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 March 31, 2001
[ _ ] 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 May 2, 2001
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Common Stock, $.01 Par Value 8,473,567
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
P.A.M. TRANSPORTATION SERVICES, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
March 31, December 31,
2001 2000
---- ----
(unaudited) (note)
ASSETS
Current assets:
Cash and cash equivalents $ 584 $ 485
Receivables:
Trade, net of allowance 29,697 23,291
Other 625 640
Operating supplies and inventories 149 71
Deferred income taxes 348 401
Prepaid expenses and deposits 6,627 3,426
Income taxes refundable 651 628
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Total current assets 38,681 28,942
Property and equipment, at cost 197,835 184,636
Less: accumulated depreciation (63,423) (59,308)
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Net property and equipment 134,412 125,328
Other assets:
Excess of cost over net assets acquired 8,405 8,506
Non compete agreement 98 131
Other 1,574 1,611
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Total other assets 10,077 10,248
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Total assets $ 183,170 $ 164,518
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt $ 19,702 $ 17,753
Trade accounts payable 11,556 10,610
Other current liabilities 9,214 8,074
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Total current liabilities 40,472 36,437
Long-term debt, less current portion 53,104 42,073
Deferred income taxes 24,856 23,798
Shareholders' equity:
Common stock 85 85
Additional paid-in capital 19,674 19,638
Accumulated other comprehensive income (loss) (147) -
Retained earnings 45,126 42,487
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Total shareholders' equity 64,738 62,210
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Total liabilities and shareholders' equity $ 183,170 $ 164,518
========= =========
Note: The balance sheet at December 31, 2000 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
March 31,
2001 2000
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Operating revenues $ 58,406 $ 54,147
Operating expenses:
Salaries, wages and benefits 25,747 24,243
Operating supplies 10,761 9,835
Rent/purchased transportation 3,906 3,556
Depreciation and amortization 4,766 4,817
Operating taxes and licenses 2,924 2,956
Insurance and claims 2,435 2,290
Communications and utilities 533 587
Other 1,764 1,015
(Gain) loss on sale of equipment 25 (46)
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52,861 49,253
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Operating income 5,545 4,894
Other income (expense)
Interest expense (1,147) (1,354)
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Income before income taxes 4,398 3,540
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Income taxes --current 551 136
--deferred 1,208 1,276
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1,759 1,412
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Net income $ 2,639 $ 2,128
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Net income per common share:
Basic $ 0.31 $ 0.25
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Diluted $ 0.31 $ 0.25
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Average common shares outstanding-Basic 8,473,567 8,440,298
========= =========
Average common shares outstanding-Diluted 8,519,088 8,514,854
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See notes to condensed consolidated financial statements.
P.A.M. TRANSPORTATION SERVICES, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
(in thousands)
Three months Ended
March 31,
2001 2000
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OPERATING ACTIVITIES
Net income $ 2,639 $ 2,128
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 4,766 4,817
Non compete agreement amortization 33 33
Provision for deferred income taxes 1,208 1,276
(Gain)/loss on retirement of property and equipment 25 (46)
Changes in operating assets and liabilities:
Accounts receivable (6,459) (4,312)
Prepaid expenses and other current assets (3,243) (2,088)
Accounts payable 702 2,554
Accrued expenses 1,140 1,597
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Net cash provided by operating activities 811 5,959
INVESTING ACTIVITIES
Purchases of property and equipment (15,130) (6,650)
Proceeds from sales of assets 1,356 200
Lease payments received on direct financing leases 46 99
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Net cash used in investing activities (13,728) (6,351)
FINANCING ACTIVITIES
Borrowings under lines of credit 74,809 46,975
Repayments under lines of credit (63,070) (44,849)
Borrowings of long-term debt 7,112 4,204
Repayments of long-term debt (5,871) (4,845)
Proceeds from exercise of stock options 36 7
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Net cash provided by financing activities 13,016 1,492
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Net increase in cash and cash equivalents 99 1,100
Cash and cash equivalents at beginning of period $ 485 $ 3,557
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Cash and cash equivalents at end of period $ 584 $ 4,657
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See notes to condensed consolidated financial statements.
P.A.M. TRANSPORTATION SERVICES, INC.
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
MARCH 31, 2001
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 three-month period ended March 31, 2001 are not
necessarily indicative of the results that may be expected for the year ended
December 31, 2001. 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, 2000.
NOTE B: NOTES PAYABLE AND LONG-TERM DEBT
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In the first three months of 2001, the Company's subsidiary, P.A.M. Transport,
Inc., entered into installment obligations for the purchase of revenue equipment
in the amount of approximately $4.5 million. These obligations are payable in 48
monthly installments at an interest rate of 7.43%.
NOTE C: DERIVATIVE FINANCIAL INSTRUMENTS
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On January 1, 2001, the Company adopted Statement of Financial Accounting
Standards No. 133, "Accounting for Derivative Instruments and Hedging
Activities," issued by the Financial Accounting Standards Board in 1998.
Statement No. 133, as amended, establishes accounting and reporting standards
requiring the recording of each derivative instrument in the balance sheet as
either an asset or liability measured at fair value. Changes in the derivative
instrument's fair value must be recognized currently in earnings unless specific
hedge accounting criteria are met. For hedges which meet the criteria, the
derivative instrument's gains and losses, to the extent effective, may be
recognized in accumulated other comprehensive income (loss) rather than current
earnings.
The Company had no transition adjustment as a result of adopting SFAS 133 on
January 1, 2001 as the Company's only derivative instrument was entered into
during the first quarter 2001. 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.
The Company designates this $15,000,000 interest rate swap as a cash flow hedge
of its exposure to variability in future cash flow resulting from interest
payments indexed to "1-month" LIBOR. Changes in future cash flow from the
interest rate swap will offset changes in interest rate payments on the first
$15,000,000 of the Company's current revolving credit facility or future
"1-month" LIBOR based borrowings that reset on the second London Business Day
prior to the start of the next interest period. The hedge locks the interest
rate at 5.08% plus the pricing spread (currently 1.15%) for the notional amount.
This interest rate swap agreement meets the specific hedge accounting criteria.
The effective portion of the cumulative gain or loss has been reported as a
component of accumulated other comprehensive loss in shareholders' equity and
will be reclassified into current earnings by March 2, 2006, the termination
date for all current swap agreements. The Company records all derivatives at
fair value as assets or liabilities in the condensed consolidated balance sheet,
with classification as current or long-term depending on the duration of the
instrument. At March 31, 2001, the net deferred hedging loss in accumulated
other comprehensive loss was approximately $147,000.
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. This method is based upon the premise that only the
floating-rate component of the swap provides the cash flow hedge, and any
changes in the swap's fair value attributable to the fixed-rate leg is not
relevant to the variability of the hedged interest payments on the floating-rate
liability. The calculation of ineffectiveness involves a comparison of the
present value of the cumulative change in the expected future cash flows on the
variable leg of the swap and the present value of the cumulative change in the
expected future interest cash flows on the floating-rate liability.
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, which are
indicated by the use of words such as "expect", "intend", "estimate", "project"
or similar expressions, may relate to future 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, the
price of fuel, the availability of drivers, 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 MARCH 31, 2001 VS. THREE MONTHS ENDED MARCH 31, 2000
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For the quarter ended March 31, 2001, revenues increased 7.9% to $58.4 million
as compared to $54.1 million for the quarter ended March 31, 2000. The main
factor contributing to the increase was improved utilization of existing revenue
equipment, resulting in a 10.3% increase in average revenue generated per
tractor each work day from $564 in the first quarter of 2000 to $622 in the
first quarter of 2001.
Salaries, wages and benefits decreased from 44.8% of revenues in the first
quarter of 2000 to 44.1% of revenues in the first quarter of 2001. The decrease
relates primarily to a decrease in the number of owner operators utilized in the
Company's operations which were replaced with company drivers.
Other expenses increased from 1.9% of revenues in the first quarter of 2000 to
3.0% of revenues in the first quarter of 2001. The increase is due to an
increase in the Company's allowance for doubtful accounts.
Depreciation and amortization decreased from 8.9% of revenues in the first
quarter of 2000 to 8.2% of revenues in the first quarter of 2001. The main
factor for the decrease was a decrease in the average number of tractors from
1,477 in the first quarter of 2000 to 1,468 in the first quarter of 2001 and
increased utilization referenced above.
The Company's operating ratio decreased to 90.5% for the first quarter of 2001
as compared to 91.0% for the first quarter of 2000, as a result of the factors
described above.
The Company's effective tax rate increased from 39.9% in the first quarter of
2000 to 40.0% in the first quarter of 2001, which, combined with increased
revenues, resulted in an increase in the provision for income taxes from
$136,000 for the first quarter of 2000 to $551,000 for the first quarter of
2001.
Net income increased to $2.6 million, or 4.5% of revenues, in the first quarter
of 2001 from $2.1 million, or 3.9% of revenues in the first quarter of 2000,
representing an increase in diluted net income per share to $.31 in the first
quarter of 2001 from $.25 in the first quarter of 2000.
LIQUIDITY AND CAPITAL RESOURCES
- ----------------------------------
During the first three months of 2001, the Company generated $.8 million in cash
from operating activities. Investing activities used $13.7 million in cash in
the first three months of 2001. Financing activities generated $13.0 million in
the first three months of 2001 primarily from long-term borrowings.
The Company's principal subsidiary, P.A.M. Transport, Inc., maintains two $15.0
million lines of credit with separate financial institutions. These bank lines
of credit are secured by accounts receivable or revenue equipment and are
subject to borrowing limitations. Withdrawals from the lines of credit bear
interest at LIBOR (as of the first day of the month) plus either 1.40% or 1.15%.
Outstanding advances on the lines of credit were approximately $8.5 million and
$15.0 million at March 31, 2001, including $2.7 million in letters of credit.
The Company's combined borrowing limitation on the two lines of credit at March
31, 2001 was $6.5 million. These lines of credit are guaranteed by the Company
and mature on May 31, 2002 and November 30, 2002.
In addition to cash flows 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 three months of 2001 at a cost of approximately $9.8 million
using its existing line of credit. In addition, P.A.M. Transport, Inc. entered
into installment obligations during the first three months of 2001 for the
purchase of revenue equipment in the amount of approximately $4.5 million,
payable in 48 monthly installments at an interest rate of 7.43%. During the
remainder of 2001, the Company plans to replace approximately 291 tractors and
to add approximately 75 trailers which would result in additional debt of
approximately $13.1 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 March 31, 2001, to repay indebtedness
coming due in the current year, and to fund its operating needs during the
remainder of fiscal 2001.
On November 22, 2000, P.A.M. Transport, Inc. ("the Company") entered into a
$15,000,000 revolving credit facility with a maturity date of November 30, 2002.
The purpose of the facility is to provide a means for financing working capital,
capital expenditure and acquisition requirements. Through this facility the
Company can elect to borrow at LIBOR rates, plus a pricing spread. Therefore,
the Company's forecasted future cash flow is exposed to interest rate risk
related to variability in LIBOR rates. Additionally, the Company anticipates it
will continue to have interest rate exposure beyond the maturity of its current
revolving credit facility. For this reason, the Company has hedged its exposure
to the volatility in variable interest rates. However, the transactions entered
will only serve to provide interest rate protection and create an interest rate
neutral position by specifically matching notional amounts, maturity dates, and
interest rate indices.
In February 2001 the Company entered into an interest rate swap effective
February 28, 2001, 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. (See Note C).
PART II. OTHER INFORMATION
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Item 3. Quantitative and Qualitative Disclosure about Market Risk.
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The Company is exposed to market risks from changes in interest rates. The
Company's two lines of credit bear interest at a floating rate equal to LIBOR
plus either 1.40% or 1.15%. Accordingly, changes in LIBOR, which is effected by
changes in interest rates generally, will affect the interest rate on, and
therefore the Company's costs under, the lines of credit. In an effort
to manage the risks associated with changing interest rates the Company entered
into an interest rate swap effective February 28, 2001, 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. (See Note C).
The Company may temporarily invest excess cash in money market funds.
Changes in interest rates would not significantly affect the fair value of these
cash investments.
Item 6. Exhibits and Reports on Form 8-K.
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(a) The following exhibits are filed with this report:
11.1 - Statement Re: Computation of Diluted Earnings Per Share.
(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: May 14, 2001 By: /s/ Robert W. Weaver
---------------------------------
Robert W. Weaver
President and Chief Executive Officer
(principal executive officer)
Dated: May 14, 2001 By: /s/ Larry J. Goddard
---------------------------------
Larry J. Goddard
Vice President-Finance, Chief Financial
Officer, Secretary and Treasurer
(principal accounting and financial officer)