1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
(x) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1998
----------------
OR
( ) 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.)
Highway 412 West, Tontitown, Arkansas 72770
-------------------------------------------
(Address of principal executive offices)
(Zip Code)
(501) 361-9111
--------------
(Registrants telephone number, including area code)
N/A
---
(Former name, former address and former fiscal year, if changed since
last report)
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 August 10, 1998
----- ------------------------------
Common Stock, $.01 Par Value 8,324,957
2
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
P.A.M. TRANSPORTATION SERVICES, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
June 30, December 31,
1998 1997
---- ----
ASSETS (unaudited) (note)
Current assets:
Cash and cash equivalents $ 5,273 $ 6,401
Receivables:
Trade, net of allowance 19,147 16,915
Other 390 1,703
Equipment held for sale 192 1,529
Operating supplies and inventories 458 449
Deferred income taxes 107 61
Prepaid expenses and deposits 3,769 3,384
Income taxes refundable 65 415
--------- ---------
Total current assets 29,401 30,857
Property and equipment, at cost 124,140 103,572
Less: accumulated depreciation (42,773) (37,382)
--------- ---------
Net property and equipment 81,367 66,190
Other assets:
Excess of cost over net assets acquired 2,339 2,400
Non compete agreement 517 737
Other 616 504
--------- ---------
Total other assets 3,472 3,641
--------- ---------
Total assets $ 114,240 $ 100,688
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt $ 17,178 $ 15,544
Trade accounts payable 9,531 9,233
Other current liabilities 5,107 4,835
--------- ---------
Total current liabilities 31,816 29,612
Long-term debt, less current portion 33,048 28,226
Non compete agreement 282 312
Deferred income taxes 11,456 9,376
Shareholders' equity:
Common stock 83 83
Additional paid-in capital 18,708 18,592
Retained earnings 18,847 14,487
--------- ---------
Total shareholders' equity 37,638 33,162
--------- ---------
Total liabilities and shareholders' equity $ 114,240 $ 100,688
========= =========
Note: The balance sheet at December 31, 1997 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.
2
3
P.A.M. TRANSPORTATION SERVICES, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
(thousands except per share data)
Three Months Ended Six Months Ended
June 30, June 30,
1998 1997 1998 1997
---- ---- ---- ----
Operating revenues $ 36,012 $ 31,353 $ 71,451 $ 63,983
Operating expenses:
Salaries, wages and benefits 16,252 13,656 32,433 28,813
Operating supplies 6,490 5,758 13,353 12,487
Rent/purchased transportation 253 445 474 856
Depreciation and amortization 3,588 3,112 7,045 6,354
Operating taxes and licenses 1,886 1,873 4,025 3,764
Insurance and claims 1,489 1,369 2,952 2,833
Communications and utilities 409 250 758 452
Other 696 626 1,345 1,150
Loss on sale of equipment 25 0 73 0
----------- ----------- ----------- -----------
31,088 27,089 62,458 56,709
----------- ----------- ----------- -----------
Operating income 4,924 4,264 8,993 7,274
Other income (expense)
Interest expense (1,027) (889) (1,857) (1,758)
----------- ----------- ----------- -----------
(1,027) (889) (1,857) (1,758)
Income before income taxes 3,897 3,375 7,136 5,516
Income taxes --current 623 396 741 559
--deferred 858 887 2,035 1,580
----------- ----------- ----------- -----------
1,481 1,283 2,776 2,139
Net income $ 2,416 $ 2,092 $ 4,360 $ 3,377
=========== =========== =========== ===========
Net income per common share:
Basic $ 0.29 $ 0.26 $ 0.53 $ 0.42
=========== =========== =========== ===========
Diluted $ 0.29 $ 0.25 $ 0.52 $ 0.41
=========== =========== =========== ===========
Average common shares outstanding-Basic 8,299,702 8,147,492 8,292,906 8,137,037
=========== =========== =========== ===========
Average common shares outstanding-Diluted 8,473,015 8,280,749 8,461,769 8,238,837
=========== =========== =========== ===========
See notes to condensed consolidated financial statements.
3
4
P.A.M. TRANSPORTATION SERVICES, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(unaudited)
(in thousands)
Six Months Ended
June 30,
1998 1997
---- ----
OPERATING ACTIVITIES
Net income $ 4,360 $ 3,377
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 7,045 6,354
Non compete agreement amortization 220 220
Provision for deferred income taxes 2,034 1,580
Loss on retirement of property and equipment 73 0
Changes in operating assets and liabilities:
Accounts receivable (569) (3,182)
Prepaid expenses and other current assets (506) (265)
Accounts payable 298 1,138
Accrued expenses 272 711
-------- --------
Net cash provided by operating activities 13,227 9,933
INVESTING ACTIVITIES
Purchases of property and equipment (23,174) (6,145)
Proceeds from sales of assets 2,277 363
-------- --------
Net cash used in investing activities (20,897) (5,782)
FINANCING ACTIVITIES
Borrowings under lines of credit 80,441 68,619
Repayments under lines of credit (85,663) (71,124)
Borrowings of long-term debt 20,807 1,747
Repayments of long-term debt (9,159) (8,677)
Proceeds from exercise of stock options 116 166
-------- --------
Net cash provided by (used in) financing activities 6,542 (9,269)
-------- --------
Net decrease in cash and cash equivalents (1,128) (5,118)
Cash and cash equivalents at beginning of period $ 6,401 $ 5,940
-------- --------
Cash and cash equivalents at end of period $ 5,273 $ 822
======== ========
See notes to condensed consolidated financial statements.
4
5
P.A.M. TRANSPORTATION SERVICES, INC.
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
JUNE 30, 1998
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, 1998 are not
necessarily indicative of the results that may be expected for the year ended
December 31, 1998. 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, 1997.
NOTE B: NOTES PAYABLE AND LONG-TERM DEBT
In the first six months of 1998, the Company's subsidiary, P.A.M. Dedicated
Services, Inc., entered into installment obligations for the purchase of revenue
equipment in the aggregate amount of approximately $20.8 million. These
obligations are payable in 36 and 60 monthly installments at interest rates
ranging from 7.00% to 7.50%.
NOTE C: NEW ACCOUNTING PRONOUNCEMENT
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivitive 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.
5
6
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 JUNE 30, 1998 VS. THREE MONTHS ENDED JUNE 30, 1997
For the quarter ended June 30, 1998, revenues increased 14.9% to $36.0 million
as compared to $31.4 million for the quarter ended June 30, 1997. The main
factor for the increase in revenues was a 15.0% increase in the average number
of tractors from 914 in the second quarter of 1997 compared to 1,051 in second
quarter of 1998.
The Company's operating ratio improved to 86.3% of revenues in the second
quarter of 1998 compared to 86.4% in the second quarter of 1997.
Salaries, wages and benefits increased from 43.6% of revenues in the second
quarter of 1997 to 45.1% of revenues in the second quarter of 1998. This
increase was due to an increase in amounts paid to drivers due to changes in
driver pay packages early in the first quarter of 1998.
Operating supplies and expenses decreased from 18.4% of revenues in the second
quarter of 1997 to 18.0% of revenues in the second quarter of 1998. The decrease
represents a lower price paid for diesel fuel.
Rent and purchased transportation decreased from 1.4% of revenues in the second
quarter of 1997 to 0.7% of revenues in the second quarter of 1998. This decrease
was due to the replacement of rental trailers with company-owned trailers.
Communications and utilities increased from 0.8% of revenues in the second
quarter of 1997 to 1.1% of revenues in the second quarter of 1998 due to
increased usage of Qualcomm units and federal surcharges related to inbound
"toll-free" calls initiated from payphones.
The Company's effective tax rate remained constant at 38% for the periods
compared.
SIX MONTHS ENDED JUNE 30, 1998 VS. SIX MONTHS ENDED JUNE 30, 1997
For the six months ended June 30, 1998, revenues increased 11.7% to $71.5
million as compared to $64.0 million for the six months ended June 30, 1997. The
main factor for the increase in revenues was a 12.1% increase in the average
number of tractors from 917 for the first six months of 1997 compared to 1,028
for the first six months of 1998.
The Company's operating ratio improved to 87.4% of revenues in the first six
months of 1998 compared to 88.6% in the first six months of 1997.
Salaries, wages and benefits increased from 45.0% of revenues in the first six
months of 1997 to 45.4% of revenues in the first six months of 1998. This
increase was due to an increase in amounts paid to drivers due to changes in
driver pay packages early in the first quarter of 1998. This increase in driver
pay was partially offset by a reduction in the amount accrued for the Company's
1998 Incentive Bonus Plan.
6
7
Operating supplies and expenses decreased from 19.5% of revenues in the first
six months of 1997 to 18.7% of revenues in the first six months of 1998. The
decrease represents a lower price paid for diesel fuel.
Rent and purchased transportation decreased from 1.3% of revenues in the first
six months of 1997 to 0.7% of revenues in the first six months of 1998. This
decrease was due to the replacement of rental trailers with company-owned
trailers.
Communications and utilities increased from 0.7% of revenues in the first six
months of 1997 to 1.1% of revenues in the first six months of 1998 due to
increased usage of Qualcomm units and federal surcharges related to inbound
"toll-free"calls initiated from payphones.
LIQUIDITY AND CAPITAL RESOURCES
During the first six months of 1998, the Company generated $13.2 million in cash
from operating activities. Investing activities used $20.9 million in cash in
the first six months of 1998. Financing activities generated $6.5 million in the
first six months of 1998 primarily from the borrowing of long-term debt.
The Company's principal subsidiary, P.A.M. Transport, Inc., has a $15.0 million
secured bank line of credit subject to borrowing limitations. The line of credit
includes a provision that allows the Company to finance equipment at a reduced
interest rate of LIBOR + 1.50% (currently 7.16%). The maximum amount of
equipment that may be financed under this equipment provision is $7.5 million
with the remaining $7.5 million representing a general "working capital" line of
credit at an interest rate of LIBOR + 2.15% (currently 7.81%). Outstanding
advances on this line of credit were approximately $1.5 million at June 30,
1998, which consisted entirely of letters of credit. The Company's borrowing
base limitation at June 30, 1998 was $15.0 million. The line of credit is
guaranteed by the Company and matures on May 31, 1999 while the equipment
portion of the line of credit matures on May 31, 2000.
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 six months of 1998 with a cost of approximately $3.2 million
using its existing line of credit. In addition, P.A.M. Dedicated Services, Inc.,
a subsidiary of the Company, entered into installment obligations during the
first six months of 1998 for the purchase of revenue equipment in the amount of
approximately $20.8 million payable in 36 and 60 monthly installments at
interest rates ranging from 7.00% to 7.50%.
During the remainder of 1998, the Company plans to replace 338 tractors and to
add 57 additional new tractors which would result in additional debt of
approximately $21.1 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 June 30, 1998, to repay indebtedness coming
due in the current year, and to fund its operating needs during the remainder of
fiscal 1998.
YEAR 2000
In the next two years, 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. The Company began the process of identifying the changes
required to its computer programs and hardware in 1997. Software upgrades
designed to correct the year 2000 problem are scheduled to be implemented by the
second quarter of 1999. Accordingly, the Company believes that it will
timely meet its year 2000 compliance requirements, and does not presently
anticipate the cost of these software and hardware changes to have a material
adverse impact on its business, financial condition, or results of operation.
However, there can be no assurance that unforeseen difficulties or costs will
not arise. The Company has issued certification requests to the software
companies on which its computer programs rely seeking assurance that they will
be year 2000 compliant. Approximately 90% of the questionnaires have been
returned. Respondents have indicated that they are year 2000 compliant now or
will be in advance of the year 2000.
7
8
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders.
The 1998 Annual Meeting of Stockholders of the Company was held on May
22, 1998. At the meeting, the following persons were elected as directors to
serve for a term of one year and until their successors are elected and
qualified: Robert W. Weaver, Daniel C. Sullivan, Matthew T. Moroun, Charles F.
Wilkins, Fredrick P. Calderone and Joseph J. Casaroll.
The results of voting with respect to the election of directors were as
follows:
Votes Votes
FOR WITHHELD
--- --------
Robert W. Weaver 7,789,546 23,530
Daniel C. Sullivan 7,789,546 23,530
Charles F. Wilkins 7,784,546 28,530
Matthew T. Moroun 7,789,546 23,530
Fredrick P. Calderone 7,789,546 24,230
Joseph J. Casaroll 7,789,546 24,230
Also at the 1998 Annual Meeting of Stockholders, the stockholders
approved an amendment to the 1995 Stock Option Plan to increase the number
of shares available for grant thereunder from 600,000 to 1,000,000 shares.
Votes for approval of the amendment were 6,464,877, votes against were
600,800 and votes withheld were 2,185.
Item 5. Other Information.
Any proposal to be presented at next year's Annual Meeting of
Stockholders must be received at the principal executive offices of the
Company not later than December 29, 1998, directed to the attention of the
Secretary, for consideration for inclusion in the Company's proxy statement
and form of proxy relating to that meeting. Any such proposals must comply
in all respects with the rules and regulations of the Securities and
Exchange Commission. With respect to any such proposals received by the
Company after March 15, 1999, the persons named in the form of proxy
solicited by management will vote the proxy in accordance with their
judgement of what is in the best interests of the Company.
Item 6. Exhibits and Reports on Form 8-K.
(a) The following exhibits are filed with this report:
10.1 - Employment Agreement between Robert W. Weaver and
the Company.
11.1 - Statement Re: Computation of Diluted Earnings
Per Share.
27.1 - Financial Data Schedule (for SEC use only).
27.2 - Restated Financial Data Schedule (for SEC use only).
(b) Reports on Form 8-K
None.
8
9
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 12, 1998 /s/ Robert W Weaver
President and Chief Executive Officer
(principal executive officer)
Dated: August 12, 1998 /s/ Larry J. Goddard
Vice President-Finance, Chief Financial
Officer, Secretary and Treasurer
(principal accounting and financial
officer)
9