59 in
the first six months of 2005 from $.50 in the first six months of 2004.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
The growth of 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 line
of credit.
During the first six months of 2005, the Company generated $14.8 million of cash
from operating activities. Investing activities used $23.7 million in cash in
the first six months of 2005. Financing activities used $7.5 million in the
first six months of 2005.
Our primary use of funds is for the purchase of revenue equipment. We typically
use our existing lines of credit, 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 six months of 2005, we utilized cash on hand
and our lines of credit to finance revenue equipment purchases of approximately
$30.3 million.
Occasionally we finance the acquisition of revenue equipment through installment
notes with fixed interest rates and terms ranging from 36 to 48 months, however
as of June 30, 2005, we had no outstanding indebtedness under such installment
notes.
In order to maintain our tractor fleet count it is often necessary to purchase
replacement tractors and place them in service before trade units are removed
from service. The timing difference created during this process often requires
the Company to pay for new units without any reduction in price for trade units.
In this situation, the Company later receives payment for the trade units as
they are delivered to the equipment vendor and have passed vendor inspection.
During the six months ended June 30, 2005, the Company received approximately
$4.9 million for tractors delivered for trade.
During the remainder of 2005, we expect to purchase approximately 231 new
tractors and approximately 450 new trailers while continuing to sell or trade
older equipment, which we expect to result in net capital expenditures of
approximately $13.1 million. Management believes we will be able to finance our
near term needs for working capital over the next twelve months, as well as
acquisitions of revenue equipment 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 maintain a $20.0 million revolving line of credit and a $30.0 million
revolving line of credit (Line A and Line B, respectively) with separate
financial institutions. Amounts outstanding under Line A bear interest at LIBOR,
as determined on the first day of each month, plus 1.40% (4.53% at June 30,
2005), are secured by our accounts receivable and mature on May 31, 2007. At
June 30, 2005, $1.5 million, including $.3 million in letters of credit were
outstanding under Line A with availability to borrow $18.5 million. Amounts
outstanding under Line B bear interest at LIBOR, as determined on the last day
of the previous month, plus 1.15% (4.30% at June 30, 2005), are secured by
revenue equipment and mature on June 30, 2007. At June 30, 2005, $27.3 million,
including $7.3 million in letters of credit were outstanding under Line B with
availability to borrow $2.7 million. In an effort to reduce interest rate risk
associated with these floating rate facilities, we have entered into interest
rate swap agreements in an aggregate notional amount of $20.0 million. For
additional information regarding the interest rate swap agreements, see Note B
to the condensed consolidated financial statements.
Trade accounts receivable at June 30, 2005 increased approximately $12.5 million
from December 31, 2004. Certain of the Company's largest customers regularly
schedule plant shutdowns for various periods during December and the volume of
freight we ship is reduced during such scheduled shutdowns. This reduction in
freight volume results in a reduction in accounts receivable at the end of each
year.
Prepaid expenses and deposits at June 30, 2005 decreased approximately $6.3
million as compared to December 31, 2004. The decrease reflects the amortization
of prepaid tractor and trailer license fees and auto liability insurance
premiums. In December 2004, approximately $3.0 million of the 2005 license fees
and approximately $5.0 million of the 2005 auto liability insurance premiums
were paid in advance. These prepaid expenses will be amortized to expense
through the remainder of the year.
Accounts payable at June 30, 2005 decreased approximately $6.4 million as
compared to December 31, 2004. The decrease is primarily related to a decrease
in the amount of bank drafts outstanding in excess of bank balance as compared
to bank drafts outstanding at December 31, 2004. As of June 30, 2005 bank drafts
of approximately $4.8 million were reclassified to accounts payable as compared
to approximately $16.5 million reclassified as of December 31, 2004. The net
decrease also reflects the increase of approximately $2.8 million in amounts
accrued for the purchase of revenue equipment but not yet paid for and an
increase of approximately $2.0 million in amounts accrued for fuel purchases and
third party equipment repair costs.
NEW ACCOUNTING PRONOUNCEMENTS
- -----------------------------
See Note C to the condensed consolidated financial statements for a description
of the most recent accounting pronouncements and their impact, if any, on the
Company.
Item 3. Quantitative and Qualitative Disclosures about Market Risk.
- --------------------------------------------------------------------
Our primary market risk exposures include equity price risk, interest rate risk,
and commodity price risk (the price paid to obtain diesel fuel for our
tractors). The potential adverse impact of these risks and the general
strategies we employ to manage such risks are discussed below.
The following sensitivity analyses do not consider the effects that an adverse
change may have on the overall economy nor do they consider additional actions
we may take to mitigate our exposure to such changes. Actual results of changes
in prices or rates may differ materially from the hypothetical results described
below.
EQUITY PRICE RISK
We hold certain actively traded marketable equity securities which subjects the
Company to fluctuations in the fair market value of its investment portfolio
based on current market price. The recorded value of marketable equity
securities increased to $9.6 million at June 30, 2005 from $8.8 million at
December 31, 2004. The increase is the result of additional purchases during the
first six months of 2005. 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 $960,000. For additional
information with respect to the marketable equity securities, see Note D to our
condensed consolidated financial statements.
INTEREST RATE RISK
Our two lines of credit each bear interest at a floating rate equal to LIBOR
plus a fixed percentage. Accordingly, changes in LIBOR, which are effected by
changes in interest rates, will affect the interest rate on, and therefore our
costs under, the lines of credit. In an effort to manage the risks associated
with changing interest rates, we entered into interest rate swap agreements
effective February 28, 2001 and May 31, 2001, on notional amounts of $15,000,000
and $5,000,000, respectively. The "pay fixed rates" under the $15,000,000 and
$5,000,000 swap agreements are 5.08% and 4.83%, respectively. The "receive
floating rate" for both swap agreements is "1-month" LIBOR. These interest rate
swap agreements terminate on March 2, 2006 and June 2, 2006, respectively.
Assuming $20.0 million of variable rate debt was outstanding under Line "A" and
not covered by the hedge agreement for a full fiscal year, a hypothetical 100
basis point increase in LIBOR would result in approximately $200,000 of
additional interest expense, net of the effect of the swap agreements. For
additional information with respect to the interest rate swap agreements, see
Note B to our condensed consolidated financial statements.
COMMODITY PRICE RISK
Prices and availability of all petroleum products are subject to political,
economic and market factors that are generally outside of our control.
Accordingly, the price and availability of diesel fuel, as well as other
petroleum products, can be unpredictable. Because our operations are dependent
upon diesel fuel, significant increases in diesel fuel costs could materially
and adversely affect our results of operations and financial condition. Based
upon our 2004 fuel consumption, a 10% increase in the average annual price per
gallon of diesel fuel would increase our annual fuel expenses by $5.6 million.
In July 2001, the Company entered into an agreement to obtain price protection
and reduce a portion of our exposure to fuel price fluctuations. Under this
agreement, we were obligated to purchase a minimum amount of diesel fuel per
month, with a price protection component, for the six month period ended
February 28, 2002. The agreement also provided that if during the twelve-month
period commencing January 2005, the average NY MX HO is below $.58 per gallon,
we will be obligated to pay the contract holder the difference between $.58 and
the average NY MX HO price for such month, multiplied by 1,000,000 gallons.
During June 2005, the average NY MX HO price was $1.62. The value of the
agreement is periodically adjusted to fair value, as determined by obtaining an
offer from the contract holder of the dollar amount required to terminate all
future liability under the contract, and as of June 30, 2005 the estimated fair
value of $250,000 is included in accrued liabilities in the accompanying
consolidated financial statements. For the three and six month period ended June
30, 2005 an adjustment of $125,000 and $250,000, respectively was made to
reflect the decline in fair value of the agreement which had the effect of
reducing operating supplies expense and other current liabilities each by
$125,000 and $250,000 during each respective period in the accompanying
consolidated financial statements. For additional information with respect to
this agreement, see Note B to our condensed consolidated financial statements.
Item 4. Controls and Procedures.
- ---------------------------------
Evaluation of disclosure controls and procedures.
In accordance with Rule 13a-15(b) of the Securities Exchange Act of 1934 (the
"Exchange Act"), the Company's management evaluated, with the participation of
the Company's President and Chief Executive Officer and Chief Financial Officer,
the effectiveness of the design and operation of the Company's disclosure
controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the
Exchange Act) as of June 30, 2005. Based upon that evaluation of these
disclosure controls and procedures, the President and Chief Executive Officer
and the Chief Financial Officer concluded that the disclosure controls and
procedures were effective as of June 30, 2005 so that material information
relating to the Company, including its consolidated subsidiaries, was made known
to them by others within those entities, particularly during the period in which
this quarterly report on Form 10-Q was being prepared.
Changes in internal controls over financial reporting.
There was no change in the Company's internal control over financial reporting
that occurred during the quarter ended June 30, 2005 that has materially
affected, or is reasonably likely to materially affect, the Company's internal
control over financial reporting.
PART II. OTHER INFORMATION
---------------------------
Item 1. Legal Proceedings.
- ---------------------------
The nature of the our business routinely results in litigation, primarily
involving claims for personal injuries and property damage incurred in the
transportation of freight. We believe that an unfavorable outcome in one or more
of those cases would not have a material adverse effect on our financial
condition.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
- ---------------------------------------------------------------------
On April 11, 2005, the Company announced that its Board of Directors had
authorized the Company to repurchase up to 600,000 shares of its common stock
during the six month period ending October 11, 2005. The following table
summarizes the Company's common stock repurchases during the second quarter of
2005 made pursuant to this authorization. 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".
Issuer Purchases of Equity Securities
Maximum Number
(or Approximate)
Total Number of Dollar Value) of
Total Number Shares (or Units) Shares (or Units)
of Shares Average Price Purchased as Part of that May Yet Be
(or Units) Paid per Share Publicly Announced Purchased Under the
Period Purchased (or Unit) Plans or Programs Plans or Programs
- ------------------------------------------------------------------------------------------------------
April 1-30, 2005 - - - 600,000
May 1-31, 2005 367,000 $16.6983 367,000 233,000
June 1-30, 2005 78,800 16.6756 78,800 154,200
-------- -------- ---------
Total 445,800 $16.6943 445,800 154,200
======== ======== =========
Item 4. Submission of Matters to a Vote of Security Holders.
- -------------------------------------------------------------
The 2005 Annual Meeting of Stockholders of the Company was held on May 26,
2005. The results of the voting with respect to each matter voted on at the
meeting is set forth below:
(1) Proposal to elect eight directors:
Votes Votes Broker
FOR WITHHELD NON-VOTES
--- -------- ---------
Fredrick P. Calderone 9,652,901 1,331,872 0
Frank L. Conner 10,854,588 130,185 0
Thomas H. Cooke 10,854,088 130,685 0
Manuel J. Moroun 9,776,998 1,207,775 0
Matthew T. Moroun 9,652,926 1,331,847 0
Daniel C. Sullivan 10,854,588 130,185 0
Robert W. Weaver 9,803,739 1,181,034 0
Charles F. Wilkins 10,854,088 130,685 0
Item 6. Exhibits.
- ------------------
Exhibits required by Item 601 of Regulations S-K:
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 10-Q filed
on May 15, 2002.)
11.1 - Statement Re: Computation of Diluted Earnings Per Share
31.1 - Rule 13a-14(a) Certification of Principal Executive Officer
31.2 - Rule 13a-14(a) Certification of Principal Financial Officer
32.1 - Section 1350 Certification of Chief Executive Officer
32.2 - Section 1350 Certification of Chief Financial Officer
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
P.A.M. TRANSPORTATION SERVICES, INC.
Dated: August 3, 2005 By: /s/ Robert W. Weaver
---------------------------------
Robert W. Weaver
President and Chief Executive Officer
(principal executive officer)
Dated: August 3, 2005 By: /s/ Larry J. Goddard
---------------------------------
Larry J. Goddard
Vice President-Finance, Chief Financial
Officer, Secretary and Treasurer
(principal accounting and financial officer)
P.A.M. TRANSPORTATION SERVICES, INC.
INDEX TO EXHIBITS TO FORM 10-Q
Exhibit
Number Exhibit Description
- -------- ---------------------------------------------------------
3.1 Amended and Restated Certificate of Incorporation of the
Registrant (incorporated by reference to Exhibit 3.1 of
the Company's Form 10-Q filed on May 15, 2002.)
3.2 Amended and Restated By-Laws of the Registrant (incorporated
by reference to Exhibit 3.2 of the Company's Form 10-Q filed
on May 15, 2002.)
11.1 Statement Re: Computation of Diluted Earnings Per Share
31.1 Rule 13a-14(a) Certification of Principal Executive Officer
31.2 Rule 13a-14(a) Certification of Principal Financial Officer
32.1 Section 1350 Certification of Chief Executive Officer
32.2 Section 1350 Certification of Chief Financial Officer