1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) ( x ) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 1995 ------------------ OR ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to ---------------- ----------------- Commission File Number 0-15057 ------- P.A.M. TRANSPORTATION SERVICES, INC. ------------------------------------ (Exact name of registrant as specified in its charter) DELAWARE 71-0633135 -------- ---------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) Highway 412 West, Tontitown, Arkansas 72770 -------------------------------------------- (Address of principal executive offices) (Zip Code) (501) 361-9111 -------------- (Registrants telephone number, including area code) N/A --- (Former name, former address and former fiscal year, if changed since last report) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No --- --- Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date: Class Outstanding at November 8, 1995 ----- ------------------------------- Common Stock, $.01 Par Value 4,988,257
2 PART I - FINANCIAL INFORMATION Item 1. Financial Statements 2
3 P.A.M. TRANSPORTATION SERVICES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS <TABLE> <CAPTION> September 30, December 31, 1995 1994 ---- ---- ASSETS (unaudited) (note) <S> <C> <C> Current assets: Cash and cash equivalents $ 73,660 $ 4,077,854 Receivables: Trade, net of allowance 11,135,941 8,498,364 Other 635,871 481,986 Equipment held for sale 974,012 1,164,262 Prepaid expenses 2,075,639 2,870,033 Investment in direct financing lease 673,640 622,790 Income taxes refundable 0 154,313 Deferred income taxes 110,943 0 Other 709,763 578,679 ------------ ------------ Total current assets 16,389,469 18,448,281 Property and equipment, at cost 78,184,289 64,299,609 Less: accumulated depreciation (23,393,125) (19,316,030) ------------ ------------ Net property and equipment 54,791,164 44,983,579 Other assets: Investment in direct financing lease, less current portion 728,041 1,239,824 Excess of cost over net assets acquired (Note C) 1,156,217 602,214 Non compete agreement (Note C) 1,179,551 0 Other 50,000 50,000 ------------ ------------ Total other assets 3,113,809 1,892,038 ------------ ------------ $ 74,294,442 $ 65,323,898 ============ ============ LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Current maturities of long-term debt $ 14,049,130 $ 10,358,442 Trade accounts payable 3,461,103 4,983,179 Deferred income taxes 0 368,866 Other current liabilities 4,001,665 2,456,504 ------------ ------------ Total current liabilities 21,511,898 18,166,991 Long-term debt, less current portion (Note B) 30,644,170 32,206,125 Non compete agreement (Note C) 1,090,914 0 Deferred income taxes 4,050,056 1,917,198 Stockholders' equity: Common stock 49,861 49,379 Additional paid-in capital 13,237,134 13,123,241 Retained earnings (deficit) 3,710,409 (139,036) ------------ ------------ Total stockholders' equity 16,997,404 13,033,584 ------------ ------------ $ 74,294,442 $ 65,323,898 ============ ============ </TABLE> Note: The balance sheet at December 31, 1994 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. 3
4 P.A.M. TRANSPORTATION SERVICES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited) <TABLE> <CAPTION> Three Months Ended Nine Months Ended September 30, September 30, 1995 1994 1995 1994 ---- ---- ---- ---- <S> <C> <C> <C> <C> Operating revenues $22,241,118 $18,508,413 $68,158,113 $57,188,275 Operating expenses: Salaries, wages and benefits 9,577,172 8,276,736 29,907,903 25,287,324 Operating supplies 4,022,869 3,503,628 12,267,146 11,166,490 Rent and purchased transportation 271,264 176,446 1,174,306 792,716 Depreciation and amortization 2,550,216 1,583,165 6,778,616 5,064,504 Operating taxes and licenses 1,341,392 1,266,207 4,130,479 3,818,875 Insurance and claims 1,032,237 910,062 3,170,227 2,881,192 Communications and utilities 243,704 220,564 649,170 650,779 (Gain) loss on sale of equipment 0 0 247,000 (208,732) Other 326,074 314,590 1,173,823 928,278 ----------- ----------- ----------- ----------- 19,364,928 16,251,398 59,498,670 50,381,426 ----------- ----------- ----------- ----------- Operating income 2,876,190 2,257,015 8,659,443 6,806,849 Other income (expense) Interest expense (922,073) (733,047) (2,581,579) (2,205,745) Other 39,602 52,701 130,917 169,010 ----------- ----------- ----------- ----------- (882,471) (680,346) (2,450,662) (2,036,735) Income before income taxes and dividends on redeemable preferred stock 1,993,719 1,576,669 6,208,781 4,770,114 Income taxes--current 223,020 (73,360) 769,126 306,945 --deferred 534,593 762,381 1,590,210 1,589,265 ----------- ----------- ----------- ----------- 757,613 689,021 2,359,336 1,896,210 ----------- ----------- ----------- ----------- Income before dividends on redeemable preferred stock 1,236,106 887,648 3,849,445 2,873,904 Accrued dividends on redeemable preferred stock 0 0 0 29,589 ----------- ----------- ----------- ----------- Net income $ 1,236,106 $ 887,648 $ 3,849,445 $ 2,844,315 =========== =========== =========== =========== Net income per share $ 0.16 $ 0.12 $ 0.50 $ 0.38 =========== =========== =========== =========== Average common and common equivalent shares outstanding 7,663,755 7,410,918 7,658,827 7,505,246 =========== =========== =========== =========== </TABLE> See notes to condensed consolidated financial statements. 4
5 P.A.M. TRANSPORTATION SERVICES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited) <TABLE> <CAPTION> Nine Months Ended September 30, 1995 1994 ---- ---- <S> <C> <C> OPERATING ACTIVITIES Net income $ 3,849,445 $ 2,844,315 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 6,778,616 5,064,504 Non compete agreement amortization 194,228 0 (Gain) loss on retirement of property and equipment 247,000 (208,732) Provision for doubtful accounts 0 55,259 Provision for deferred income taxes 1,590,210 1,589,265 Accrued dividends on redeemable preferred stock 0 29,589 Changes in operating assets and liabilities: Accounts receivable (1,871,131) (599,502) Prepaid expenses and other current assets 953,245 249,084 Accounts payable (1,522,076) 337,674 Accrued expenses 849,856 796,987 ------------ ------------ Net cash provided by operating activities 11,069,393 10,158,443 INVESTING ACTIVITIES Purchases of property and equipment (2,793,192) (163,965) Proceeds from sale or disposal of property and equipment 1,421,550 3,017,694 Lease payments received on direct financing lease 460,933 415,135 ------------ ------------ Net cash provided by (used in) investing activities (910,709) 3,268,864 FINANCING ACTIVITIES Borrowings under lines of credit 70,940,681 39,851,722 Repayments under lines of credit (73,979,221) (45,143,458) Repayments of long-term debt (9,589,921) (6,840,627) Choctaw acquisition less cash acquired of $1,213,085 (Note C) (1,323,792) 0 Redemption of preferred stock 0 (4,425,205) Proceeds from exercise of stock options 114,375 83,010 Payments on non-compete agreements (325,000) 0 ------------ ------------ Net cash used in financing activities (14,162,878) (16,474,558) ------------ ------------ Net decrease in cash and cash equivalents (4,004,194) (3,047,251) Cash and cash equivalents at beginning of period 4,077,854 3,621,642 ------------ ------------ Cash and cash equivalents at end of period $ 73,660 $ 574,391 ============ ============ </TABLE> See notes to condensed consolidated financial statements. 5
6 P.A.M. TRANSPORTATION SERVICES, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) SEPTEMBER 30, 1995 NOTE A: BASIS OF PRESENTATION The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In management's opinion, all adjustments (consisting of normal recurring accruals) necessary for a fair presentation have been included. Operating results for the nine-month period ended September 30, 1995 are not necessarily indicative of the results that may be expected for the year ended December 31, 1995. 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, 1994. NOTE B: NOTES PAYABLE AND LONG-TERM DEBT In the first nine months of 1995, the Company's subsidiary, P.A.M. Transport, Inc., entered into installment obligations for the purchase of revenue equipment in the aggregate amount of $14.8 million payable in 48 and 60 monthly installments at an interest rate ranging from 7.3% to 8.5%. NOTE C: ACQUISITION On January 31, 1995, the Company acquired 100% of the outstanding capital stock of Choctaw Express, Inc. and Choctaw Brokerage, Inc. based in Oklahoma City, (collectively "Choctaw "). Assets of approximately $2.7 million were acquired and liabilities of approximately $.8 million were assumed. The total purchase price for Choctaw was $2.5 million in cash. The acquisition has been accounted for under the purchase method, effective January 31, 1995, with operations of Choctaw included in the Company's financial statements for the eight months ended September 30, 1995. The purchase price has been allocated to assets and liabilities based on their estimated fair values as of the date of acquisition. Goodwill in the amount of $600,000 was recorded as a result of the purchase allocation and is being amortized over a 25-year period. The Company will also pay $325,000 per year for a five year noncompete agreement with the former sole shareholder of Choctaw. Pro forma unaudited financial information (as if the Choctaw acquisition was completed at the beginning of the respective periods) for the first nine months of 1995 and 1994 is provided below: <TABLE> <CAPTION> Nine Months Ended, September 30, 1995 1994 ---- ---- <S> <C> <C> Operating revenues $69,025,173 $66,536,542 Operating expenses 60,263,404 59,324,526 ----------- ----------- Operating income 8,761,769 7,212,016 Interest expense 2,468,202 2,202,904 Income taxes 2,391,555 2,003,644 ----------- ----------- Net income $ 3,902,012 $ 3,005,468 =========== =========== Net income per common share (primary) $ 0.51 $ 0.40 =========== =========== Average common and common equivalent shares outstanding 7,658,827 7,505,246 =========== =========== </TABLE> The above pro forma unaudited financial information does not purport to be indicative of the results which actually would have occurred had the acquisition been made at the beginning of the respective periods. 6
7 PART I - FINANCIAL INFORMATION Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 7
8 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS THREE MONTHS ENDED SEPTEMBER 30, 1995 VS. THREE MONTHS ENDED SEPTEMBER 30, 1994 For the quarter ended September 30, 1995 revenues increased 20.2% to $22.2 million as compared to $18.5 million for the quarter ended September 30, 1994. The main factor for the increase in revenues was a 19.0% increase in average tractors from 574 in 1994 to 683 in 1995, of which 46 were added in connection with the acquisition of Choctaw which produced revenues of $2 million for the third quarter of 1995. The Company's operating ratio improved from 87.8% of revenues in the third quarter of 1994 to 87.1% in the third quarter of 1995. Salaries, wages and benefits decreased from 44.7% of revenues in the third quarter of 1994 to 43.1% of revenues in the third quarter of 1995. The major factor was a .8% decrease in maintenance wages. Operating supplies and expenses decreased from 18.9% of revenues in the third quarter of 1994 to 18.1% of revenues in the third quarter of 1995, as the Company continues to modernize its fleet. The largest areas of savings were realized in repairs and maintenance where a .8% reduction was recorded. Operating taxes and licenses decreased from 6.8% of revenues in the third quarter of 1994 to 6% of revenues in the third quarter of 1995 due largely to lower accruals of state fuel tax expenses. The Company incurred an increase in depreciation expense as a result of the new equipment being placed into service. Depreciation expense increased from 8.6% of revenues in the third quarter of 1994 to 11.5% of revenues in the third quarter of 1995. The Company's effective income tax rate of 38% differs from the expected tax rate of 34% primarily due to state income taxes. NINE MONTHS ENDED SEPTEMBER 30, 1995 VS. NINE MONTHS ENDED SEPTEMBER 30, 1994 For the nine months ended September 30, 1995 revenues increased 19.2% to $68.2 million as compared to $57.2 million for the nine months ended September 30, 1994. The main factor for the increase in revenues was a 16.2% increase in average tractors from 573 in 1994 to 666 in 1995, of which 48 were added in connection with the acquisition of Choctaw which produced revenues of $5.8 million for the first nine months of 1995. The Company's operating ratio improved from 88.1% of revenues in the first nine months of 1994 to 87.3% in the first nine months of 1995. Operating supplies and expenses decreased from 19.5% of revenues in the first nine months of 1994 to 18% of revenues in the first nine months of 1995, as the Company continues to modernize its fleet. The largest areas of savings were realized in repairs and maintenance where a 1.2% reduction was recorded. The Company incurred a 1% increase in depreciation expense as a result of the new equipment being placed into service. Depreciation expense increased from 8.9% of revenues in the first nine months of 1994 to 9.9% of revenues in the first nine months of 1995. Operating taxes and licenses as a percent of revenues decreased from 6.7% in the first nine months of 1994 to 6.1% in the first nine months of 1995 due largely to lower accruals of state fuel tax expenses. The Company's effective income tax rate of 38% differs from the expected tax rate of 34% primarily due to state income taxes. 8
9 LIQUIDITY AND CAPITAL RESOURCES The Company's principal subsidiary, P.A.M. Transport, Inc., has a $10 million secured bank line of credit, including $.7 million in letters of credit, subject to borrowing limitations. Outstanding advances on this line of credit were approximately $2.5 million (at an interest rate of 8.34%) at September 30, 1995. The Company's borrowing base limitation at September 30, 1995 was $9.3 million. The line of credit is guaranteed by the Company and matures May 31, 1997. The Company entered into installment obligations in the first nine months of 1995 for the purchase of revenue equipment for approximately $14.8 million payable in 48 and 60 monthly installments at an interest rate ranging from 7.3% to 8.5%. During the remainder of 1995 the Company plans to add 111 tractors with additional installment debt of approximately $6.4 million. Operating results during the first nine months of 1995 provided net cash from operations of approximately $11 million. Management of the Company believes that its cash requirements for 1995 will be adequately met from operating cash flows and the Company's available credit line. ACQUISITION On January 31, 1995, the Company acquired 100% of the outstanding capital stock of Choctaw Express, Inc. and Choctaw Brokerage, Inc. based in Oklahoma City, (collectively "Choctaw"). The total purchase price for Choctaw was approximately $2.5 million in cash. The acquisition was financed through borrowings under the Company's bank line of credit agreement and available cash, and the acquisition was accounted for under the purchase method, effective January 31, 1995, with operations included in the Company's financial statements beginning on the acquisition date. The Company will also pay $325,000 per year for a five year noncompete agreement with the former sole shareholder of Choctaw. See Note C to the accompanying condensed consolidated financial statements (unaudited). 9
10 PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K. (a) The following exhibits are filed with this report: 11.1 - Statement Re: Computation of Per Share Earnings. 27.1 - Financial Data Schedule (for SEC use only). (b) Reports on Form 8-K The Company filed no reports on Form 8-K during the quarter ended September 30, 1995. 10
11 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. <TABLE> <S> <C> P.A.M. TRANSPORTATION SERVICES, INC. Dated: November 13, 1995 By: /s/ Robert W. Weaver -------------------------------------------- Robert W. Weaver President and Chief Executive Officer (principal executive officer) Dated: November 13, 1995 By: /s/ Larry J. Goddard -------------------------------------------- Larry J. Goddard Vice President-Finance, Chief Financial Officer, Secretary and Treasurer (principal accounting and financial officer) </TABLE> 11