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 September 30, 1999
[ _ ] 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
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P.A.M. TRANSPORTATION SERVICES, INC.
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(Exact name of registrant as specified in its charter)
Delaware 71-0633135
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Highway 412 West, Tontitown, Arkansas 72770
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(Address of principal executive offices) (Zip Code)
Registrants telephone number, including area code: (501) 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 the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date:
Class Outstanding at October 29, 1999
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Common Stock, $.01 Par Value 8,443,757
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
P.A.M. TRANSPORTATION SERVICES, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
September 30, December 31,
1999 1998
---- ----
(unaudited) (note)
ASSETS
Current assets:
Cash and cash equivalents $ 729 $ 5,963
Receivables:
Trade, net of allowance 25,586 20,816
Other 818 63
Equipment held for sale 192 505
Operating supplies and inventories 384 458
Deferred income taxes 115 19
Prepaid expenses and deposits 6,084 3,860
Income taxes refundable 19 38
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Total current assets 33,927 31,722
Property and equipment, at cost 175,359 133,860
Less: accumulated depreciation (51,756) (42,429)
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Net property and equipment 123,603 91,431
Other assets:
Excess of cost over net assets acquired 9,012 2,277
Non compete agreement 361 297
Other 1,284 744
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Total other assets 10,657 3,318
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Total assets $ 168,187 $ 126,471
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt $ 20,896 $ 13,362
Trade accounts payable 14,014 8,494
Other current liabilities 8,362 5,178
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Total current liabilities 43,272 27,034
Long-term debt, less current portion 56,305 44,816
Non compete agreement 163 0
Deferred income taxes 17,658 13,164
Shareholders' equity:
Common stock 84 83
Additional paid-in capital 19,250 18,814
Retained earnings 31,455 22,560
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Total shareholders' equity 50,789 41,457
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Total liabilities and shareholders' equity $ 168,187 $ 126,471
========= =========
Note: The balance sheet at December 31, 1998 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 Nine Months Ended
September 30, September 30,
1999 1998 1999 1998
---- ---- ---- ----
Operating revenues $ 51,284 $ 34,131 $ 156,350 $ 105,583
Operating expenses:
Salaries, wages and benefits 22,084 15,419 67,796 47,852
Operating supplies 9,027 6,361 25,901 19,714
Rent/purchased transportation 3,076 224 10,399 697
Depreciation and amortization 4,833 3,447 13,712 10,492
Operating taxes and licenses 2,683 2,080 8,453 6,106
Insurance and claims 1,903 1,483 5,999 4,436
Communications and utilities 608 410 1,809 1,168
Other 1,163 715 3,270 2,060
(Gain) loss on sale of equipment (149) (17) (262) 56
--------- --------- --------- ---------
45,228 30,122 137,077 92,581
--------- --------- --------- ---------
Operating income 6,056 4,009 19,273 13,002
Other income (expense)
Interest expense (1,413) (981) (4,297) (2,838)
--------- --------- --------- ---------
(1,413) (981) (4,297) (2,838)
Income before income taxes 4,643 3,028 14,976 10,164
Income taxes --current 547 185 1,620 926
--deferred 1,302 990 4,461 3,025
--------- --------- --------- ---------
1,849 1,175 6,081 3,951
Net income $ 2,794 $ 1,853 $ 8,895 $ 6,213
========= ========= ========= =========
Net income per common share:
Basic $ 0.33 $ 0.22 $ 1.06 $ 0.75
========= ========= ========= =========
Diluted $ 0.33 $ 0.22 $ 1.05 $ 0.74
========= ========= ========= =========
Average common shares outstanding-Basic 8,420,603 8,312,674 8,380,541 8,299,568
========= ========= ========= =========
Average common shares outstanding-Diluted 8,527,189 8,421,163 8,477,753 8,452,355
========= ========= ========= =========
See notes to condensed consolidated financial statements.
P.A.M. TRANSPORTATION SERVICES, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(unaudited)
(in thousands)
Nine months Ended
September 30,
1999 1998
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OPERATING ACTIVITIES
Net income $ 8,895 $ 6,213
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 13,712 10,492
Non compete agreement amortization 295 330
Provision for deferred income taxes 4,461 3,025
(Gain)/loss on retirement of property and equipment (262) 56
Changes in operating assets and liabilities:
Accounts receivable 34 (4,228)
Prepaid expenses and other current assets (1,489) (678)
Accounts payable 3,620 7,868
Accrued expenses 1,297 887
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Net cash provided by operating activities 30,563 23,965
INVESTING ACTIVITIES
Purchases of property and equipment (37,151) (33,564)
Acquisition of business, net of cash acquired (9,642) 0
Proceeds from sales of assets 5,251 3,584
Lease payments received on direct financing leases 749 0
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Net cash used in investing activities (40,793) (29,980)
FINANCING ACTIVITIES
Borrowings under lines of credit 147,185 125,632
Repayments under lines of credit (146,233) (129,116)
Borrowings of long-term debt 18,469 24,505
Repayments of long-term debt (14,861) (21,245)
Proceeds from exercise of stock options 436 176
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Net cash provided by financing activities 4,996 (48)
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Net decrease in cash and cash equivalents (5,234) (6,063)
Cash and cash equivalents at beginning of period $ 5,963 $ 6,401
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Cash and cash equivalents at end of period $ 729 $ 338
========= =========
See notes to condensed consolidated financial statements.
P.A.M. TRANSPORTATION SERVICES, INC.
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
SEPTEMBER 30, 1999
NOTE A: BASIS OF PRESENTATION
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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 nine-month period ended September 30, 1999 are not
necessarily indicative of the results that may be expected for the year ended
December 31, 1999. 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, 1998.
NOTE B: NOTES PAYABLE AND LONG-TERM DEBT
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In the first nine months of 1999, the Company's subsidiaries, P.A.M. Transport,
Inc., P.A.M. Dedicated Services, Inc., Choctaw Express, Inc. and Decker
Transport Co., Inc. entered into installment obligations for the purchase of
revenue equipment in the amounts of approximately $8.8 million, $2.1 million,
$3.1 million and $4.5 million, respectively. These obligations are payable in
36, 48 and 60 monthly installments at interest rates ranging from 6.34% to
6.97%.
NOTE C: NEW ACCOUNTING PRONOUNCEMENT
- ----------------------------------------
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities". The Statement establishes accounting and reporting
standards requiring that every derivative instrument be recorded in the balance
sheet as either an asset or liability at its fair value. The Company has
determined that the adoption of this statement will have no material effect on
its financial statements.
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 contains
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995. Such forward-looking statements may relate to
financial results and plans for future business activities, 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,
general economic conditions, competition and other uncertainties detailed in
this report and detailed from time to time in other filings by the Company with
the Securities and Exchange Commission.
THREE MONTHS ENDED SEPTEMBER 30, 1999 VS. THREE MONTHS ENDED SEPTEMBER 30, 1998
- --------------------------------------------------------------------------------
For the quarter ended September 30, 1999, revenues increased 50.3% to $51.3
million as compared to $34.1 million for the quarter ended September 30, 1998.
The main factors for the increase were an increase in the average number of
tractors from 1,054 in the third quarter of 1998 to 1,459 in the third quarter
of 1999, of which 249 additional units were attributable to the acquisition of
Decker Transport Co., Inc. ("Decker"), and an increase in the average rate per
mile charged by the Company in the third quarter of 1999 as compared to the
third quarter of 1998, also primarily related to the Decker acquisition.
The Company's operating ratio remained constant at 88.2% for the periods
compared.
Salaries, wages and benefits decreased from 45.2% of revenues in the third
quarter of 1998 to 43.1% of revenues in the third quarter of 1999. The
decrease relates primarily to the brokerage operations acquired in connection
with the Decker acquisition in which revenues are generated through the use of
outside transportation services and not Company paid drivers.
Operating supplies and expenses decreased from 18.6% of revenues in the third
quarter of 1998 to 17.6% of revenues in the third quarter of 1999. The
decrease, which was partially offset by an increase in fuel costs, relates
primarily to costs associated with the brokerage operations acquired in
connection with the Decker acquisition being combined and paid to other
transportation companies in the form of purchased transportation.
Rent and purchased transportation increased from 0.7% of revenues in the third
quarter of 1998 to 6.0% of revenues in the third quarter of 1999. The increase
relates primarily to the Decker acquisition which purchases transportation
services from other transportation companies in order to support its brokerage
operations.
Depreciation and amortization decreased from 10.1% of revenues in the third
quarter of 1998 to 9.4% of revenues in the third quarter of 1999. The decrease
relates primarily to the Decker acquisition which utilizes outside
transportation companies' drivers and equipment in order to perform its
brokerage activities.
The Company's effective tax rate increased from 38.8% in the third quarter of
1998 to 39.8% in the third quarter of 1999. This increase is related to
payments made to Decker drivers in the form of a per diem which is only
partially deductible by the Company for federal and state income tax purposes.
NINE MONTHS ENDED SEPTEMBER 30, 1999 VS. NINE MONTHS ENDED SEPTEMBER 30, 1998
- --------------------------------------------------------------------------------
For the nine months ended September 30, 1999, revenues increased 48.1% to $156.3
million as compared to $105.6 million for the nine months ended September 30,
1998. The main factors for the increase were an increase in the average number
of tractors from 1,036 for the first nine months of 1998 to 1,438 for the first
nine months of 1999, of which 253 additional units were attributable to the
Decker acquisition, and an increase in the average rate per mile charged by the
Company for the first nine months of 1999 as compared to the first nine months
of 1998, also primarily related to the Decker acquisition.
The Company's operating ratio remained constant at 87.7% for the periods
compared.
Salaries, wages and benefits decreased from 45.3% of revenues in the first nine
months of 1998 to 43.4% of revenues in the first nine months of 1999. The
decrease relates primarily to the brokerage operations acquired in connection
with the Decker acquisition in which revenues are generated through the use of
outside transportation services and not Company paid drivers.
Operating supplies and expenses decreased from 18.7% of revenues in the first
nine months of 1998 to 16.6% of revenues in the first nine months of 1999. The
decrease, which was partially offset by an increase in fuel costs, relates
primarily to costs associated with the brokerage operations acquired in
connection with the Decker acquisition being combined and paid to other
transportation companies in the form of purchased transportation.
Rent and purchased transportation increased from 0.7% of revenues in the
first nine months of 1998 to 6.6% of revenues in the first nine months of 1999.
The increase relates primarily to the Decker acquisition which purchases
transportation services from other transportation companies in order to support
its brokerage operations.
Depreciation and amortization decreased from 9.9% of revenues in the first nine
months of 1998 to 8.8% of revenues in the first nine months of 1999. The
decrease relates primarily to the Decker acquisition which utilizes outside
transportation companies' drivers and equipment in order to perform its
brokerage activities.
The Company's effective tax rate increased from 38.9% in the first nine months
of 1998 to 40.6% in the first nine months of 1999. This increase is related to
payments made to Decker drivers in the form of a per diem which is only
partially deductible by the Company for federal and state income tax purposes.
LIQUIDITY AND CAPITAL RESOURCES
- ----------------------------------
During the first nine months of 1999, the Company generated $30.6 million in
cash from operating activities. Investing activities used $40.8 million in cash
in the first nine months of 1999. Financing activities generated $5.0 million in
the first nine months of 1999 primarily from long-term borrowings.
The Company's principal subsidiary, P.A.M. Transport, Inc., has a $15.0 million
secured bank line of credit subject to borrowing limitations. This line of
credit represents a general "working capital" line of credit at an interest rate
of LIBOR as of the first day of the month plus 1.40% (6.78% at September 30,
1999). Outstanding advances on this line of credit were approximately $4.5
million at September 30, 1999, including $3.6 million in letters of credit. The
Company's borrowing base limitation at September 30, 1999 was $10.5 million. The
line of credit is guaranteed by the Company and the first $7.5 million matures
on May 31, 2000 while the remaining $7.5 million matures on May 31, 2001.
In addition to cash flow from operations, the Company uses its existing line of
credit on an interim basis to finance capital expenditures and repay long-term
debt. Longer-term transactions, such as installment notes (generally three to
five year terms at fixed rates), are typically entered into for the purchase of
revenue equipment; however, the Company purchased additional revenue equipment
during the first nine months of 1999 at a cost of approximately $14.9 million
using its existing line of credit. In addition, P.A.M. Transport, Inc., P.A.M.
Dedicated Services, Inc., Choctaw Express, Inc. and Decker Transport Co., Inc.,
subsidiaries of the Company, entered into installment obligations during the
first nine months of 1999 for the purchase of revenue equipment in the amounts
of approximately $8.8, $2.1, $3.1 and $4.5 million, respectively, payable in 36,
48 and 60 monthly installments at interest rates ranging from 6.34% to 6.97%.
During the remainder of 1999, the Company plans to replace 105 tractors which
would result in additional debt of approximately $5.6 million. Management
expects that the Company's existing working capital and its available line of
credit will be sufficient to meet the Company's capital commitments as of
September 30, 1999, to repay indebtedness coming due in the current year, and to
fund its operating needs during the remainder of fiscal 1999.
ACQUISITION OF DECKER TRANSPORT CO., INC.
- ----------------------------------------------
On January 11, 1999, the Company closed the purchase of substantially all of the
assets and assumed certain liabilities of Decker Transport Co., Inc., a
truckload carrier located in New Jersey. The Company acquired assets, which
consisted primarily of revenue equipment and trade accounts receivable, totaling
approximately $21.0 million and assumed liabilities, which consisted primarily
of installment note obligations and trade accounts payable, totaling
approximately $14.1 million. In connection with this acquisition, the Company
issued to the seller an installment note in the amount of $4.0 million at an
interest rate of 6% and paid cash of approximately $9.8 million utilizing
existing cash and its line of credit.
The purchase price has been allocated to assets and liabilities based on their
estimated fair values as of the date of acquisition. Goodwill was recorded as a
result of the purchase allocation and it is being amortized over a 25-year
period. The Company also entered into three-year Non-competition Agreements
with eight shareholders or officers/employees of Decker Transport Co., Inc.
The acquisition has been accounted for under the purchase method, effective
January 11, 1999, with the operations of Decker included in the Company's
financial statements since that date. The following pro forma financial
information is based on the audited consolidated financial statements of P.A.M.
Transportation Services, Inc. for the year ended December 31, 1998 and from the
audited combined financial statements of Decker Transport Co., Inc. and Van
Houten Ltd. for the year ended December 31, 1998 and adjusted as if the
acquisition had occurred on January 1, 1998, with certain assumptions made that
management believes to be reasonable. This information is for comparative
purposes only and does not purport to be indicative of the results of operations
that would have occurred had the transaction been completed at the beginning of
the period or indicative of the results that may occur in the future.
1998
(unaudited)
----------------
(in thousands, except per share data)
Operating revenue $ 191,616
Income from operations 17,402
Income before income tax provision 11,813
Net income 7,239
Earnings per share -basic .87
Earnings per share -diluted .86
Weighted average shares -basic 8,306
Weighted average shares -diluted 8,444
YEAR 2000
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Many companies may face a potentially serious information systems problem
because their computer software applications and operational programs may not
properly recognize calendar dates beginning in the Year 2000. This problem
could force computers to either shut down or provide incorrect data or
information causing a temporary inability to process transactions. Accordingly,
a disruption of normal business activities may occur.
The Company began the process of identifying the changes required to its
computer programs and hardware in 1997 and has completed its Year 2000
assessment consisting of an analysis of all information systems, data and voice
networks, physical plants, rolling stock electronic systems and external
suppliers and customers. The Company has determined its overall risk due to
Year 2000 failures and has developed a strategy to repair or replace any system
determined to be non-compliant. The Company anticipates funding all Year 2000
related expenditures, which are currently estimated at $100,000, from operating
cash flows and as of September 30, 1999 the Company had incurred costs of
approximately $90,000 related to Year 2000 issues.
All information systems requiring replacement or remediation are under a vendor
software maintenance contract, which includes an upgrade to a Year 2000
compatible version. The software vendor has released its Year 2000 compatible
version, which has been installed and is being used. This version has passed
all of the Company's Year 2000 tests and the Company believes that this software
is Year 2000 compliant.
The Company has surveyed its major suppliers and customers as well as secondary
suppliers and customers for their state of readiness. Major suppliers and
customers whose responses indicate they may not be Year 2000 compatible in a
timely fashion are being monitored on a monthly basis. The Company has also
issued certification requests to the software companies on which its computer
programs rely seeking assurance that they will be Year 2000 compliant.
Approximately 99% of the questionnaires have been returned. Respondents have
indicated that they are currently Year 2000 compliant or will be in advance of
the Year 2000.
The related costs and projected completion dates for Year 2000 compatability are
based upon management's best estimates. However, management cannot predict with
certainty the impact on the Company's business, financial condition, and results
of operations if customers and suppliers fail or delay to address Year 2000
issues.
PART II. OTHER INFORMATION
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Item 3. Quantitative and Qualitative Disclosure about Market Risk.
- ----------------------------------------------------------------------------
The Company's General Line of Credit agreement provides for borrowings, which
bear interest at variable rates based on the LIBOR. At September 30, 1999, the
Company had approximately $4.5 million outstanding pursuant to the General Line
of Credit. The Company believes that the effect, if any, of reasonably possible
near-term changes in interest rates on the Company's financial position, results
of operations, and cash flows should not be material.
All customers are required to pay for the Company's services in U.S. dollars
and the Company does not engage in hedging transactions relating to diesel fuel
or any other commodity.
Item 6. Exhibits and Reports on Form 8-K.
- --------------------------------------------------
(a) The following exhibits are filed with this report:
11.1 - Statement Re: Computation of Diluted Earnings Per Share.
27.1 - Financial Data Schedule (for SEC use only).
(b) Reports on Form 8-K
None.
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: November 9, 1999 By: /s/ Robert W Weaver
---------------------------------
Robert W. Weaver
President and Chief Executive Officer
(principal executive officer)
Dated: November 9, 1999 By: /s/ Larry J. Goddard
---------------------------------
Larry J. Goddard
Vice President-Finance, Chief Financial
Officer, Secretary and Treasurer
(principal accounting and financial officer)