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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[ X ] Annual Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the Fiscal Year Ended December 31, 2000
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Commission File No. 0-15057
P.A.M. TRANSPORTATION SERVICES, INC.
(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
P.O. Box 188
Tontitown, Arkansas 72770
(501) 361-9111
(Address of principal executive offices, including zip code,
and telephone number, including area code)
Securities registered pursuant to section 12(b) of the Act: None
Securities registered pursuant to section 12(g) of the Act: Common Stock, $.01
par value
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 if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
The aggregate market value of the common stock of the registrant held by
non-affiliates of the registrant on March 15, 2001 was $16,715,648. Solely for
the purposes of this response, executive officers, directors and beneficial
owners of more than five percent of the Company's common stock are considered
the affiliates of the Company at that date.
The number of shares outstanding of the issuer's common stock, as of March 15,
2001: 8,475,957 shares of $.01 par value common stock.
DOCUMENTS INCORPORATED BY REFERENCE
The Registrant's definitive Proxy Statement for its Annual Meeting of
Shareholders to be held in 2001 is incorporated by reference in answer to Part
III of this report, with the exception of information regarding executive
officers required under Item 10 of Part III, which information is included in
Part I, Item 1.
Certain statements contained in this filing are "forward-looking statements"
within the meaning of the Private Securities Litigation Reform Act of 1995, such
as statements relating to financial results and plans for future business
development 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 in the
transportation industry and other uncertainties detailed from time to time in
the Company's Securities and Exchange Commission filings.
PART I
ITEM 1. BUSINESS
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P.A.M. Transportation Services, Inc. (the "Company"), operating through its
wholly-owned subsidiaries, is an irregular route, common and contract motor
carrier authorized to transport general commodities throughout the continental
United States and the Canadian provinces of Ontario and Quebec, pursuant to
operating authorities granted by the former Interstate Commerce Commission
("ICC"), various state regulatory agencies and Canadian regulatory agencies.
Under its operating authorities, the Company may transport all types of freight
(except household goods, commodities in bulk and certain explosives) intrastate
within any state, and from any point in the continental United States, Ontario
or Quebec to any other point in the continental United States or in Ontario or
Quebec over any route selected by the Company. The Company transports dry
freight commodities ("freight") in 48-foot and 53-foot long, high cube
conventional and specialized freight vans ("trailers"). The freight consists
primarily of automotive parts, consumer goods, such as general retail store
merchandise, and products from the manufacturing sector, such as heating and air
conditioning units. All freight is transported as truckload quantities.
The Company is a holding company organized under the laws of the State of
Delaware in June 1986 and conducts its operations through its wholly-owned
subsidiaries, P.A.M. Transport, Inc. ("P.A.M. Transport"), P.A.M. Special
Services, Inc., T.T.X., Inc., P.A.M. Dedicated Services, Inc., P.A.M. Logistics
Services, Inc., Choctaw Express, Inc., Choctaw Brokerage, Inc., Allen Freight
Services, Inc. and Decker Transport Co., Inc. The Company's operating
authorities are held by P.A.M. Transport, P.A.M. Dedicated Services, Inc.,
Choctaw Express, Inc., Choctaw Brokerage, Inc., Allen Freight Services, Inc. and
Decker Transport Co., Inc. Although not organized until June 1986, the Company
is, for financial accounting purposes, the successor to P.A.M. Transport, which
was organized under the laws of the State of Arkansas in 1980. Unless the
context otherwise requires, all references to the Company in this Annual Report
on Form 10-K include P.A.M. Transportation Services, Inc. and its subsidiaries.
The Company is headquartered and maintains its primary terminal,
maintenance facilities and corporate and administrative offices in Tontitown in
the northwest corner of Arkansas, a major center for the trucking industry and
where the support services (including warranty repair services) of most major
tractor and trailer equipment manufacturers are readily available.
MARKETING/MAJOR CUSTOMERS
The Company's marketing emphasis is directed to that segment of the
truckload market which is generally service-sensitive, as opposed to being
solely price competitive. Since 1990, the Company has diversified its marketing
efforts to gain access to non-traditional freight traffic, including
international (Mexico and Canada), domestic regional short-haul, dedicated fleet
services and intermodal transportation. The Company also participates in
various "core carrier" partnerships with its larger customers. The Company
estimates that approximately 70% of its deliveries to customers are made on a
JIT ("just in time") basis, whereby products and raw materials are scheduled for
delivery as they are needed on the retail customer's shelves or in the
manufacturing customer's production line. Such requirements place a premium on
the freight carrier's delivery performance and reliability. With respect to
these JIT deliveries, approximately 30% require the use of two-man driver teams
to meet the customer's schedule. The need for this service is a product of
modern manufacturing and assembly methods which are designed to drastically
decrease inventory levels and handling costs.
The Company's marketing efforts are conducted by ten outside sales persons
domiciled within the Company's major markets. Field personnel are supervised
from Company headquarters, emphasizing an even flow of freight traffic (balance
between originations and destinations in a given geographical area) and
minimization of movement of empty equipment.
During 2000, the Company's five largest customers, for which the Company
provides carrier services covering a number of geographic locations, accounted
for approximately 55% of total revenues. General Motors Corporation accounted
for approximately 33% of 2000 revenues. A total loss of this business, however
unlikely, would have an adverse impact on the Company's operations, at least
over the short term.
The Company also provides transportation services to other manufacturers
who are suppliers for automobile manufacturers. As a result, concentration of
the Company's business within the industry is greater than the concentration in
a single customer. Of the Company's revenues for 2000 that were attributable to
its top ten customers, approximately 50% were derived from transportation
services provided to the automobile industry.
OPERATIONS
The Company maintains dispatch offices at its headquarters, as well as its
offices in Jacksonville, Florida; Columbia, Mississippi; Warren, Ohio; Oklahoma
City, Oklahoma; Willard, Ohio; Riverdale, New Jersey; Laredo, Texas; and Irving,
Texas, with a toll free WATS line to facilitate communications with both
customers and drivers. The location, status and contact assignment of all of
the Company's equipment are available on an up-to-date basis through the
Company's computer system, which permits the Company to better meet delivery
schedules, respond to customer inquiries and match equipment with the next
available load.
The Company has installed Qualcomm OmnitracsTM display units in all of its
tractors. The Omnitracs system is a satellite-based global positioning and
communications system that allows fleet managers to communicate directly with
drivers. Drivers can provide location status and updates directly to the
customer's computer, saving telephone usage cost, lost productivity, and
inconvenience. The Omnitracs system provides customer service with accurate
estimated time of arrival information which optimizes load selection and service
levels to the Company's customers. In order to lower its tractor to trailer
ratio, the Company has also installed Qualcomm TrailerTracsTM tracking units in
all of its trailers. The TrailerTracs system is a tethered trailer tracking
product that enables the Company to more efficiently track the location of all
trailers in its inventory as they connect and disconnect to Qualcomm equipped
Company equipment. The system has been extended through a partnership with
Qualcomm and its Mexican subsidiary, CNR, to provide the same information when
the Company's trailers are picked up and dropped by Mexican carriers providing
through trailer service into Mexico.
The Company communicates through electronic data interchange with many of
its customers, providing live status reports of freight shipments and arrival
time information. This system provides the Company's customers flexibility and
convenience by allowing the customer to tender freight electronically.
REVENUE EQUIPMENT
The Company operated a fleet of 1,413 tractors and 3,759 trailers at
December 31, 2000. All except 117 tractors are owned by the Company. The
tractors that are not Company owned are leased from owner/operators on a per
mile basis.
At the end of the respective years, the average age of the Company's
tractors was 1.74 years in 1998, 1.64 years in 1999 and 1.72 years in 2000. The
average age of the Company's trailer fleet was 3.31, 3.97, and 4.66 at the end
of 1998, 1999, and 2000, respectively.
During 2000, the Company purchased 355 new tractors and 51 new trailers and
disposed of 379 tractors and 127 trailers. During 2001, the Company expects to
purchase 460 new tractors and 100 new trailers while continuing to sell or trade
older equipment.
MAINTENANCE
The Company has a strictly enforced comprehensive preventive maintenance
program for the tractors and trailers it operates. Inspections and various
levels of repair and preventive maintenance are performed at set mileage
intervals on both tractors and trailers. Although a significant portion of
maintenance is performed at the Company's maintenance facility in Tontitown,
Arkansas, the Company's subsidiaries have additional maintenance facilities in
Columbia, Mississippi; Springfield, Missouri; Riverdale, New Jersey; Willard and
Warren, Ohio; Oklahoma City, Oklahoma; and Irving, Laredo and El Paso, Texas.
These facilities enhance the Company's preventive and routine maintenance
operations and are strategically located on major transportation routes where a
majority of the Company's freight originates and terminates. A maintenance and
safety inspection is performed on all vehicles each time they return to a
terminal. The Company's primary maintenance facilities consist of thirteen
mechanical repair bays, four body-shop bays and three safety and maintenance
inspection bays. The Company believes that its current maintenance facilities
will be adequate to accommodate its fleet for the foreseeable future.
The Company's tractors carry full warranty coverage of at least 350,000
miles. Extended warranties are negotiated with the manufacturer and major
component manufacturer (i.e., engine, transmission, differential) for up to
750,000 miles. Trailers are also warranted by the manufacturer and major
component manufacturer for up to five years.
Manufacturers of tractors are required to certify that new tractors meet
federal emission standards and the Company receives such certifications on each
new tractor it acquires. Certain governmental regulations require the Company
to adhere to a fuel and oil spillage prevention plan and to comply with
regulations concerning the discharge and disposal of waste oil. The Company
believes it is in compliance with applicable waste disposal and emission
regulations. The Company also maintains insurance to cover clean up expense in
the event of a spill.
DRIVERS
At December 31, 2000, the Company utilized 1,779 drivers in its operations.
All drivers are recruited, screened, drug tested and trained and are subject to
the control and supervision of the Company's operations and safety departments.
The Company's driver training program stresses the importance of safety and
reliable, on-time delivery. Drivers are required to report to their dispatchers
daily and at the earliest possible moment when any condition en route occurs
which might delay their scheduled delivery time.
The Company's drivers are selected only after strict application screening
and drug testing. Before being permitted to operate a vehicle for the Company,
drivers must undergo classroom instruction on Company policies and procedures,
safety techniques and proper operation of equipment and then must pass both
written and road tests. Instruction in defensive driving and safety techniques
continues after hiring, with the Company holding seminars at its terminals in
Tontitown, Arkansas; Jacksonville, Florida; Columbia, Mississippi; Riverdale,
New Jersey; Warren, Ohio; and Oklahoma City, Oklahoma. The Company currently
employs approximately 55 persons on a full-time basis in its driver recruiting,
training and safety instruction programs.
The Company's drivers are compensated on the basis of miles driven, loading
and unloading, extra stops and layovers in transit. Drivers can earn bonuses
by recruiting other qualified drivers who become employed by the Company and
both cash and non-cash prizes are awarded for consecutive periods of safe,
accident-free driving.
Intense competition in the trucking industry for qualified drivers over the
last several years, along with difficulties and added expense in recruiting and
retaining qualified drivers, has had a negative impact on the industry. The
Company's operations have also been impacted and from time to time the Company
has experienced under-utilization and increased expenses due to a shortage of
qualified drivers. Management places the highest of priorities on the
recruitment and retention of an adequate supply of qualified drivers.
EMPLOYEES
At December 31, 2000, the Company employed 2,154 persons, of which 1,779
were drivers, 108 were maintenance personnel, 116 were employed in operations,
29 were employed in marketing, 55 were employed in safety and personnel, and 67
were employed in general administration and accounting. The Company also had
117 owner/operators under contract compensated on a per mile basis. None of the
Company's employees are represented by a collective bargaining unit and the
Company believes that its employee relations are good.
REGULATION
The Company is a common and contract motor carrier that is regulated by
various federal and state agencies. Effective January 1, 1996, the ICC
Termination Act of 1995 (the "Act") abolished the Interstate Commerce Commission
("ICC") and established within the Department of Transportation ("DOT") the
Surface Transportation Board, which maintains limited oversight authority over
motor carriers.
The Company is subject to safety requirements prescribed by the DOT. Such
matters as weight and dimension of equipment are also subject to federal and
state regulations. All of the Company's drivers are required to obtain national
driver's licenses pursuant to the regulations promulgated by the DOT. Also, DOT
regulations impose mandatory drug and alcohol testing of drivers. The Company
believes that it is in compliance in all material respects with applicable
regulatory requirements relating to its trucking business and operates with a
"satisfactory" rating (the highest of three grading categories) from the DOT.
The trucking industry is subject to possible regulatory and legislative
changes (such as increasingly stringent environmental regulations or limits on
vehicle weight and size) that may affect the economics of the industry by
requiring changes in operating practices or by changing the demand for common or
contract carrier services or the cost of providing truckload services. These
types of future regulations could unfavorably affect the Company's operations.
COMPETITION
The trucking industry is highly competitive. The Company competes
primarily with other irregular route long-haul truckload carriers, with private
carriage conducted by its existing and potential customers, and, to a lesser
extent, with the railroads. Increased competition has resulted from
deregulation of the trucking industry and has generally exerted downward
pressure on prices. The Company competes on the basis of its quality of service
and delivery performance, as well as price. Many of the other irregular route
long-haul truckload carriers have substantially greater financial resources, own
more equipment or carry a larger total volume of freight than the Company.
EXECUTIVE OFFICERS
The executive officers of the Company are as follows:
Name Position with Company
---- -----------------------
Robert W. Weaver President and Chief Executive Officer
W. Clif Lawson Executive Vice President and Chief Operating Officer
Larry J. Goddard Vice President-Finance, Chief Financial Officer,
Secretary and Treasurer
ROBERT W. WEAVER, age 50, is a co-founder of the Company and served as its
Vice President from March 1980 to June 1986. He was President and Chief
Operating Officer from June 1986 until he resigned in February 1987. Between
February 1987 and September 1989, he was self-employed as a transportation
consultant. In September 1989, Mr. Weaver returned to the Company as President
and Chief Operating Officer and a director. On February 22, 1990, he was
appointed Chief Executive Officer.
W. CLIF LAWSON, age 47, has been Executive Vice President of the Company
since August 1989 and Chief Operating Officer since March 1992. He joined the
Company in June 1984 and served in various operations and sales capacities until
August 1989.
LARRY J. GODDARD, age 42, has been Vice President-Finance and Chief
Financial Officer since January 1991 and served as Controller of the Company
from May 1989 to January 1991. In addition, he has served as Secretary since
September 1989, and Treasurer since May 1991. From November 1987 to May 1989,
he served as General Accounting Manager of the Company.
ITEM 2. PROPERTIES.
- ---------------------
The Company's executive offices and primary terminal facilities are located
in Tontitown, Arkansas. The Company's facilities are located on approximately
45 acres and consist of 79,193 square feet of office space and maintenance and
storage facilities. The Company's facilities in Tontitown are owned by the
Company.
The Company's subsidiaries also lease terminal facilities in Jacksonville,
Florida; Springfield, Missouri; Riverdale, New Jersey; Warren, Ohio; Oklahoma
City, Oklahoma; Memphis, Tennessee; and Laredo, El Paso, and Irving, Texas; the
terminal facilities in Columbia, Mississippi; and Willard, Ohio are owned.
The leased facilities are leased primarily on a month-to-month basis, and
provide on-the-road maintenance and trailer drop and relay stations.
The Company has access to trailer drop and relay stations in various
locations across the country. Certain of these facilities are leased by the
Company on a month-to-month basis from an affiliate of its majority shareholder.
The Company believes that all of the properties owned or leased by the
Company are suitable for their purposes and adequate to meet the Company's
needs.
ITEM 3. LEGAL PROCEEDINGS.
- -----------------------------
The nature of the Company's business routinely results in litigation,
primarily involving claims for personal injuries and property damage incurred in
the transportation of freight, and management of the Company believes all such
litigation is adequately covered by insurance and that adverse results in one or
more of those cases would not have a material adverse effect on the Company's
financial condition.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
- ----------------------------------------------------------------------
No matters were submitted to a vote of security holders of the Company
during the fourth quarter ended December 31, 2000.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
- --------------------------------------------------------------------------------
The Company's Common Stock is traded on the Nasdaq National Market under the
symbol PTSI. The following table sets forth, for the fiscal quarters indicated,
the range of the high and low sales price per share for the Common Stock as
quoted on the Nasdaq National Market.
Fiscal Year Ended December 31, 2000
- ----------------------------------------
High Low
---- ---
First Quarter $ 11.44 $ 8.50
Second Quarter 11.00 8.00
Third Quarter 10.63 8.25
Fourth Quarter 10.00 7.63
Fiscal Year Ended December 31, 1999
- ----------------------------------------
High Low
---- ---
First Quarter $ 10.00 $ 7.00
Second Quarter 9.88 8.94
Third Quarter 12.88 9.25
Fourth Quarter 12.13 9.81
As of March 15, 2001, the number of stockholders of record was
approximately 284. The Company has not declared or paid any cash dividend on
its common stock. The policy of the Board of Directors of the Company is to
retain earnings for the expansion and development of the Company's business.
Future dividend policy and the payment of dividends, if any, will be determined
by the Board of Directors in light of circumstances then existing, including the
Company's earnings, financial condition and other factors deemed relevant by the
Board of Directors.
ITEM 6. SELECTED FINANCIAL DATA.
- ------------------------------------
The following selected financial data should be read in conjunction with the
Consolidated Financial Statements and notes thereto included elsewhere herein.
Years Ended December 31,
2000 1999 1998 1997 1996
---------------------------------------------------
(in thousands, except per share amounts)
STATEMENT OF OPERATIONS DATA:
Operating revenues $205,245 $207,381 $143,164 $127,211 $113,021
---------------------------------------------------
Operating expenses:
Salaries, wages and benefits 90,680 90,248 65,169 57,662 52,444
Operating supplies 37,728 35,246 26,511 24,666 21,909
Rent and purchased transportation 12,542 13,309 1,082 1,655 1,824
Depreciation and amortization 18,806 18,392 14,003 12,995 11,999
Operating taxes and licenses 11,140 11,334 8,388 7,581 6,734
Insurance and claims 8,674 7,945 6,069 5,571 5,004
Communications and utilities 2,234 2,365 1,583 1,001 1,090
Other 3,756 4,388 3,131 2,394 2,077
(Gain) loss on sale or disposal of property 285 (301) 168 71 375
---------------------------------------------------
Total operating expenses 185,845 182,926 126,104 113,596 103,456
---------------------------------------------------
Operating income 19,400 24,455 17,060 13,615 9,565
Interest expense (5,048) (5,650) (3,830) (3,423) (4,137)
Other - - 1 - 31
---------------------------------------------------
Income before income taxes 14,352 18,805 13,231 10,192 5,459
Income taxes 5,694 7,536 5,158 3,892 2,147
---------------------------------------------------
Net income $ 8,658 $ 11,269 $ 8,073 $ 6,300 $ 3,312
===================================================
Earnings per common share:
Basic $ 1.02 $ 1.34 $ 0.97 $ 0.77 $ 0.66
===================================================
Diluted $ 1.02 $ 1.33 $ 0.96 $ 0.76 $ 0.44
===================================================
Average common shares outstanding-Basic 8,455 8,393 8,306 8,192 5,035
===================================================
Average common shares outstanding-Diluted(1) 8,518 8,488 8,444 8,290 7,578
===================================================
(1) Diluted income per share for 2000, 1999, 1998, 1997 and 1996 assumes the exercise of stock
purchase warrants and stock options to purchase an aggregate of 208,602, 262,097, 317,040,
347,850 and 3,545,280 shares of Common Stock, respectively.
At December 31,
2000 1999 1998 1997 1996
-----------------------------------------
(in thousands)
BALANCE SHEET DATA:
Total assets 164,518 168,961 126,471 100,688 94,985
Long term debt 42,073 55,617 44,816 28,226 34,938
Shareholders' equity 62,210 53,365 41,457 33,162 26,312
Years Ended December 31,
2000 1999 1998 1997 1996
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OPERATING DATA:
Operating ratio (1) 90.5% 88.2% 88.1% 89.4% 91.5%
Average number of truckloads per week 5,169 4,885 3,425 2,874 2,437
Average miles per trip 713 734 767 786 845
Total miles traveled (in thousands) 183,476 186,355 131,847 115,622 102,946
Average miles per tractor 128,936 128,966 125,569 125,404 122,250
Average revenue per tractor per week $ 2,897 $ 2,848 $ 2,716 $ 2,694 $ 2,684
Average revenue per loaded mile $ 1.18 $ 1.18 $ 1.15 $ 1.17 $ 1.17
Empty mile factor 5.6% 5.4% 5.5% 5.8% 6.1%
At end of period:
Total company-owned/leased tractors 1,413(2) 1,468(3) 1,127(4) 975(4) 912(5)
Average age of all tractors (in years) 1.72 1.64 1.74 1.94 1.85
Total trailers 3,759 3,846(6) 2,784(7) 2,678(8) 2,398(9)
Average age of trailers (in years) 4.66 3.97 3.31 2.85 2.60
Number of employees 2,154 1,899 1,656 1,446 1,438
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(1) Total operating expenses as a percentage of total operating revenues.
(2) Includes 117 owner operator tractors.
(3) Includes 148 owner operator tractors.
(4) Includes 94 owner operator tractors.
(5) Includes 126 owner operator tractors.
(6) Includes 21 trailers leased from an affiliate of the Company's majority shareholder.
(7) Includes 46 trailers leased from an affiliate of the Company's majority shareholder.
(8) Includes 66 trailers leased from an affiliate of the Company's majority shareholder.
(9) Includes 74 trailers leased from an affiliate of the Company's majority shareholder.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
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RESULTS OF OPERATIONS.
- ------------------------
The following table sets forth the percentage relationship of revenue and
expense items to operating revenues for the periods indicated.
Percentage of Operating Revenues
Years Ended December 31,
2000 1999 1998
------------------
Operating revenues 100% 100% 100%
------------------
Operating expenses:
Salaries, wages and benefits 44.2 43.5 45.5
Operating supplies 18.4 17.0 18.5
Rent and purchased transportation 6.1 6.4 0.8
Depreciation and amortization 9.2 8.9 9.8
Operating taxes and licenses 5.4 5.5 5.9
Insurance and claims 4.2 3.8 4.2
Communications and utilities 1.1 1.1 1.1
Other 1.8 2.1 2.2
(Gain) loss on sale or disposal of property 0.1 (0.1) 0.1
------------------
Total operating expenses 90.5 88.2 88.1
------------------
Operating income 9.5 11.8 11.9
Interest expense (2.5) (2.7) (2.7)
------------------
Income before income taxes 7.0 9.1 9.2
Federal and state income taxes (2.8) (3.6) (3.6)
------------------
Net income 4.2% 5.5% 5.6%
==================
RESULTS OF OPERATIONS
2000 COMPARED TO 1999
For the year ended December 31, 2000, revenues were $205 million as
compared to $207 million for the year ended December 31, 1999. The decrease
relates primarily to a decrease in the average number of tractors from 1,445 in
1999 to 1,423 in 2000. The decrease in revenue from fewer tractors was
partially offset by an increase in the Company's utilization (revenue per
tractor per work day) which increased 1.6% from $570 in 1999 to $579 in 2000.
The Company's operating ratio increased from 88.2% in 1999 to 90.5% in
2000.
Salaries, wages and benefits increased from 43.5% of revenues in 1999 to
44.2% of revenues in 2000. The increase relates primarily to an increase in
driver pay packages early in the third quarter of 2000.
Operating supplies and expenses increased from 17.0% of revenues in 1999 to
18.4% of revenues in 2000. The increase relates primarily to an increase in
fuel costs of 1.3% of revenues net of a fuel surcharge passed to customers.
Insurance and claims increased from 3.8% of revenues in 1999 to 4.2% of
revenues in 2000. The increase relates primarily to an increase in rates for
auto liability insurance coverage.
The Company's effective tax rate decreased from 40.1% in 1999 to 39.7% in
2000.
Net income decreased to $8.6 million, or 4.2% of revenues, in 2000 from
$11.3 million, or 5.5% of revenues in 1999, representing a decrease in
diluted net income per share to $1.02 in 2000 from $1.33 in 1999.
1999 COMPARED TO 1998
For the year ended December 31, 1999, revenues increased 44.9% to $207
million as compared to $143 million for the year ended December 31, 1998. The
Company's utilization (revenue per tractor per work day) increased 5.0% from
$543 in 1998 to $570 in 1999.
The Company's operating ratio increased from 88.1% in 1998 to 88.2% in
1999.
Salaries, wages and benefits decreased from 45.5% of revenues in 1998 to
43.5% of revenues in 1999. The decrease relates primarily to the brokerage
operations of Decker Transport in which revenues are generated through the use
of outside transportation services and not Company paid drivers.
Operating supplies and expenses decreased from 18.5% of revenues in 1998
to 17.0% of revenues in 1999. The decrease, which was partially offset by an
increase in fuel costs, relates primarily to costs associated with the Decker
brokerage operations being combined and paid to other transportation companies
in the form of purchased transportation.
Rent and purchased transportation increased from 0.8% of revenues in 1998
to 6.4% of revenues in 1999. The increase relates primarily to the purchase of
transportation services from other transportation companies in order to support
brokerage operations.
Depreciation and amortization decreased from 9.8% of revenues in 1998 to
8.9% of revenues in 1999. The decrease relates primarily to the utilization of
outside transportation companies' drivers and equipment in order to perform
brokerage activities.
The Company's effective tax rate increased from 39.0% in 1998 to 40.1% in
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.
Net income increased to $11.3 million, or 5.5% of revenues, in 1999 from
$8.1 million, or 5.6% of revenues in 1998, representing an increase in diluted
net income per share to $1.33 in 1999 from $.96 in 1998.
LIQUIDITY AND CAPITAL RESOURCES
During 2000, the Company generated $32.5 million in cash from operating
activities. The ratio of current assets to current liabilities was .8 at the
end of 2000, compared to .8 and 1.2 at the end of 1999 and 1998, respectively.
Investing activities used $17.7 million in cash during 2000 compared to
$47.8 million and $38.3 million in 1999 and 1998, respectively. The cash used
in all three years related primarily to the purchase of revenue equipment used
in the Company's operations.
Financing activities used $17.9 million in cash during 2000 primarily for
the payment of long-term debt originally incurred to finance the purchase of
revenue equipment used in the Company's operations.
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 are at
an interest rate of LIBOR as of the first day of the month plus either 1.40% or
1.15%. The Company's borrowing limitations on the two lines of credit at
December 31, 2000 were $7.2 million and $5.0 million, respectively. These two
lines of credit are guaranteed by the Company and mature on May 31, 2002 and
November 30, 2002. The Company was in compliance with all provisions of both
agreements at December 31, 2000.
In addition to cash flow from operations, the Company uses its existing
lines of credit on an interim basis to finance capital expenditures and repay
long-term debt. Longer-term transactions, such as installment notes (generally
three and four year terms at fixed rates) are typically entered into for the
purchase of revenue equipment; however, the Company purchased additional revenue
equipment during 2000 with a cost of approximately $28.8 million using its
existing line of credit and cash on hand. In addition, P.A.M. Transport, Inc.,
entered into an installment obligation during 2000 in the amount of
approximately $4.2 million in order to finance revenue equipment previously
acquired utilizing its line of credit. This obligation is payable in 48 monthly
installments at an interest rate of 7.25%. The Company's weighted average
interest rates on all borrowings were 6.75%, 6.73% and 7.68% for 2000, 1999 and
1998, respectively.
During 2000, the Company sold or traded revenue equipment for approximately
$12.8 million. The Company plans to replace 100 trailers and 460 tractors in
2001, which would result in additional debt of approximately $21.2 million.
Management expects that the Company's existing working capital and its available
lines of credit will be sufficient to meet the Company's capital commitments as
of December 31, 2000, to repay indebtedness coming due in the current year, and
to fund its operating needs during fiscal 2001.
INSURANCE
Auto liability and collision coverage are generally subject to a $2,500
deductible per occurrence while cargo loss coverage generally has a $1,000
deductible. The Company maintains a reserve for estimated losses for claims
incurred, and maintains a reserve for claims incurred but not reported (based on
the Company's historical experience). The Company is fully-insured through an
insurance company for workers' compensation coverage in Arkansas, Oklahoma,
Mississippi and Florida. The Company continues to be self-insured for workers'
compensation coverage in Ohio with excess coverage maintained for claims
exceeding $350,000. The Company has reserved for estimated losses to pay such
claims as incurred as well as claims incurred but not reported. The Company has
not experienced any adverse trends involving differences in claims experienced
versus claims estimates for workers' compensation reserves. The Company
contracts a third-party licensed associate of risk management and a certified
Hazard Control Manager to develop its workers' compensation reserves using the
Company's historical data of past injuries. Letters of credit are held by a
bank as security for workers' compensation claims in Arkansas, Oklahoma,
Mississippi, and Florida, respectively, and two letters of credit are held by a
bank for auto liability claims.
SEASONALITY
The Company's revenues do not exhibit a seasonal pattern, due primarily to
its varied customer mix. Operating expenses are generally somewhat higher in
the winter months, primarily due to decreased fuel efficiency and increased
maintenance costs in cold weather.
ENVIRONMENTAL
The Company has no outstanding inquiries with any federal or state
environmental agency at December 31, 2000.
INFLATION
Inflation has an impact on most of the Company's operating costs.
Recently, the effect of inflation has been minimal.
Competition for drivers has increased in recent years, leading to increased
labor costs. While increases in fuel and driver costs affect the Company's
operating costs, the effects of such increases are not greater for the Company
than for other trucking concerns.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK.
- ---------------------------------------------------------------------------
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.
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 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
- ----------------------------------------------------------
The following statements are filed with this report:
Report of Independent Public Accountants
Consolidated Balance Sheets - December 31, 2000 and 1999
Consolidated Statements of Income - Years ended December 31, 2000, 1999
and 1998
Consolidated Statements of Shareholders' Equity - Years ended December 31,
2000, 1999 and 1998
Consolidated Statements of Cash Flows - Years ended December 31, 2000, 1999
and 1998
Notes to Consolidated Financial Statements
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
- --------------------------------------------------------------------------------
FINANCIAL DISCLOSURE.
- ----------------------
No response is required to this item.
P.A.M. Transportation Services, Inc. and Subsidiaries
Consolidated Financial Statements
Years ended December 31, 2000, 1999 and 1998
with Report of Independent Public Accountants
CONTENTS
Report of Independent Public Accountants
Audited Consolidated Financial Statements:
Consolidated Balance Sheets
Consolidated Statements of Income
Consolidated Statements of Shareholders' Equity
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
Report of Independent Public Accountants
To the Board of Directors and Shareholders of
P.A.M. Transportation Services, Inc.:
We have audited the accompanying consolidated balance sheets of P.A.M.
Transportation Services, Inc. (a Delaware corporation) and subsidiaries as of
December 31, 2000 and 1999, and the related consolidated statements of income,
shareholders' equity, and cash flows for each of the three years in the period
ended December 31, 2000. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of P.A.M.
Transportation Services, Inc. and subsidiaries as of December 31, 2000 and 1999,
and the results of their operations and their cash flows for each of the three
years in the period ended December 31, 2000, in conformity with accounting
principles generally accepted in the United States.
ARTHUR ANDERSEN LLP
Fayetteville, Arkansas
February 9, 2001
P.A.M. Transportation Services, Inc.
Consolidated Balance Sheets
(thousands, except shares and par value)
December 31,
2000 1999
-----------------------
Assets
Current assets:
Cash and cash equivalents $ 485 $ 3,557
Accounts receivable:
Trade 23,291 22,890
Other 640 1,032
Operating supplies and inventories 71 60
Prepaid expenses and deposits 3,426 4,408
Deferred income taxes 401 378
Income taxes refundable 628 113
-----------------------
Total current assets 28,942 32,438
Property and equipment:
Land 1,337 1,224
Structures and improvements 3,158 3,021
Revenue equipment 173,512 167,012
Service vehicles 583 667
Office furniture and equipment 6,046 5,578
-----------------------
184,636 177,502
Accumulated depreciation (59,308) (51,382)
-----------------------
125,328 126,120
Other assets:
Excess of cost over net assets acquired, net of
accumulated amortization (2000--$1,378; 1999--$973) 8,506 8,911
Non-competition agreements, net of accumulated
amortization (2000--$261; 1999--$131) 131 261
Other 1,611 1,231
-----------------------
10,248 10,403
-----------------------
Total assets $ 164,518 $ 168,961
=======================
December 31,
2000 1999
-----------------------
Liabilities and Shareholders' Equity
Current liabilities:
Trade accounts payable $ 10,610 $ 11,210
Accrued expenses 8,074 7,674
Current portion of long-term debt 17,753 22,271
-----------------------
Total current liabilities 36,437 41,155
Long-term debt, less current portion 42,073 55,617
Deferred income taxes 23,798 18,693
Non-competition agreements - 131
Shareholders' equity:
Common stock, $.01 par value:
Authorized shares--20,000,000
Issued and outstanding shares: 2000-8,469,657;
1999-8,439,957 85 84
Additional paid-in capital 19,638 19,452
Retained earnings 42,487 33,829
-----------------------
Total shareholders' equity 62,210 53,365
-----------------------
Total liabilities and shareholders' equity $ 164,518 $ 168,961
=======================
See accompanying notes.
P.A.M. Transportation Services, Inc.
Consolidated Statements of Income
(thousands, except per share data)
Year ended December 31,
2000 1999 1998
-------------------------------
Operating revenues $205,245 $207,381 $143,164
Operating expenses and costs:
Salaries, wages and benefits 90,680 90,248 65,169
Operating supplies and expenses 37,728 35,246 26,511
Rents and purchased transportation 12,542 13,309 1,082
Depreciation and amortization 18,806 18,392 14,003
Operating taxes and licenses 11,140 11,334 8,388
Insurance and claims 8,674 7,945 6,069
Communications and utilities 2,234 2,365 1,583
Other 3,756 4,388 3,131
(Gain) loss on sale or disposal of equipment 285 (301) 168
-------------------------------
185,845 182,926 126,104
-------------------------------
Operating income 19,400 24,455 17,060
Interest expense (5,048) (5,650) (3,829)
-------------------------------
Income before income taxes 14,352 18,805 13,231
Federal and state income taxes:
Current 1,056 2,107 1,323
Deferred 4,638 5,429 3,835
-------------------------------
5,694 7,536 5,158
-------------------------------
Net income $ 8,658 $ 11,269 $ 8,073
===============================
Earnings per common share:
Basic $ 1.02 $ 1.34 $ .97
===============================
Diluted $ 1.02 $ 1.33 $ .96
===============================
Average common shares outstanding:
Basic 8,455 8,393 8,306
===============================
Diluted 8,518 8,488 8,444
===============================
See accompanying notes.
P.A.M. Transportation Services, Inc.
Consolidated Statements of Shareholders' Equity
(thousands)
Additional
Common Paid-In Retained
Stock Capital Earnings Total
- ------------------------------------------------------------------------------------------------
Balances at December 31, 1997 $ 83 $ 18,592 $ 14,487 $ 33,162
Net income - - 8,073 8,073
Exercise of stock options-shares issued - 175 - 175
Tax benefits of stock options - 47 - 47
- ------------------------------------------------------------------------------------------------
Balances at December 31, 1998 83 18,814 22,560 41,457
Net income - - 11,269 11,269
Exercise of stock options-shares issued 1 488 - 489
Tax benefits of stock options - 150 - 150
- ------------------------------------------------------------------------------------------------
Balances at December 31, 1999 84 19,452 33,829 53,365
Net income - - 8,658 8,658
Exercise of stock options-shares issued 1 186 - 187
- ------------------------------------------------------------------------------------------------
Balances at December 31, 2000 $ 85 $ 19,638 $ 42,487 $ 62,210
================================================================================================
See accompanying notes.
P.A.M. Transportation Services, Inc.
Consolidated Statements of Cash Flows
(thousands)
Year ended December 31,
2000 1999 1998
----------------------------------
Net income $ 8,658 $ 11,269 $ 8,073
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization 18,806 18,392 14,003
Non-competition agreement amortization 131 427 440
Provision for deferred income taxes 4,638 5,429 3,835
(Gain) loss on sale or disposal of equipment 285 (301) 168
Changes in operating assets and liabilities,
net of acquisition:
Accounts receivable (242) 2,322 (2,261)
Prepaid expenses and other assets 592 563 (724)
Income taxes refundable (516) (75) 377
Trade accounts payable (295) 920 (739)
Accrued expenses 400 609 343
----------------------------------
Net cash provided by operating activities 32,457 39,555 23,515
----------------------------------
Investing Activities
Purchases of property and equipment (30,732) (51,480) (46,119)
Proceeds from sale or disposal of equipment 12,842 12,668 7,846
Lease payments received on direct financing lease 231 670 -
Acquisition of business, net of cash acquired - (9,642) -
----------------------------------
Net cash used in investing activities (17,659) (47,784) (38,273)
----------------------------------
Financing Activities
Borrowings under line of credit 196,472 199,508 173,227
Repayments under line of credit (191,295) (195,559) (178,449)
Borrowings of long-term debt 4,384 24,179 43,785
Repayments of long-term debt (27,158) (22,589) (24,017)
Other (273) 284 (226)
----------------------------------
Net cash provided by (used in) financing activities (17,870) 5,823 14,320
----------------------------------
Net decrease in cash and cash equivalents (3,072) (2,406) (438)
Cash and cash equivalents at beginning of year 3,557 5,963 6,401
----------------------------------
Cash and cash equivalents at end of year $ 485 $ 3,557 $ 5,963
==================================
See accompanying notes.
P.A.M. Transportation Services, Inc.
Notes to Consolidated Financial Statements
December 31, 2000
1. ACCOUNTING POLICIES
DESCRIPTION OF BUSINESS AND CONSOLIDATION
P.A.M. Transportation Services, Inc. (the Company), through its subsidiaries,
operates as a truckload motor carrier.
The consolidated financial statements include the accounts of the Company and
its wholly owned subsidiaries: P.A.M. Transport, Inc., P.A.M. Dedicated
Services, Inc., Choctaw Express, Inc., Allen Freight Services, Inc., T.T.X.,
Inc., and Decker Transport Co., Inc. All significant intercompany accounts and
transactions have been eliminated.
Majority ownership of the Company is held by an affiliate of another
transportation company.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments with a maturity of three
months or less when purchased to be cash equivalents.
TIRE PURCHASES
Tires purchased with revenue equipment are capitalized as a cost of the related
equipment. Replacement tires are included in other current assets and are
amortized over a 24-month period. Amounts paid for the recapping of tires are
expensed when incurred.
EXCESS OF COST OVER NET ASSETS ACQUIRED
The excess of cost over net assets acquired, or goodwill, is being amortized on
a straight-line basis over 25 years. The carrying value of goodwill will be
reviewed if the facts and circumstances suggest that it may be impaired. No
reduction of goodwill was required in 2000, 1999, or 1998.
CLAIMS LIABILITIES
With respect to cargo loss, physical damage and auto liability, the Company
maintains adequate insurance coverage to protect it from certain business risks.
These policies are with various carriers and have deductibles ranging from $0 to
$2,500 per occurrence.
P.A.M. Transportation Services, Inc.
Notes to Consolidated Financial Statements (continued)
1. ACCOUNTING POLICIES (continued)
During 1998, the Company changed from being self-insured for workers'
compensation coverage in Arkansas, Oklahoma, Mississippi and Florida with excess
coverage maintained for claims exceeding $250,000, to being fully-insured for
workers' compensation coverage in those states. The Company continues to be
self-insured for workers' compensation coverage in Ohio with excess coverage
maintained for claims exceeding $350,000. The Company has reserved for
estimated losses to pay such claims as incurred as well as claims incurred but
not reported. The Company has not experienced any adverse trends involving
differences in claims experienced versus claims estimates for workers'
compensation reserves. The Company contracts a third-party licensed associate of
risk management and a certified Hazard Control Manager to develop its workers'
compensation reserves using the Company's historical data of past injuries.
Letters of credit in the amounts of $100,000, $200,000, $250,000, and $100,000
are held by a bank as security for workers' compensation claims in Arkansas,
Oklahoma, Mississippi, and Florida, respectively, and letters of credit
aggregating $704,500 are held by a bank for auto liability claims.
REVENUE RECOGNITION POLICY
The Company recognizes revenue based upon relative transit time in each
reporting period with expenses recognized as incurred.
REPAIRS AND MAINTENANCE
Repairs and maintenance costs are expensed as incurred.
PROPERTY AND EQUIPMENT
Property and equipment is recorded at cost. For financial reporting purposes,
the cost of such property is depreciated principally by the straight-line
method. For tax reporting purposes, accelerated depreciation or applicable cost
recovery methods are used. Gains and losses are reflected in the year of
disposal. The following is a table reflecting estimated ranges of asset lives
by major class of depreciable assets:
Asset Class Estimated Asset Life
----------- --------------------
Revenue Equipment 3-7 years
Service Vehicles 3-5 years
Office Furniture & Equipment 3-7 years
Structures & Improvements 5-30 years
P.A.M. Transportation Services, Inc.
Notes to Consolidated Financial Statements (continued)
1. ACCOUNTING POLICIES (continued)
INCOME TAXES
The Company applies the provisions of Statement of Financial Accounting
Standards No. 109, Accounting for Income Taxes (SFAS No. 109). SFAS No. 109
requires recognition of deferred tax liabilities and assets for expected future
consequences of events that have been included in a company's financial
statements or tax return. Under this method, deferred tax liabilities and
assets are determined based on the difference between the financial statements
and the tax basis of assets and liabilities using enacted tax rates.
BUSINESS SEGMENT AND CONCENTRATIONS OF CREDIT RISK
The Company operates in one business 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. The Company maintains
reserves for potential credit losses and such losses have been within
management's expectations.
In 2000, 1999 and 1998, one customer accounted for 33%, 30% and 35% of revenues,
respectively. A second customer accounted for 10%, 9% and 12% of revenues in
2000, 1999 and 1998, respectively. The Company's largest customer is an
automobile manufacturer. The Company also provides transportation services to
other manufacturers who are suppliers for automobile manufacturers including the
Company's largest customer. As a result, concentration of the Company's
business within the automobile industry is greater than the concentration in a
single customer. Of the Company's revenues for 2000, 1999 and 1998, 50%, 46%
and 53%, respectively, were derived from transportation services provided to the
automobile manufacturing industry.
COMPENSATION TO EMPLOYEES
Stock based compensation to employees is accounted for based on the intrinsic
value method under Accounting Principles Board Opinion No. 25, Accounting for
Stock Issued to Employees.
P.A.M. Transportation Services, Inc.
Notes to Consolidated Financial Statements (continued)
1. ACCOUNTING POLICIES (continued)
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, Accounting for Derivative Instruments
and Hedging Activities, (SFAS No. 133), which was amended by Statement of
Financial Accounting Standards No. 138, Accounting for Certain Derivative
Instruments and Certain Hedging Activities - an Amendment of FASB Statement No.
133 (SFAS No. 138). SFAS No. 133 establishes accounting and reporting standards
requiring that every derivative instrument (including certain derivative
instruments embedded in other contracts) be recorded in the balance sheet as
either an asset or liability measured at its fair value. SFAS No. 133 requires
that changes in the derivative's fair value be recognized currently in earnings
unless specific hedge accounting criteria are met. Companies must formally
document, designate, and assess the effectiveness of transactions that receive
hedge accounting. SFAS No. 138 amends the accounting and reporting standards
for certain derivative instruments and certain hedging activities, including the
normal purchases and normal sales exception.
SFAS No. 133 is effective for fiscal years beginning after June 15, 2000 and
must be applied to (a) derivative instruments and (b) certain derivative
instruments embedded in hybrid contracts that were issued, acquired, or
substantively modified after December 31, 1997 (and, at the company's election,
before January 1, 1998). The Company adopted SFAS No. 133 on January 1, 2001,
however, as of December 31, 2000, the Company had no outstanding derivative
instruments or embedded derivatives that were subject to the requirements of
SFAS No. 133.
RECLASSIFICATIONS
Certain reclassifications have been made to prior years' consolidated financial
statements to conform to the current year presentation.
USE OF ESTIMATES
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires management to make estimates
and assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
P.A.M. Transportation Services, Inc.
Notes to Consolidated Financial Statements (continued)
2. ACCRUED EXPENSES
December 31,
2000 1999
--------------
(thousands)
Payroll $1,266 $1,019
Accrued Vacation 784 793
Taxes 1,654 1,645
Interest 195 256
Driver escrows 818 925
Insurance 1,652 1,330
Current portion of non-competition agreements 131 131
Self-insurance claims reserves 1,574 1,575
--------------
$8,074 $7,674
==============
3. LONG-TERM DEBT
Long-term debt consists of the following:
December 31,
2000 1999
----------------
(thousands)
Equipment financings (1) $47,496 $69,728
Line of credit with a bank, due May 31, 2002 and
collateralized by accounts receivable(2) 4,127 3,949
Line of credit with a bank, due November 30, 2002 and
collateralized by revenue equipment(3) 5,000 -
Note payable (4) 2,602 3,348
Other financings (5) 601 863
----------------
59,826 77,888
Less current maturities 17,753 22,271
----------------
$42,073 $55,617
================
(1) Equipment financings consist of installment obligations for revenue and
service equipment purchases, payable in various monthly installments through
2004, at a weighted average interest rate of 6.75% and collateralized by
equipment with a net book value of approximately $54.9 million at December 31,
2000.
P.A.M. Transportation Services, Inc.
Notes to Consolidated Financial Statements (continued)
3. LONG-TERM DEBT (continued)
(2) The line of credit agreement with a bank provides for maximum borrowings
of $15.0 million and contains certain restrictive covenants that must be
maintained by the Company on a consolidated basis. Borrowings on the line of
credit are at an interest rate of LIBOR as of the first day of the month plus
1.40%. The Company was in compliance with all provisions of the agreement at
December 31, 2000.
(3) The line of credit agreement with a bank provides for maximum borrowings
of $15.0 million and contains certain restrictive covenants that must be
maintained by the Company on a consolidated basis. Borrowings on the line of
credit are at an interest rate of LIBOR as of the first day of the month plus
1.15%. The Company was in compliance with all provisions of the agreement at
December 31, 2000.
(4) 6.0% note to the former owner of Decker Transport Company, Inc., payable
in monthly installments of $77,216 through January 2004 and secured by a letter
of credit from a bank in the amount of $1,300,000.
(5) Various notes with interest rates ranging from 6.0% to 8.0% payable in
monthly installments through December 2005.
Scheduled annual maturities on long-term debt outstanding at December 31, 2000
are:
(thousands)
2001 $ 17,753
2002 27,744
2003 10,724
2004 3,562
2005 43
---------
$ 59,826
=========
Interest payments of approximately $5.1 million, $5.5 million, and $3.8 million
were made during 2000, 1999 and 1998, respectively.
P.A.M. Transportation Services, Inc.
Notes to Consolidated Financial Statements (continued)
4. INCOME TAXES
Under SFAS No. 109, deferred income taxes reflect the net tax effects of
temporary differences between the carrying amounts of assets and liabilities for
financial reporting purposes and the carrying amounts for income tax purposes.
Significant components of the Company's deferred tax liabilities and assets are
as follows:
December 31,
2000 1999
---------------------
(thousands)
Deferred tax liabilities:
Property and equipment $29,301 $25,107
Prepaid expenses 1,722 1,558
---------------------
Total deferred tax liabilities 31,023 26,665
Deferred tax assets:
Alternative minimum tax credit 4,785 4,659
Investment credit carryovers 355 1,096
Allowance for doubtful accounts 249 249
Vacation reserves 297 278
Self-insurance reserves 1,225 1,105
Non-competition agreement 515 691
Other 200 272
---------------------
Total deferred tax assets 7,626 8,350
---------------------
Net deferred tax liabilities $23,397 $18,315
=====================
The reconciliation between the effective income tax rate and the statutory
Federal income tax rate is presented in the following table:
Year Ended December 31,
2000 1999 1998
-------------------------
(thousands)
Income tax at the statutory Federal rate of 34% $4,879 $6,394 $4,499
Nondeductible expenses 311 330 60
State income taxes (195) (82) (85)
Other (336) (255) (329)
-------------------------
Federal income taxes 4,659 6,387 4,145
State income taxes 1,035 1,149 1,013
-------------------------
Total income taxes $5,694 $7,536 $5,158
=========================
Effective tax rate 39.7% 40.1% 39.0%
=========================
P.A.M. Transportation Services, Inc.
Notes to Consolidated Financial Statements (continued)
4. INCOME TAXES (continued)
The current income tax provision consists of the following:
2000 1999 1998
-------------------------
(thousands)
Federal $ 656 $1,866 $1,073
State 400 241 250
-------------------------
$1,056 $2,107 $1,323
=========================
As of December 31, 2000, the Company has investment tax credit carryovers of
approximately $355,000, which begin expiring in 2001. The current taxes
provided in 2000, 1999 and 1998 result from alternative minimum taxable income.
The Company has alternative minimum tax credits of approximately $4.8 million at
December 31, 2000, which carryover indefinitely.
Income taxes paid totaled approximately $1,100,000, $2,200,000 and $1,200,000
for the years ended December 31, 2000, 1999 and 1998, respectively.
5. SHAREHOLDERS' EQUITY
The Company maintains an incentive stock option plan and a nonqualified stock
option plan for the issuance of options to directors, officers, key employees
and others. During 1998, the incentive stock option plan was amended to include
an additional 400,000 shares available for future granting. The option price
under these plans is the fair market value of the stock at the date the options
were granted, ranging from $5.75 to $10.63 as of December 31, 2000. At December
31, 2000, approximately 630,000 shares were available for granting future
options.
Outstanding incentive stock options at December 31, 2000, must be exercised
within six years from the date of grant and vest in increments of 20% each year.
Outstanding nonqualified stock options at December 31, 2000 must be exercised
within five to six years and certain nonqualified options may not be exercised
within one year of the date of grant.
P.A.M. Transportation Services, Inc.
Notes to Consolidated Financial Statements (continued)
5. SHAREHOLDERS' EQUITY (continued)
Transactions in stock options under these plans are summarized as follows:
Shares
Under
Option Price Range
-----------------------
Outstanding at December 31, 1997 342,850 $2.38-$7.38
Granted 33,000 $9.25-$10.63
Exercised (49,800) $2.38-$5.75
------------------------
Outstanding at December 31, 1998 326,050 $2.38-$10.63
Granted 55,000 $8.63-$10.25
Exercised (115,000) $2.38-$6.00
Canceled (1,050) $2.38
------------------------
Outstanding at December 31, 1999 265,000 $5.75-$10.63
Granted 10,000 $9.13
Exercised (29,700) $5.75-$6.75
Canceled (5,000) $7.38-$9.13
------------------------
Outstanding at December 31, 2000 240,300 $5.75-$10.63
========================
Options exercisable at December 31, 2000 201,300
=========
The following is a summary of stock options outstanding as of December 31, 2000:
Weighted
Option Average
Options Exercise Remaining Options
Outstanding Price Years Exercisable
- -----------------------------------------------
130,000 $ 5.75 .5 130,000
3,000 $ 7.38 1.2 3,000
5,000 $ 6.50 1.4 5,000
6,300 $ 5.75 1.5 6,300
2,000 $ 6.00 2.2 2,000
3,000 $10.63 3.2 3,000
30,000 $ 9.25 3.6 18,000
8,000 $ 8.63 4.2 8,000
45,000 $10.25 4.6 18,000
8,000 $ 9.13 5.2 8,000
- -----------------------------------------------
240,300 201,300
===============================================
P.A.M. Transportation Services, Inc.
Notes to Consolidated Financial Statements (continued)
5. SHAREHOLDERS' EQUITY (continued)
The Company adopted the disclosure-only provisions of Statement of Financial
Accounting Standards No. 123, Accounting for Stock-Based Compensation ("SFAS No.
123"). Accordingly, no compensation cost has been recognized for the stock
option plans. Had compensation cost for the Company's stock option plans been
determined consistent with the provisions of SFAS No. 123, the Company's net
income and earnings per share would have been reduced to the pro forma amounts
indicated below:
2000 1999
-----------------
(thousands)
Net income:
As reported $8,658 $11,269
Pro forma $8,542 $11,076
Earnings per share as reported:
Basic $1.02 $1.34
Diluted $1.02 $1.33
Pro forma earnings per share:
Basic $1.01 $1.32
Diluted $1.00 $1.31
The fair value of each option grant is estimated on the date of grant using the
Black-Scholes option pricing model with the following weighted average
assumptions: dividend yield of 0%; expected volatility of 31.63% to 76.64%;
risk-free interest rate of 5.25% to 7.02%; and expected lives of five years.
6. EARNINGS PER SHARE
The Company applies Financial Accounting Standards Board Statement No. 128,
Earnings Per Share, for computing and presenting earnings per share. Basic
earnings per common share were computed by dividing the income by the weighted
average number of shares outstanding during the period. Diluted earnings per
share were calculated as follows:
P.A.M. Transportation Services, Inc.
Notes to Consolidated Financial Statements (continued)
6. EARNINGS PER SHARE (continued)
2000 1999 1998
--------------------------------
(thousands, except per share data)
Actual net income (A) $ 8,658 $11,269 $8,073
================================
Assumed exercise of options and warrants 209 262 317
Application of assumed proceeds ($1,375,
$1,621 and $1,606, respectively)
toward repurchase of stock at an average
market price of $9.430, $9.719 and
$8.958 per share, respectively. (146) (167) (179)
--------------------------------
Net additional shares issuable 63 95 138
================================
Adjustment of shares outstanding:
Weighted average common shares outstanding 8,455 8,393 8,306
Net additional shares issuable 63 95 138
--------------------------------
Adjusted shares outstanding (B) 8,518 8,488 8,444
================================
Diluted earnings per common share - (A) divided by (B) $ 1.02 $ 1.33 $ .96
================================
7. PROFIT SHARING PLAN
P.A.M. Transport, Inc. sponsors a profit sharing plan for the benefit of all
eligible employees. The plan qualifies under Section 401(k) of the Internal
Revenue Code thereby allowing eligible employees to make tax deductible
contributions to the plan. The plan provides for employer matching contributions
of 50% of each participant's voluntary contribution up to 3% of the
participant's compensation. Total contributions to the plan totaled
approximately $255,000, $200,000 and $133,000 in 2000, 1999 and 1998,
respectively.
8. LITIGATION
The Company is not a party to any pending legal proceedings which management
believes to be material to the financial position or results of operations of
the Company. The Company maintains liability insurance against risks arising out
of the normal course of its business.
P.A.M. Transportation Services, Inc.
Notes to Consolidated Financial Statements (continued)
9. QUARTERLY RESULTS OF OPERATIONS (Unaudited)
The tables below present quarterly financial information for 2000 and 1999:
2000
Three Months Ended
March 31 June 30 September 30 December 31
---------------------------------------------------------------
(thousands, except per share data)
Operating revenues $ 54,147 $ 53,034 $ 47,100 $ 50,964
Operating expenses 49,253 46,965 43,749 45,878
---------------------------------------------------------------
Operating income 4,894 6,069 3,351 5,086
Other expenses - net 1,354 1,368 1,184 1,142
Income taxes 1,412 1,881 823 1,578
---------------------------------------------------------------
Net income $ 2,128 $ 2,820 $ 1,344 $ 2,366
===============================================================
Net income per common share:
Basic $ .25 $ .33 $ .16 $ .28
===============================================================
Diluted $ .25 $ .33 $ .16 $ .28
===============================================================
Average common shares outstanding:
Basic 8,440 8,444 8,465 8,470
===============================================================
Diluted 8,515 8,515 8,525 8,520
===============================================================
1999
Three Months Ended
March 31 June 30 September 30 December 31
---------------------------------------------------------------
(thousands, except per share data)
Operating revenues $ 51,391 $ 53,675 $ 51,284 $ 51,032
Operating expenses 45,241 46,608 45,228 45,850
---------------------------------------------------------------
Operating income 6,150 7,067 6,056 5,182
Other expenses - net 1,404 1,479 1,413 1,354
Income taxes 1,938 2,294 1,849 1,455
---------------------------------------------------------------
Net income $ 2,808 $ 3,294 $ 2,794 $ 2,373
===============================================================
Net income per common share:
Basic $ .34 $ .39 $ .33 $ .28
===============================================================
Diluted $ .33 $ .39 $ .33 $ .28
===============================================================
Average common shares outstanding:
Basic 8,342 8,378 8,421 8,445
===============================================================
Diluted 8,441 8,458 8,527 8,535
===============================================================
P.A.M. Transportation Services, Inc.
Notes to Consolidated Financial Statements (continued)
10. FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used by the Company in estimating
fair value disclosures for financial instruments:
Cash and cash equivalents - The carrying amount reported in the balance sheet
for cash and cash equivalents approximates fair value.
Long-term debt - The fair values of the Company's long-term debt are estimated
using discounted cash flow analyses, based on the Company's current incremental
borrowing rates for similar types of borrowing arrangements.
Lines of credit - The carrying amount for the line of credit approximates fair
value.
The carrying amounts and fair values of the Company's financial instruments at
December 31 are as follows (in thousands):
2000 1999
- ----------------------------------------------------------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
- ----------------------------------------------------------------------
Cash and cash equivalents $ 485 $ 485 $ 3,557 $ 3,557
Long-term debt 50,699 50,305 73,939 73,705
Lines of credit 9,127 9,127 3,949 3,949
======================================================================
11. ACQUISITION
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.
P.A.M. Transportation Services, Inc.
Notes to Consolidated Financial Statements (continued)
11. ACQUISITION (continued)
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. Actual fiscal 1999 operating results are
representative of 1999 pro forma amounts. The following fiscal 1998 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)
------------------
(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
PART III
Except as to information with respect to executive officers which is
contained in a separate heading under Item 1 to this Form 10-K, the information
required by Part III of Form 10-K is, pursuant to General Instruction G (3) of
Form 10-K, incorporated by reference from the Company's definitive proxy
statement to be filed pursuant to Regulation 14A for the Company's Annual
Meeting of Shareholders to be held on May 31, 2001. The Company will, within
120 days of the end of its fiscal year, file with the Securities and Exchange
Commission a definitive proxy statement pursuant to Regulation 14A.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
- --------------------------------------------------------------------
The information responsive to this item is incorporated by reference from
the section entitled "Election of Directors" contained in the proxy statement.
ITEM 11. EXECUTIVE COMPENSATION.
- -----------------------------------
The information responsive to this item is incorporated by reference from
the section entitled "Executive Compensation" contained in the proxy statement.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
- --------------------------------------------------------------------------------
The information responsive to this item is incorporated by reference from
the section entitled "Security Ownership of Certain Beneficial Owners and
Management" contained in the proxy statement.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
- --------------------------------------------------------------
The information responsive to this item is incorporated by reference from
the section entitled "Certain Relationships and Related Transactions" contained
in the proxy statement.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
- --------------------------------------------------------------------------------
(a)1. Financial Statements and Auditors' Report.
----------------------------------------------
The following financial statements and auditors' report have been filed
as Item 8 in Part II of this report:
Report of Independent Public Accountants
Consolidated Balance Sheets - December 31, 2000 and 1999
Consolidated Statements of Income - Years ended December 31, 2000,
1999 and 1998
Consolidated Statements of Shareholders' Equity - Years ended
December 31, 2000, 1999 and 1998
Consolidated Statements of Cash Flows - Years ended December 31,
2000, 1999 and 1998
Notes to Consolidated Financial Statements
(a)2. Financial Statement Schedules.
--------------------------------
The following supporting financial statement schedule is filed with this
report:
II- Valuation and Qualifying Accounts - Years Ended December 31, 2000,
1999 and 1998
All other schedules are omitted as the required information is inapplicable
or the information is presented in the consolidated financial statements or
related notes.
(a)3. Exhibits.
---------
The following exhibits are filed with or incorporated by reference into
this report. The exhibits which are denominated by an asterisk (*) were
previously filed as a part of, and are hereby incorporated by reference from
either (i) the Form S-1 Registration Statement under the Securities Act of 1933,
as filed with the Securities and Exchange Commission on July 30, 1986,
Registration No. 33-7618, as amended on August 8, 1986, September 3, 1986 and
September 10, 1986 ("1986 S-1"); (ii) the Annual Report on Form 10-K for the
year ended December 31, 1987 ("1987 10-K"); (iii) the Annual Report on Form 10-K
for the year ended December 31, 1992 ("1992 10-K"); (iv) the Quarterly Report on
Form 10-Q for the quarter ended June 30, 1994 ("6/30/94 10-Q"); (v) the
Quarterly Report on Form 10-Q for the quarter ended June 30, 1995 ("6/30/95
10-Q"); (vi) the Quarterly Report on Form 10-Q for the quarter ended September
30, 1996 (9/30/96 10-Q); (vii) the Annual Report on Form 10-K for the year ended
December 31, 1996 ("1996 10-K"); or (viii) the Quarterly Report on Form 10-Q for
the quarter ended June 30, 1998 ("6/30/98 10-Q").
Exhibit# Description of Exhibit
- -------- -------------------------------------------------------------------
*3.1 Amended and Restated Certificate of Incorporation of the
Registrant (Exh. 3.1, 1986 S-1)
*3.1.1 Amendment to Certificate of Incorporation dated June 24, 1987
(Exh. 3.1.1, 1987 10-K)
*3.2 Amended and Restated By-Laws of the Registrant (Exh. 3.2, 1986 S-1)
*3.2.1 Amendment to Article I, Section 3 of Bylaws of Registrant (Exh.
3.2.1, 1986 S-1)
*3.2.2 Amendments to Bylaws of Registrant adopted May 7, 1987 (Exh. 3.2.2,
1987 10-K)
*3.2.3 Amendments to Bylaws of Registrant adopted January 4, 1993 (Exh.
3.2.3, 1992 10-K)
*4.1 Specimen Stock Certificate (Exh. 4.1, 1986 S-1)
*4.2 Loan Agreement dated July 26, 1994 among First Tennessee Bank
National Association, Registrant and P.A.M. Transport, Inc.
together with Promissory Note (Exh. 4.1, 6/30/94 10-Q)
*4.2.1 Security Agreement dated July 26, 1994 between First Tennessee
Bank National Association and P.A.M. Transport, Inc.(Exh. 4.2,
6/30/94 10-Q)
*4.3 First Amendment to Loan Agreement date June 27, 1995 by and among
P.A.M. Transport, Inc., First Tennessee Bank National Association
and P.A.M. Transportation Services, Inc., together with Promissory
Note in the principal amount of $2,500,000 (Exh. 4.1.1, 6/30/95
10-Q)
*4.3.1 First Amendment to Security Agreement dated June 28, 1995 by and
between P.A.M. Transport, Inc. and First Tennessee Bank National
Association (Exh. 4.2.2, 6/30/95 10-Q)
*4.3.2 Security Agreement dated June 27, 1995 by and between Choctaw
Express, Inc. and First Tennessee Bank National Association (Exh.
4.1.3, 6/30/95 10-Q)
*4.3.3 Guaranty Agreement of P.A.M. Transportation Services, Inc. dated
June 27, 1995 in favor of First Tennessee Bank National Association
respecting $10,000,000 line of credit (Exh. 4.1.4, 6/30/95 10-Q)
*4.4 Second Amendment to Loan Agreement dated July 3, 1996 by and among
P.A.M. Transport, Inc., First Tennessee Bank National Association
and P.A.M. Transportation Services, Inc., together with Promissory
Note in the principal amount of $5,000,000 (Exh. 4.1.1, 9/30/96
10-Q)
*4.4.1 Second Amendment to Security Agreement dated July 3, 1996 by and
between P.A.M. Transport, Inc. and First Tennessee National Bank
Association (Exh. 4.1.2, 9/30/96 10-Q)
*4.4.2 First Amendment to Security Agreement dated July 3, 1996 by and
between Choctaw Express, Inc. and First Tennessee Bank National
Association(Exh. 4.1.3, 9/30/96 10-Q)
*4.4.3 Security Agreement dated July 3, 1996 by and between Allen Freight
Services, Inc. and First Tennessee Bank National Association
(Exh. 4.1.4, 9/30/96 10-Q)
No other long-term debt instrument of the Registrant or its
subsidiaries authorizes indebtedness exceeding 10% of the total
assets of the Registrant and its subsidiaries on a consolidated
basis and the Registrant hereby undertakes to provide the
Commission upon request with any long-term debt instrument not
filed herewith.
*10.1 Employment Agreement between the Registrant and Robert W. Weaver
dated July 1, 1998 (Exh. 10.1, 6/30/98 10-Q)
*10.2 1995 Stock Option Plan, effective June 29, 1995 (Exh. 10.6, 1996
10-K)
21.1 Subsidiaries of the Registrant
23.1 Consent of Arthur Andersen LLP
(b) Reports on Form 8-K.
-----------------------
No reports on Form 8-K were filed during the fourth quarter ended December
31, 2000.
SCHEDULE II
P.A.M. TRANSPORTATION SERVICES, INC.
VALUATION AND QUALIFYING ACCOUNTS
Years Ended December 31, 2000, 1999 and 1998
ADDITIONS
---------
Charged to
Balance at Charged to Other Balance
Beginning Costs and Accounts Deductions at End
Description of Period Expenses (Describe) (Describe) of Period
----------- ---------- ---------- ---------- ---------- ---------
2000 - Allowance for doubtful accounts $655,043 -- $ 1,389 -- $656,432
1999 - Allowance for doubtful accounts 579,333 -- 75,710 -- 655,043
1998 - Allowance for doubtful accounts 579,333 -- -- -- 579,333
SIGNATURES
- ----------
Pursuant to the requirements of Section 13 of the Securities Exchange Act
of 1934, the Registrant has caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
P.A.M. TRANSPORTATION SERVICES, INC.
Dated: March 27, 2001 By: /s/ Robert W. Weaver
-----------------------------
ROBERT W. WEAVER
President and Chief Executive Officer
(principal executive officer)
Dated: March 27, 2001 By: /s/ Larry J. Goddard
-----------------------------
LARRY J. GODDARD
Vice President - Finance, Chief Financial
Officer, Secretary and Treasurer (principal
financial and accounting officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated:
P.A.M. TRANSPORTATION SERVICES, INC.
Dated: March 27, 2001 By: /s/ Robert W. Weaver
----------------------------
ROBERT W. WEAVER
President and Chief Executive Officer,
Director
Dated: March 27, 2001 By: /s/ Matthew T. Moroun
----------------------------
MATTHEW T. MOROUN, Director
Dated: March 27, 2001 By: /s/ Daniel C. Sullivan
----------------------------
DANIEL C. SULLIVAN, Director
Dated: March 27, 2001 By: /s/ Charles F. Wilkins
----------------------------
CHARLES F. WILKINS, Director
Dated: March 27, 2001 By: /s/ Frederick P. Calderone
----------------------------
FREDERICK P. CALDERONE, Director
EXHIBIT INDEX
Exhibit No. Description
- ------------ ----------------------------------
21.1 Subsidiaries of the Registrant
23.1 Consent of Arthur Anderson LLP