PAM TRANSPORTATION SERVICES INC - Annual Report: 2008 (Form 10-K)
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-K
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ý
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Annual Report Pursuant to
Section 13 or 15(d) of the Securities Exchange Act of
1934
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For
the Fiscal Year Ended December 31, 2008
or
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o
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Transition
Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934
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For
the transition period from ________to________
Commission
File No. 0-15057
P.A.M. TRANSPORTATION
SERVICES, INC.
(Exact
name of registrant as specified in its charter)
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Delaware
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71-0633135
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(State
or other jurisdiction of
incorporation
or organization)
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(I.R.S.
Employer
Identification
No.)
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297 West Henri De Tonti
Blvd, Tontitown, Arkansas 72770
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(Address
of principal executive offices) (Zip
Code)
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(479)
361-9111
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Registrant's
telephone number, including area
code
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Securities
registered pursuant to section 12(b) of the Act:
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Title of each class
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Name of each exchange on which
registered
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Common
Stock, $.01 par value
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NASDAQ
Global Market
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Securities
registered pursuant to section 12(g) of the Act:
None
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Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in
Rule 405 of the Securities Act.
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Yes
o
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No
þ
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Indicate
by check mark if the registrant is not required to file reports pursuant to
Section 13 or Section 15(d) of the Act.
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Yes
o
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No
þ
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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.
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Yes
þ
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No
o
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Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K (Section 229.405 of this chapter) 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. o
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
the definitions of “large accelerated filer,” “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act.
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Large
accelerated filer o
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Accelerated
filer þ
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Non-accelerated
filer o
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Smaller
reporting company o
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Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Act).
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Yes
o
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No
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The
aggregate market value of the common stock of the registrant held by
non-affiliates of the registrant computed by reference to the average of the
closing bid and asked prices of the common stock as of the last business day of
the registrant's most recently completed second quarter was $46,796,134. Solely for
the purposes of this response, executive officers, directors and beneficial
owners of more than five percent of the registrant’s common stock are considered
the affiliates of the registrant at that date.
The
number of shares outstanding of the registrant’s common stock, as of March 5,
2009: 9,409,607
shares of $.01 par value common stock.
DOCUMENTS
INCORPORATED BY REFERENCE
Portions
of the registrant’s definitive Proxy Statement for its Annual Meeting of
Stockholders to be held in May 2009 are 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. Such proxy statement will be filed with the Securities and
Exchange Commission within 120 days of the Registrant’s fiscal year ended
December 31, 2008.
FORWARD-LOOKING
STATEMENTS
This
Annual Report on Form 10-K (“this Report”) contains forward-looking statements,
including statements about our operating and growth strategies, our expected
financial position and operating results, industry trends, our capital
expenditure and financing plans and similar matters. Such forward-looking
statements are found throughout this Report, including under Item 1, Business,
Item 1A, Risk Factors, Item 7, Management’s Discussion and Analysis of Financial
Condition and Results of Operations, and Item 7A, Quantitative and Qualitative
Disclosures About Market Risk. In those and other portions of this Report, the
words “believe,” “may,” “will,” “estimate,” “continue,” “anticipate,” “intend,”
“expect,” “project” and similar expressions, as they relate to us, our
management, and our industry are intended to identify forward-looking
statements. We have based these forward-looking statements largely on our
current expectations and projections about future events and financial trends
affecting our business. Actual results may differ materially. Some of the risks,
uncertainties and assumptions about P.A.M. that may cause actual results to
differ from these forward-looking statements are described under the headings
“Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and
Results of Operations,” and “Quantitative and Qualitative Disclosures About
Market Risk.”
All
forward-looking statements attributable to us, or to persons acting on our
behalf, are expressly qualified in their entirety by this cautionary
statement.
We
undertake no obligation to publicly update or revise any forward-looking
statements, whether as a result of new information, future events or otherwise.
In light of these risks and uncertainties, the forward-looking events and
circumstances discussed in this Report might not transpire.
FORM
10-K
For
the fiscal year ended December 31, 2008
TABLE
OF CONTENTS
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PART
I
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PART
II
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29
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57
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PART
III
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PART
IV
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63
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PART
I
Unless
the context otherwise requires, all references in this Annual Report on Form
10-K to “P.A.M.,” the “Company,” “we,” “our,” or “us” mean P.A.M. Transportation
Services, Inc. and its subsidiaries.
We are a
truckload dry van carrier transporting general commodities throughout the
continental United States, as well as in certain Canadian provinces. We also
provide transportation services in Mexico under agreements with Mexican
carriers. Our freight consists primarily of automotive parts, consumer goods,
such as general retail store merchandise, and manufactured goods, such as
heating and air conditioning units.
P.A.M.
Transportation Services, Inc. is a holding company incorporated under the laws
of the State of Delaware in June 1986 which conducts operations through the
following wholly owned subsidiaries: P.A.M. Transport, Inc., T.T.X., Inc.,
P.A.M. Dedicated Services, Inc., P.A.M. Logistics Services, Inc., Choctaw
Express, Inc., Choctaw Brokerage, Inc., Transcend Logistics, Inc., Allen Freight
Services, Inc., Decker Transport Co., Inc., East Coast Transport and Logistics,
LLC, S & L Logistics, Inc., P.A.M. International, Inc. and P.A.M. Canada,
Inc. Our operating authorities are held by P.A.M. Transport, Inc., P.A.M.
Dedicated Services, Inc., Choctaw Express, Inc., Choctaw Brokerage, Inc., Allen
Freight Services, Inc., T.T.X., Inc., Decker Transport Co., Inc., and East Coast
Transport and Logistics, LLC.
We are
headquartered and maintain our primary terminal and maintenance facilities and
our corporate and administrative offices in Tontitown, Arkansas, which is
located in northwest Arkansas, a major center for the trucking industry and
where the support services (including warranty repair services) for most major
truck and trailer equipment manufacturers are readily available.
Segment
Financial Information
The
Company's operations are all in the motor carrier segment and are aggregated
into a single operating segment in accordance with the aggregation criteria
presented in Statement of Financial Accounting Standards No. 131.
Operations
Our
operations can generally be classified into truckload services or brokerage and
logistics services. Truckload services include those transportation services in
which we utilize company owned trucks or owner-operator owned trucks for the
pickup and delivery of freight. The brokerage and logistics services consists of
services such as transportation scheduling, routing, mode selection,
transloading and other value added services related to the transportation of
freight which may or may not involve the use of company owned or owner-operator
owned equipment. Both our truckload operations and our brokerage and logistics
operations have similar economic characteristics and are impacted by virtually
the same economic factors as discussed elsewhere in this Report. Truckload
services operating revenues, before fuel surcharges represented 89.6%, 90.4%,
and 87.8% of total operating revenues for the years ended December 31, 2008,
2007, and 2006, respectively. The remaining operating revenues, before fuel
surcharge for the same periods were generated by brokerage and logistics
services, representing 10.4%, 9.6%, and 12.2%, respectively. Approximately 99%
of the Company's revenues are generated by operations conducted in the United
States and all of the Company's assets are located or based in the United
States.
Business
and Growth Strategy
Our
strategy focuses on the following elements:
Maintaining Dedicated Fleets in High
Density Lanes. We strive to maximize utilization and increase revenue per
truck while minimizing our time and empty miles between loads. In this regard,
we seek to provide dedicated equipment to our customers where possible and to
concentrate our equipment in defined regions and disciplined traffic lanes.
Dedicated fleets in high density lanes enable us to:
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maintain
more consistent equipment capacity;
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provide
a high level of service to our customers, including time-sensitive
delivery schedules;
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attract
and retain drivers; and
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maintain
a sound safety record as drivers travel familiar
routes.
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Providing Superior and Flexible
Customer Service. Our wide range of services includes dedicated fleet
services, logistics services, “just-in-time” delivery, two-man driving teams,
cross-docking and consolidation programs, specialized trailers, and
Internet-based customer access to delivery status. These services, combined with
a decentralized regional operating strategy, allow us to quickly and reliably
respond to the diverse needs of our customers, and provide an advantage in
securing new business. We also maintain ISO 9002 certification to ensure that we
operate in accordance with approved quality assurance standards.
Many of
our customers depend on us to make delivery on a “just-in-time” basis, meaning
that parts or raw materials are scheduled for delivery as they are needed on the
manufacturer’s production line. The need for this service is a product of modern
manufacturing and assembly methods that are designed to drastically decrease
inventory levels and handling costs. Such requirements place a premium on the
freight carrier’s delivery performance and reliability.
Employing Stringent Cost
Controls. Throughout our organization, emphasis is placed on gaining
efficiency in our processes with the primary goals of decreasing costs and
improving customer satisfaction. Maintaining a high level of efficiency and
prioritizing our focus on improvements allows us to minimize the number of
non-driving personnel we employ and positively influence other overhead costs.
Expenses are intensely scrutinized for opportunities for elimination, reduction
or to further leverage our purchasing power to achieve more favorable
pricing.
Making Strategic
Acquisitions. We continually evaluate strategic acquisition
opportunities, focusing on those that complement our existing business or that
could profitably expand our business or services. Our operational integration
strategy is to centralize administrative functions of acquired businesses at our
headquarters, while maintaining the localized operations of acquired businesses.
We believe that allowing acquired businesses to continue to operate under their
pre-acquisition names and in their original regions allows such businesses to
maintain driver loyalty and customer relationships.
Industry
According
to the American Trucking Association’s “American Trucking Trends 2007-2008”
report, the trucking industry transported approximately 70% of the total volume
of freight transported in the United States during 2006, which equates to an
all-time high carrying load of 10.7 billion tons, and $645.6 billion in revenue,
representing 83.8% of the nation’s freight bill. The truckload industry is
highly fragmented and is impacted by several economic and business factors, many
of which are beyond the control of individual carriers. The state of the
economy, coupled with equipment capacity levels, can impact freight rates.
Volatility of various operating expenses, such as fuel and insurance, make the
predictability of profit levels uncertain. Availability, attraction, retention
and compensation for drivers also affect operating costs, as well as equipment
utilization. In addition, the
capital
requirements for equipment, coupled with potential uncertainty of used equipment
values, impact the ability of many carriers to expand their operations. The
current operating environment is characterized by the following:
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Price
increases by truck and trailer equipment manufacturers, volatile fuel
costs, and intense competition for
freight.
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In
recent years, many less profitable or undercapitalized carriers have been
forced to consolidate or to exit the
industry.
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Competition
The
trucking industry is highly competitive and includes thousands of carriers, none
of which dominates the market in which the Company operates. The Company's
market share is less than 1% and we compete primarily with other irregular route
medium- to long-haul truckload carriers, with private carriage conducted by our
existing and potential customers, and, to a lesser extent, with the railroads.
Increased competition has resulted from deregulation of the trucking industry.
We compete on the basis of 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 as compared to the Company.
Marketing
and Significant Customers
Our
marketing emphasis is directed to that portion of the truckload market which is
generally service-sensitive, as opposed to being solely price competitive. We
seek to become a “core carrier” for our customers in order to maintain high
utilization and capitalize on recurring revenue opportunities. Our marketing
efforts are diversified and designed to gain access to dedicated fleet services
(including those in Mexico and Canada), domestic regional freight traffic, and
cross-docking and consolidation programs.
Our
marketing efforts are conducted by a sales staff of 10 employees who are located
in our major markets and supervised from our headquarters. These individuals
work to improve profitability by maintaining an even flow of freight traffic
(taking into account the balance between originations and destinations in a
given geographical area) and high utilization, and minimizing movement of empty
equipment.
Our five
largest customers, for which we provide carrier services covering a number of
geographic locations, accounted for approximately 49%, 56% and 59% of our total
revenues in 2008, 2007 and 2006, respectively. General Motors Corporation
accounted for approximately 31%, 38% and 41% of our revenues in 2008,
2007 and 2006, respectively.
We also
provide transportation services to other manufacturers who are suppliers for
automobile manufacturers. Approximately 40%, 49% and 52% of our revenues were
derived from transportation services provided to the automobile industry during
2008, 2007 and 2006, respectively.
Revenue
Equipment
At
December 31, 2008, we operated a fleet of 1,839 trucks and 4,809 trailers. We
operate late-model, well-maintained premium trucks to help attract and retain
drivers, promote safe operations, minimize maintenance and repair costs, and
improve customer service by minimizing service interruptions caused by
breakdowns. We evaluate our equipment purchasing decisions based on factors such
as initial cost, useful life, warranty terms, expected maintenance costs, fuel
economy, driver comfort, customer needs, manufacturer support, and resale value.
Our current policy is to replace most of our trucks at 500,000 miles, which
normally occurs 30 to 48 months after purchase.
We have
historically contracted with owner-operators to provide transportation services
for a small portion of our business. Owner-operators provide their own trucks
and are contractually responsible for all associated expenses, including
financing costs, fuel, maintenance, insurance, and taxes, among other things.
They are also responsible for maintaining compliance with the Federal Motor
Carrier Administration regulations. We believe that utilizing owner-operators
complements our recruiting efforts and offers greater flexibility in responding
to fluctuations in customer demand. At December 31, 2008, the Company had 33
owner-operators under contract.
During
1999, the U.S. Environmental Protection Agency (“EPA”) proposed a three-phase
strategy to reduce engine emissions from heavy-duty vehicles through a
combination of advanced emissions control technologies and diesel fuel with a
reduced sulfur content. Each phase and its effect on the Company’s operations,
if known, are described below.
The first
phase (Phase I) mandated new engine emission standards for all model year 2004
heavy-duty trucks; however, through agreements with heavy-duty diesel engine
manufacturers, the effective date was accelerated to October 1, 2002. Therefore,
effective October 1, 2002, all newly manufactured truck engines had to comply
with the new engine emission standards. All truck engines manufactured prior to
October 1, 2002 were not subject to these new standards. As of December 31,
2008, the majority of our Company-owned
truck fleet consisted of trucks with engines that comply with these emission
standards. The Company has experienced a reduction in fuel efficiency and
increased depreciation expense due to the higher cost of trucks with these new
engines.
In the
second phase (Phase II), effective January 1, 2007, the EPA mandated a new set
of more stringent emission standards for vehicles powered by diesel fuel engines
manufactured in 2007 through 2009. These new engines have been designed for and
require the use of a more costly type of fuel known as ultra-low-sulfur-diesel
(“ULSD”) which, according to EPA estimates, cost from $0.04 to $0.05 more per
gallon due to increased refining costs. The EPA also mandated that refiners and
importers nationwide must ensure that at least 80% of the volume of the highway
diesel fuel they produce or import is ULSD-compliant by June 1, 2006. However,
the EPA does not require service stations and truck stops to sell ULSD fuel.
Therefore, it is possible that ULSD fuel might not be available in a particular
area in which the Company operates. A majority of the Company’s current truck
fleet can be fueled with either ULSD or low-sulfur diesel (“LSD”), but
additional future purchases of trucks which contain 2007 or later diesel engines
will require the use of ULSD fuel which may result in lower fuel economy as the
process that removes sulfur can also reduce the energy content of the fuel. As
of December 31, 2008, 640 trucks in our Company-owned truck fleet consisted of
trucks with engines that comply with the Phase II emission standards and require
the use of ULSD. During 2009, the Company expects to take delivery of 38 new
trucks, all of which will contain engines compliant with the Phase II emission
standards requiring the use of ULSD. As compared to our current Company-owned
truck fleet which contain primarily Phase I diesel engines, trucks powered by
the Phase II compliant diesel engines have a higher purchase price and as a
result, we expect that our depreciation expense will increase as we continue to
replace older trucks with trucks powered by the Phase II diesel engines. We also
expect that these Phase II diesel engines will result in higher maintenance
costs. To the extent we are unable to offset these anticipated increased costs
with rate increases charged to customers or offsetting cost savings in other
areas, our results of operations would be adversely affected.
During
the third phase (Phase III), effective in 2010, final emission standards become
effective and LSD fuel will no longer be available for highway use. The EPA
requires that by June 1, 2010 all diesel fuel imported or produced must be
ULSD-compliant as it phases out LSD fuel availability by December 1, 2010 when
all highway diesel fuel must be ULSD fuel. We are unable at this time to
determine the increase in acquisition and operating costs of trucks powered by
the Phase III compliant engines, but we expect that the engines produced under
the final standards will be less fuel-efficient and have higher acquisition and
maintenance costs than either the Phase I or Phase II compliant
engines.
Technology
We have
installed Qualcomm Omnitracs™ display units in all of our trucks. 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 our computer system which increases
productivity and convenience. The Omnitracs system provides us with accurate
estimated time of arrival information, which optimizes load selection and
service levels to our customers. In order to optimize our truck-to-trailer
ratio, we have also installed Qualcomm TrailerTracs™ tracking units in all of
our trailers. The TrailerTracs system is a trailer tracking product that enables
us to more efficiently track the location of trailers in our
inventory.
Our
computer system manages the information provided by the Qualcomm devices to
provide us with real-time information regarding the location, status and load
assignment of all of our equipment, which permits us to better meet delivery
schedules, respond to customer inquiries and match equipment with the next
available load. Our system also provides real-time information electronically to
our customers regarding the status of freight shipments and anticipated arrival
times. This system provides our customers flexibility and convenience by
extending supply chain visibility through electronic data interchange, the
Internet and e-mail.
Maintenance
We have a
strictly enforced comprehensive preventive maintenance program for our trucks
and trailers. Inspections and various levels of preventive maintenance are
performed at set mileage intervals on both trucks and trailers. A maintenance
and safety inspection is performed on all vehicles each time they return to a
terminal.
Our
trucks carry full warranty coverage for at least three years or 350,000 miles.
Extended warranties are negotiated with the truck manufacturer and manufacturers
of major components, such as engine, transmission and differential
manufacturers, for up to four years or 500,000 miles. Our trailers carry full
warranties by the manufacturer and major component manufacturers for up to five
years.
Employees
At
December 31, 2008, we employed 2,931 persons, of whom 2,493 were drivers, 151
were maintenance personnel, 156 were employed in operations, 12 were employed in
marketing, 61 were employed in safety and personnel, and 58 were employed in
general administration and accounting. None of our employees are represented by
a collective bargaining unit and we believe that our employee relations are
good.
Drivers
At
December 31, 2008, we utilized 2,493 company drivers in our operations. We also
had 33 owner-operators under contract compensated on a per mile basis. Our
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 us and both cash and non-cash
prizes are awarded for consecutive periods of safe, accident-free driving. All
of our drivers are recruited, screened, drug tested and trained and are subject
to the control and supervision of our operations and safety departments. Our
driver training program stresses the importance of safety and reliable, on-time
delivery. Drivers are required to report to their driver managers daily and at
the earliest possible moment when any condition en route occurs that might delay
their scheduled delivery time.
In
addition to strict application screening and drug testing, before being
permitted to operate a vehicle our drivers must undergo classroom instruction on
our policies and procedures, safety techniques as taught by the Smith System of
Defensive Driving, and the proper operation of equipment, and must pass both
written and road tests. Instruction in defensive driving and safety techniques
continues after hiring, with seminars at several of our terminals. At December
31, 2008, we employed 61 persons on a full-time basis in our driver recruiting,
training and safety instruction programs.
Historically,
intense competition in the trucking industry for qualified drivers has resulted
in additional expense to recruit and retain an adequate supply of drivers, and
has had a negative impact on the industry. In prior years, our operations have
also been impacted and from time to time we have experienced under-utilization
and increased expenses due to a shortage of qualified drivers. During 2008, the
general economic downturn reduced the trucking industry’s demand for drivers and
we did not experience decreases in utilization resulting from a driver shortage.
However, we continue to place a high priority on the recruitment and retention
of an adequate supply of qualified drivers.
Executive
Officers of the Registrant
Our
executive officers are as follows:
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Name
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Age
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Position
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Years
of service
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Robert
W. Weaver
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59
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President
and Chief Executive Officer
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26
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W.
Clif Lawson
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55
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Executive
Vice President and Chief Operating Officer
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24
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Larry
J. Goddard
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50
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Vice
President - Finance, Chief Financial Officer, Secretary and
Treasurer
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21
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Each of
our executive officers has held his present position with the Company for at
least the last five years. The Company has entered into an employment agreement
with Robert W. Weaver that expires on July 10, 2009. The Company has the option
to extend the employment agreement for two consecutive years following the July
10, 2009 expiration date for an additional one year at a time. The Company has
also entered into employment agreements with both W. Clif Lawson and Larry J.
Goddard each of which expire on June 1, 2010. The Company has the option to
extend these employment agreements for one additional year following the June 1,
2010 expiration date.
Internet
Web Site
The
Company maintains a web site where additional information concerning its
business can be found. The address of that web site is www.pamt.com. The Company
makes available free of charge on its Internet web site its Annual Report on
Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and
amendments to those reports filed or furnished pursuant to Section 13(a) or
15(d) of the Securities Exchange Act of 1934 (the “Exchange Act”) as soon as
reasonably practicable after it electronically files or furnishes such materials
to the Securities and Exchange Commission.
Seasonality
Our
revenues do not exhibit a significant seasonal pattern due primarily to our
varied customer mix. Operating expenses can be somewhat higher in the winter
months primarily due to decreased fuel efficiency and increased maintenance
costs associated with inclement weather. In addition, the automobile plants for
which we transport a large amount of freight typically utilize scheduled
shutdowns of two weeks in July and one week in December and the volume of
freight we ship is reduced during such scheduled plant shutdowns.
Regulation
We are a
common and contract motor carrier regulated by various federal and state
agencies. We are subject to safety requirements prescribed by the U.S.
Department of Transportation (“DOT”). Such matters as weight and dimension of
equipment are also subject to federal and state regulations. All of our 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 our drivers. We believe that we are in compliance in all material
respects with applicable regulatory requirements relating to our trucking
business and operate with a “satisfactory” rating (the highest of three grading
categories) from the DOT.
The
Federal Motor Carrier Safety Administration (“FMCSA”), a separate administration
within the DOT charged with regulating motor carrier safety, issued a final rule
on April 24, 2003 (“2003 rule”) that made several changes to the regulations
that govern truck drivers' hours-of-service (“HOS”). These new federal
regulations became effective on January 4, 2004. On July 16, 2004, the U.S.
Circuit Court of Appeals for the District of Columbia (the “Court”) rejected
these new hours of service rules for truck drivers that had been in place since
January 2004 because it agreed that the FMCSA had failed to address the impact
of the rules on the health of drivers as required by Congress. In addition, the
Court’s ruling noted other areas of concern including the increase in driving
hours from 10 hours to 11 hours, the exception that allows drivers in trucks
with sleeper berths to split their required rest periods, the new rule allowing
drivers to reset their 70-hour clock to 0 hours after 34 consecutive hours off
duty, and the decision by the FMCSA not to require the use of electronic onboard
recorders to monitor driver compliance. However, to avoid industry disruption
and burden on the state enforcement, Congress enacted section 7(f) of the
Surface Transportation Extension Act of 2004. This section provided that the
2003 rule would remain in effect until a new rule addressed the Court’s issues
or until September 30, 2005, whichever occurred first. On January 24, 2005, the
FMCSA re-proposed its April 2003 HOS rules, adding references to how the rules
would affect driver health, but made no other changes to the regulations. The
FMCSA sought public comments by March 10, 2005 on what changes to the rule, if
any, were necessary to respond to the concerns raised by the Court, and to
provide data or studies that would support changes to, or continued use of, the
2003 rule. On August 25, 2005, the FMCSA published a final HOS rule (“2005
rule”) that retained most of the provisions of the 2003 rule with the most
significant exception being that of requiring drivers that utilize the sleeper
berth provision to take at least eight consecutive hours in the sleeper berth
during their ten hours off-duty. Under the 2003 rule, drivers were allowed to
split their ten hour off-duty time in the sleeper berth into two periods,
provided neither period was less than two hours.
The 2005
rule was later challenged in court on several grounds and in July 2007 the Court
vacated the 11-hour driving time and 34-hour restart provisions, stating that
the FMCSA methodologies, used in the studies regarding how the 2003 rules
affected driver health, were not disclosed in time for public comment and that
the explanation for some of its critical elements were not provided. In an order
filed on September 28, 2007, the Court granted a 90-day stay of the mandate and
directed that issuance of the mandate be withheld until December 27, 2007. In an
effort to prevent disruption to enforcement and compliance with HOS rules when
the stay expires, as well as possible effects on timely delivery of essential
goods and services, the FMCSA issued an interim final rule (“IFR”) effective
December 27, 2007 which allows commercial motor vehicle drivers up to 11 hours
of driving time within a 14-hour, non-extendable window from the start of the
workday, following 10 consecutive hours off duty (11-hour limit). This IFR also
allows motor carriers and drivers to restart calculations of the weekly on-duty
time limits after the driver has at least 34 consecutive hours off duty (34-hour
restart provision). During November 2008, the FMCSA announced its final HOS rule
and the rule remains unchanged from the previous IFR. This final rule became
effective on January 19, 2009.
In
general, more restrictive sleeper berth provisions may impact multiple-stop
shipments and those shipments incurring delays in loading or unloading. Improper
planning on such shipments could result in delivery delays and equipment
utilization inefficiencies.
Our motor
carrier operations are also subject to environmental laws and regulations,
including laws and regulations dealing with underground fuel storage tanks, the
transportation of hazardous materials and other environmental matters, and our
operations involve certain inherent environmental risks. We maintain three bulk
fuel storage and fuel islands. Our operations involve the risks of fuel spillage
or seepage, environmental damage, and hazardous waste disposal, among others. We
have instituted programs to monitor and control environmental risks and assure
compliance with applicable environmental laws. As part of our safety and risk
management program, we periodically perform internal environmental reviews so
that we can achieve environmental compliance and avoid environmental risk. We
transport a minimum amount of environmentally hazardous substances and, to date,
have experienced no significant claims for hazardous materials shipments. If we
should fail to comply with applicable regulations, we could be subject to
substantial fines or penalties and to civil and criminal
liability.
Company
operations conducted in industrial areas, where truck terminals and other
industrial activities are conducted, and where groundwater or other forms of
environmental contamination have occurred, potentially expose us to claims that
we contributed to the environmental contamination.
We
believe we are currently in material compliance with applicable laws and
regulations and that the cost of compliance has not materially affected results
of operations.
In
addition to environmental regulations directly affecting our business, we are
also subject to the effects of new truck engine design requirements implemented
by the EPA. See "Revenue Equipment" above.
Set forth
below and elsewhere in this Report and in other documents we file with the SEC
are risks and uncertainties that could cause our actual results to differ
materially from the results contemplated by the forward-looking statements
contained in this Report.
Our
business is subject to general economic and business factors that are largely
beyond our control, any of which could have a material adverse effect on our
operating results.
These
factors include significant increases or rapid fluctuations in fuel prices,
excess capacity in the trucking industry, surpluses in the market for used
equipment, interest rates, fuel taxes, license and registration fees, insurance
premiums, self-insurance levels, and difficulty in attracting and retaining
qualified drivers and independent contractors.
We are
also affected by recessionary economic cycles and downturns in customers’
business cycles, particularly in market segments and industries, such as the
automotive industry, where we have a significant concentration of customers.
Economic conditions may adversely affect our customers and their ability to pay
for our services.
We
operate in a highly competitive and fragmented industry, and our business may
suffer if we are unable to adequately address downward pricing pressures and
other factors that may adversely affect our ability to compete with other
carriers.
Numerous
competitive factors could impair our ability to operate at an acceptable profit.
These factors include, but are not limited to, the following:
|
·
|
we
compete with many other truckload carriers of varying sizes and, to a
lesser extent, with less-than-truckload carriers and railroads, some of
which have more equipment and greater capital resources than we
do;
|
|
·
|
some
of our competitors periodically reduce their freight rates to gain
business, especially during times of reduced growth rates in the economy,
which may limit our ability to maintain or increase freight rates,
maintain our margins or maintain significant growth in our
business;
|
|
·
|
many
customers reduce the number of carriers they use by selecting so-called
“core carriers” as approved service providers, and in some instances we
may not be selected;
|
|
·
|
many
customers periodically accept bids from multiple carriers for their
shipping needs, and this process may depress freight rates or result in
the loss of some of our business to
competitors;
|
|
·
|
the
trend toward consolidation in the trucking industry may create other large
carriers with greater financial resources and other competitive advantages
relating to their size and with whom we may have difficulty
competing;
|
|
·
|
advances
in technology require increased investments to remain competitive, and our
customers may not be willing to accept higher freight rates to cover the
cost of these investments;
|
|
·
|
competition
from Internet-based and other logistics and freight brokerage companies
may adversely affect our customer relationships and freight rates;
and
|
|
·
|
economies
of scale that may be passed on to smaller carriers by procurement
aggregation providers may improve their ability to compete with
us.
|
We
are highly dependent on our major customers, the loss of one or more of which
could have a material adverse effect on our business.
A
significant portion of our revenue is generated from our major customers. For
2008, our top five customers, based on revenue, accounted for approximately 49%
of our revenue, and our largest customer, General Motors Corporation, accounted
for approximately 31% of our revenue. We also provide transportation services to
other manufacturers who are suppliers for automobile manufacturers. As a result,
the concentration of our business within the automobile industry is greater than
the concentration in a single customer. Approximately 40% of our revenues for
2008 were derived from transportation services provided to the automobile
industry.
Generally,
we do not have long-term contractual relationships with our major customers, and
we cannot assure that our customer relationships will continue as presently in
effect. A reduction in or termination of our services by our major customers
could have a material adverse effect on our business and operating
results.
Ongoing
insurance and claims expenses could significantly reduce our
earnings.
Our
future insurance and claims expenses might exceed historical levels, which could
reduce our earnings. The Company is self insured for health and workers
compensation insurance coverage up to certain limits. If medical costs continue
to increase, or if the severity or number of claims increase, and if we are
unable to offset the resulting increases in expenses with higher freight rates,
our earnings could be materially and adversely affected.
We
may be unable to successfully integrate businesses we acquire into our
operations.
Integrating
businesses we acquire may involve unanticipated delays, costs or other
operational or financial problems. Successful integration of the businesses we
acquire depends on a number of factors, including our ability to transition
acquired companies to our management information systems. In integrating
businesses we acquire, we may not achieve expected economies of scale or
profitability or realize sufficient revenues to justify our investment. We also
face the risk that an unexpected problem at one of the companies we acquire will
require substantial time and attention from senior management, diverting
management’s attention from other aspects of our business. We cannot be certain
that our management and operational controls will be able to support us as we
grow.
Difficulty
in attracting drivers could affect our profitability and ability to
grow.
Periodically,
the transportation industry experiences difficulty in attracting and retaining
qualified drivers, including independent contractors, resulting in intense
competition for drivers. We have from time to time experienced under-utilization
and increased expenses due to a shortage of qualified drivers. If we are unable
to attract drivers when needed or contract with independent
contractors when needed, we could be required to further adjust our driver
compensation packages or let trucks sit idle, which could adversely affect our
growth and profitability.
If
we are unable to retain our key employees, our business, financial condition and
results of operations could be harmed.
We are
highly dependent upon the services of the following key employees: Robert W.
Weaver, our President and Chief Executive Officer; W. Clif Lawson, our Executive
Vice President and Chief Operating Officer; and Larry J. Goddard, our Vice
President and Chief Financial Officer. We do not maintain key-man life insurance
on any of these executives. The loss of any of their services could have a
material adverse effect on our operations and future profitability. We must
continue to develop and retain a core group of managers if we are to realize our
goal of expanding our operations and continuing our growth. We cannot assure
that we will be able to do so.
We
have significant ongoing capital requirements that could affect our
profitability if we are unable to generate sufficient cash from
operations.
The
trucking industry is capital intensive. If we are unable to generate sufficient
cash from operations in the future, we may have to limit our growth, enter into
financing arrangements, or operate our revenue equipment for longer periods, any
of which could have a material adverse affect on our profitability.
Our
operations are subject to various environmental laws and regulations, the
violation of which could result in substantial fines or penalties.
We are
subject to various environmental laws and regulations dealing with the handling
of hazardous materials, underground fuel storage tanks, and discharge and
retention of storm-water. We operate in industrial areas, where truck terminals
and other industrial activities are located, and where groundwater or other
forms of environmental contamination could occur. We also maintain bulk fuel
storage and fuel islands at three of our facilities. Our operations involve the
risks of fuel spillage or seepage, environmental damage, and hazardous waste
disposal, among others. If we are involved in a spill or other accident
involving hazardous substances, or if we are found to be in violation of
applicable laws or regulations, it could have a materially adverse effect on our
business and operating results. If we should fail to comply with applicable
environmental regulations, we could be subject to substantial fines or penalties
and to civil and criminal liability.
We
operate in a highly regulated industry and increased costs of compliance with,
or liability for violation of, existing or future regulations could have a
material adverse effect on our business.
The DOT
and various state agencies exercise broad powers over our business, generally
governing such activities as authorization to engage in motor carrier
operations, safety, and financial reporting. We may also become subject to new
or more restrictive regulations relating to fuel emissions, drivers’ hours in
service, and ergonomics. Compliance with such regulations could substantially
impair equipment productivity and increase our operating expenses.
The EPA
adopted new emission control regulations, which require progressive reductions
in exhaust emissions from diesel engines through 2010. In part to offset the
costs of compliance with the new EPA engine design requirements, some
manufacturers have increased new equipment prices and eliminated or sharply
reduced the price of repurchase or trade-in commitments. If new equipment prices
were to increase, or if the price of repurchase commitments by equipment
manufacturers were to decrease more than anticipated, we may be required to
increase our depreciation and financing costs and/or retain some of our
equipment longer, which may result in an increase in maintenance expenses. To
the extent we are unable to offset any such increases in expenses with rate
increases or cost savings, our results of operations would be adversely
affected. If our fuel or maintenance expenses were to increase as a result of
our use of the new, EPA-compliant engines, and we are unable to offset such
increases with fuel surcharges or higher freight rates, our results of
operations would be adversely affected. Further, our business and operations
could be adversely impacted if we experience problems with the reliability of
the new engines. Although we have not experienced any significant reliability
issues with these engines to date, the expenses associated with the trucks
containing these engines have been slightly elevated, primarily as a result of
lower fuel efficiency and higher depreciation.
None.
Our
executive offices and primary terminal facilities, which we own, are located in
Tontitown, Arkansas. These facilities are located on approximately 49.3 acres
and consist of 114,403 square feet of office space and maintenance and storage
facilities.
Our
subsidiaries lease facilities in Jacksonville, Florida; Breese and Effingham,
Illinois; Paulsboro, New Jersey; North Jackson, Ohio; Oklahoma City, Oklahoma;
and El Paso, Texas. Our terminal facilities in Columbia, Mississippi; Irving and
Laredo, Texas; North Little Rock, Arkansas; and Willard, Ohio are owned. The
leased facilities are leased primarily on contractual terms typically ranging
from one to five years. As of December 31, 2008, the following provides a
summary of the ownership and types of activities conducted at each
location:
|
Location
|
Own/
Lease
|
Dispatch
Office
|
Maintenance
Facility
|
Safety
Training
|
|
Tontitown,
Arkansas
|
Own
|
Yes
|
Yes
|
Yes
|
|
North
Little Rock, Arkansas
|
Own
|
No
|
Yes
|
No
|
|
Jacksonville,
Florida
|
Lease
|
Yes
|
Yes
|
Yes
|
|
Breese,
Illinois
|
Lease
|
Yes
|
No
|
No
|
|
Effingham,
Illinois
|
Lease
|
No
|
Yes
|
No
|
|
Columbia,
Mississippi
|
Own
|
No
|
No
|
No
|
|
Paulsboro,
New Jersey
|
Lease
|
Yes
|
No
|
No
|
|
North
Jackson, Ohio
|
Lease
|
Yes
|
Yes
|
Yes
|
|
Willard,
Ohio
|
Own
|
Yes
|
Yes
|
Yes
|
|
Oklahoma
City, Oklahoma
|
Lease
|
Yes
|
Yes
|
Yes
|
|
El
Paso, Texas
|
Lease
|
No
|
No
|
No
|
|
Irving,
Texas
|
Own
|
Yes
|
Yes
|
Yes
|
|
Laredo,
Texas
|
Own
|
Yes
|
Yes
|
No
|
We also
have access to trailer drop and relay stations in various other locations across
the country. We lease certain of these facilities on a month-to-month basis from
an affiliate of our largest shareholder.
We
believe that all of the properties that we own or lease are suitable for their
purposes and adequate to meet our needs.
The
nature of our business routinely results in litigation, primarily involving
claims for personal injuries and property damage incurred in the transportation
of freight. We believe that all such routine 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 our financial condition.
No
matters were submitted to a vote of our security holders during the fourth
quarter ended December 31, 2008.
PART
II
Item 5. Market for Registrant’s Common Equity, Related
Stockholder Matters and Issuer Purchases of Equity Securities.
Our
common stock is traded on the NASDAQ Global Market under the symbol PTSI. The
following table sets forth, for the quarters indicated, the range of the high
and low sales prices per share for our common stock as reported on the NASDAQ
Global Market.
Fiscal
Year Ended December 31, 2008
|
High
|
Low
|
|||||||
|
First
Quarter
|
$ | 16.85 | $ | 13.82 | ||||
|
Second
Quarter
|
16.90 | 9.22 | ||||||
|
Third
Quarter
|
15.82 | 9.82 | ||||||
|
Fourth
Quarter
|
11.08 | 3.15 | ||||||
Fiscal
Year Ended December 31, 2007
|
High
|
Low
|
|||||||
|
First
Quarter
|
$ | 25.19 | $ | 19.29 | ||||
|
Second
Quarter
|
22.48 | 16.98 | ||||||
|
Third
Quarter
|
19.31 | 17.43 | ||||||
|
Fourth
Quarter
|
18.69 | 13.80 | ||||||
As of
February 27, 2009, there were approximately 148 holders of record of our common
stock.
Dividends
We have
never declared or paid any cash dividends on our common stock. The policy of our
Board of Directors is to retain earnings for the expansion and development of
our business and the payment of our debt service obligations. 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 our earnings,
financial condition and other factors deemed relevant by the Board of
Directors.
Repurchases
of Common Stock
On April
11, 2005, the Company announced that its Board of Directors had authorized the
Company to repurchase up to 600,000 shares of its common stock during the six
month period ending October 11, 2005. These 600,000 shares were all repurchased
by September 30, 2005. On September 6, 2005, the Company announced that its
Board of Directors had authorized the Company to extend the stock repurchase
program until September 6, 2006 and to include up to an additional 900,000
shares of its common stock. The Company repurchased 458,600 shares of these
additional shares prior to the September 6, 2006 program expiration
date.
On May
30, 2007, the Company announced that its Board of Directors had authorized the
Company to repurchase up to 600,000 shares of its common stock during the twelve
month period following the announcement. Subsequent to the date of the
announcement and through the remainder of 2007, the Company repurchased 471,500
shares of its common stock. The remaining 128,500 shares authorized were
repurchased during the first three months of 2008.
On June
13, 2008, the Company announced that its Board of Directors had authorized the
Company to repurchase up to 300,000 shares of its common stock during the twelve
month period following the announcement. Subsequent to the date of the
announcement and through the remainder of 2008, the Company repurchased 300,000
shares of its common stock, with 254,200 shares being repurchased during the
fourth quarter of 2008.
The
following table summarizes the Company's common stock repurchases during the
fourth quarter of 2008. No shares were purchased during the quarter other than
through this program, and all purchases were made by or on behalf of the Company
and not by any “affiliated purchaser”.
|
Period
|
Total
number of shares
purchased
|
Average
price paid per share
|
Total
number of shares purchased as part of publicly announced
plans or programs
|
Maximum
number of shares that may yet be purchased under the plans or programs
|
||||||||||||
|
October
1-31, 2008
|
49,700 | $ | 9.78 | 49,700 | 204,500 | |||||||||||
|
November
1-30, 2008
|
17,300 | 6.77 | 17,300 | 187,200 | ||||||||||||
|
December
1-31, 2008
|
187,200 | 4.81 | 187,200 | - | ||||||||||||
|
Total
|
254,200 | $ | 5.91 | 254,200 | - | |||||||||||
Securities
Authorized for Issuance Under Equity Compensation Plans
See Part
III, Item 12, “Security Ownership of Certain Beneficial Owners and Management
and Related Stockholder Matters” of this Annual Report for a presentation of
compensation plans under which equity securities of the Company are authorized
for issuance.
Performance
Graph
Set forth
below is a line graph comparing the yearly percentage change in the cumulative
total stockholder return on our common stock against the cumulative total return
of the CRSP Total Return Index for the Nasdaq Stock Market (U.S. companies) and
the CRSP Total Return Index for the Nasdaq Trucking and Transportation Stocks
for the period of five years commencing December 31, 2003 and ending December
31, 2008. The graph assumes that the value of the investment in our common stock
and in each index was $100 on December 31, 2003 and that all dividends were
reinvested.
Item 6. Selected Financial Data.
The
following selected financial and operating data should be read in conjunction
with the Consolidated Financial Statements and notes thereto included elsewhere
in this Report.
|
Year
Ended December 31,
|
||||||||||||||||||||
|
2008
|
2007
|
2006
|
2005
|
2004
|
||||||||||||||||
|
(in
thousands, except per share amounts)
|
||||||||||||||||||||
|
Statement
of Operations Data:
|
||||||||||||||||||||
|
Operating
revenues:
|
||||||||||||||||||||
|
Operating
revenues, before fuel surcharge
|
$ | 323,272 | $ | 351,701 | $ | 351,373 | $ | 326,353 | $ | 309,475 | ||||||||||
|
Fuel
surcharge
|
83,451 | 57,140 | 48,896 | 34,527 | 15,591 | |||||||||||||||
|
Total
operating revenues
|
406,723 | 408,841 | 400,269 | 360,880 | 325,066 | |||||||||||||||
|
Operating
expenses:
|
||||||||||||||||||||
|
Salaries,
wages and benefits
|
123,961 | 135,606 | 127,539 | 122,005 | 119,519 | |||||||||||||||
|
Fuel
expense
|
140,531 | 114,242 | 97,286 | 81,017 | 55,645 | |||||||||||||||
|
Rent
and purchased transportation
|
39,887 | 38,718 | 43,844 | 39,074 | 38,938 | |||||||||||||||
|
Depreciation
and amortization
|
37,477 | 38,759 | 33,929 | 31,376 | 30,016 | |||||||||||||||
|
Goodwill
impairment charge
|
15,413 | - | - | - | - | |||||||||||||||
|
Operating
supplies
|
30,514 | 30,845 | 25,682 | 23,114 | 21,718 | |||||||||||||||
|
Operating
taxes and licenses
|
15,937 | 17,520 | 16,421 | 15,776 | 15,488 | |||||||||||||||
|
Insurance
and claims
|
16,018 | 17,591 | 16,389 | 15,992 | 15,820 | |||||||||||||||
|
Communications
and utilities
|
2,869 | 3,113 | 2,642 | 2,648 | 2,690 | |||||||||||||||
|
Other
|
5,119 | 7,130 | 5,426 | 6,205 | 5,131 | |||||||||||||||
|
Loss
(gain) on sale or disposal of property
|
952 | (48 | ) | 47 | 147 | 915 | ||||||||||||||
|
Total
operating expenses
|
428,678 | 403,476 | 369,205 | 337,354 | 305,880 | |||||||||||||||
|
Operating
(loss) income
|
(21,955 | ) | 5,365 | 31,064 | 23,526 | 19,186 | ||||||||||||||
|
Non-operating
(loss) income
|
(4,996 | ) | 1,707 | 448 | 477 | 464 | ||||||||||||||
|
Interest
expense
|
(2,429 | ) | (2,453 | ) | (1,475 | ) | (1,881 | ) | (1,758 | ) | ||||||||||
|
(Loss)
income before income taxes
|
(29,380 | ) | 4,619 | 30,037 | 22,122 | 17,892 | ||||||||||||||
|
Income
tax (benefit) expense
|
(10,615 | ) | 1,966 | 12,073 | 8,983 | 7,304 | ||||||||||||||
|
Net
(loss) income
|
$ | (18,765 | ) | $ | 2,653 | $ | 17,964 | $ | 13,139 | $ | 10,588 | |||||||||
|
(Loss)
earnings per common share:
|
||||||||||||||||||||
|
Basic
|
$ | (1.94 | ) | $ | 0.26 | $ | 1.74 | $ | 1.20 | $ | 0.94 | |||||||||
|
Diluted
|
$ | (1.94 | ) | $ | 0.26 | $ | 1.74 | $ | 1.20 | $ | 0.94 | |||||||||
|
Average
common shares outstanding – Basic
|
9,683 | 10,238 | 10,296 | 10,966 | 11,298 | |||||||||||||||
|
Average
common shares outstanding – Diluted(1)
|
9,683 | 10,239 | 10,302 | 10,976 | 11,324 | |||||||||||||||
__________
|
(1)
|
Diluted
income per share for 2008, 2007, 2006, 2005 and 2004 assumes the exercise
of stock options to purchase an aggregate of 0, 19,213, 55,738, 22,297 and
62,224 shares of common stock,
respectively.
|
|
At
December 31,
|
||||||||||||||||||||
|
2008
|
2007
|
2006
|
2005
|
2004
|
||||||||||||||||
|
Balance
Sheet Data:
|
(in
thousands)
|
|||||||||||||||||||
|
Total
assets
|
$ | 290,361 | $ | 319,904 | $ | 314,246 | $ | 293,441 | $ | 285,349 | ||||||||||
|
Long-term
debt, excluding current portion
|
35,492 | 44,172 | 21,205 | 39,693 | 23,225 | |||||||||||||||
|
Stockholders'
equity
|
155,477 | 179,377 | 185,028 | 164,762 | 168,543 | |||||||||||||||
|
Year
Ended December 31,
|
||||||||||||||||||||
|
2008
|
2007
|
2006
|
2005
|
2004
|
||||||||||||||||
|
Operating
Data:
|
||||||||||||||||||||
|
Operating
ratio (1)
|
106.8 | % | 98.5 | % | 91.2 | % | 92.8 | % | 93.8 | % | ||||||||||
|
Average
number of truckloads per week
|
7,559 | 7,849 | 7,200 | 6,946 | 7,278 | |||||||||||||||
|
Average
miles per trip
|
598 | 647 | 659 | 680 | 664 | |||||||||||||||
|
Total
miles traveled (in thousands)
|
221,450 | 246,801 | 229,810 | 228,624 | 235,894 | |||||||||||||||
|
Average
miles per truck
|
111,114 | 118,483 | 123,156 | 125,479 | 127,124 | |||||||||||||||
|
Average
revenue, before fuel surcharge per truck per day
|
$ | 662 | $ | 695 | $ | 778 | $ | 740 | $ | 684 | ||||||||||
|
Average
revenue, before fuel surcharge per loaded mile
|
$ | 1.41 | $ | 1.38 | $ | 1.43 | $ | 1.33 | $ | 1.19 | ||||||||||
|
Empty
mile factor
|
7.3 | % | 6.5 | % | 5.9 | % | 5.5 | % | 4.7 | % | ||||||||||
|
At
end of period:
|
||||||||||||||||||||
|
Total
company-owned/leased trucks
|
1,839 | (2) | 2,055 | (3) | 1,998 | (4) | 1,792 | (5) | 1,857 | (6) | ||||||||||
|
Average
age of trucks (in years)
|
1.90 | 1.75 | 1.55 | 1.43 | 1.70 | |||||||||||||||
|
Total
trailers
|
4,809 | 4,882 | 4,540 | 4,406 | 4,257 | |||||||||||||||
|
Average
age of trailers (in years)
|
4.43 | 4.44 | 4.16 | 3.92 | 4.69 | |||||||||||||||
|
Number
of employees
|
2,931 | 3,181 | 3,062 | 3,035 | 2,736 | |||||||||||||||
__________
(1) Total
operating expenses, net of fuel surcharge as a percentage of operating revenues,
before fuel surcharge.
(2)
Includes 33 owner operator trucks; (3) Includes 55 owner operator trucks; (4)
Includes 49 owner operator trucks.
(5)
Includes 50 owner operator trucks; (6) Includes 85 owner operator
trucks.
The
Company has not declared or paid any cash dividends during any of the periods
presented above.
Item 7. Management’s Discussion and Analysis of Financial
Condition and Results of Operations.
Business
Overview
The
Company's administrative headquarters are in Tontitown, Arkansas. From this
location we manage operations conducted through our wholly owned subsidiaries
based in various locations around the United States and Canada. The operations
of these subsidiaries can generally be classified into either truckload services
or brokerage and logistics services. Truckload services include those
transportation services in which we utilize company owned trucks or
owner-operator owned trucks. Brokerage and logistics services consist of
services such as transportation scheduling, routing, mode selection,
transloading and other value added services related to the transportation of
freight which may or may not involve the usage of company owned or
owner-operator owned equipment. Both our truckload operations and our
brokerage/logistics operations have similar economic characteristics and are
impacted by virtually the same economic factors as discussed elsewhere in this
Report. All of the Company's operations are in the motor carrier
segment.
For both
operations, substantially all of our revenue is generated by transporting
freight for customers and is predominantly affected by the rates per mile
received from our customers, equipment utilization, and our percentage of
non-compensated miles. These aspects of our business are carefully managed and
efforts are continuously underway to achieve favorable results. Truckload
services revenues, excluding fuel surcharges, represented 89.6%, 90.4%, and
87.8% of total revenues, excluding fuel surcharges for the twelve months ended
December 31, 2008, 2007, and 2006, respectively.
The main
factors that impact our profitability on the expense side are costs incurred in
transporting freight for our customers. Currently, our most challenging costs
include fuel, driver recruitment, training, wage and benefit costs, independent
broker costs (which we record as purchased transportation), insurance, and
maintenance and capital equipment costs.
In
discussing our results of operations we use revenue, before fuel surcharge, (and
fuel expense, net of surcharge), because management believes that eliminating
the impact of this sometimes volatile source of revenue allows a more consistent
basis for comparing our results of operations from period to period. During
2008, 2007 and 2006, approximately $83.5 million, $57.1 million and $48.9
million, respectively, of the Company's total revenue was generated from fuel
surcharges. We also discuss certain changes in our expenses as a percentage of
revenue, before fuel surcharge, rather than absolute dollar changes. We do this
because we believe the high variable cost nature of certain expenses makes a
comparison of changes in expenses as a percentage of revenue more meaningful
than absolute dollar changes.
Results
of Operations - Truckload Services
The
following table sets forth, for truckload services, the percentage relationship
of expense items to operating revenues, before fuel surcharges, for the periods
indicated. Fuel costs are shown net of fuel surcharges.
|
Years
Ended December 31,
|
||||||||||||
|
2008
|
2007
|
2006
|
||||||||||
|
Operating
revenues, before fuel surcharge
|
100.0 | % | 100.0 | % | 100.0 | % | ||||||
|
Operating
expenses:
|
||||||||||||
|
Salaries,
wages and benefits
|
42.1 | 42.0 | 40.6 | |||||||||
|
Fuel
expense, net of fuel surcharge
|
19.9 | 18.2 | 16.0 | |||||||||
|
Rent
and purchased transportation
|
3.2 | 2.5 | 1.7 | |||||||||
|
Depreciation
and amortization
|
12.9 | 12.2 | 11.0 | |||||||||
|
Goodwill
impairment
|
2.9 | 0.0 | 0.0 | |||||||||
|
Operating
supplies and expenses
|
10.5 | 9.7 | 8.3 | |||||||||
|
Operating
taxes and licenses
|
5.5 | 5.5 | 5.3 | |||||||||
|
Insurance
and claims
|
5.5 | 5.5 | 5.3 | |||||||||
|
Communications
and utilities
|
1.0 | 0.9 | 0.8 | |||||||||
|
Other
|
1.7 | 2.0 | 1.6 | |||||||||
|
Loss
on sale or disposal of property
|
0.3 | 0.0 | 0.0 | |||||||||
|
Total
operating expenses
|
105.5 | 98.5 | 90.6 | |||||||||
|
Operating
(loss) income
|
(5.5 | ) | 1.5 | 9.4 | ||||||||
|
Non-operating
(loss) income
|
(1.7 | ) | 0.5 | 0.1 | ||||||||
|
Interest
expense
|
(0.8 | ) | (0.7 | ) | (0.4 | ) | ||||||
|
(Loss)
income before income taxes
|
(8.0 | )% | 1.3 | % | 9.1 | % | ||||||
2008
Compared to 2007
For the
year ended December 31, 2008, truckload services revenue, before fuel
surcharges, decreased 8.9% to $289.6 million as compared to $317.9 million for
the year ended December 31, 2007. The decrease relates primarily to a decrease
in the number of trucks utilized during 2008 as compared to 2007 and to a
decrease in equipment utilization for the periods compared. During 2008 the
number of trucks utilized decreased to an average count of 1,993 units compared
to 2,083 units during 2007 as the Company has reduced its fleet size in response
to current freight demand. During 2008, the Company also experienced a decrease
in the average number of miles traveled per unit each work day from 488 miles
during 2007 to 454 miles during 2008. Partially offsetting these decreases in
revenue was an increase in the average rate charged per total mile. During 2008,
the average rate charged to customers per total mile increased by $0.02 as
compared to the average rate charged during 2007.
Salaries,
wages and benefits increased from 42.0% of revenues, before fuel surcharges,
during 2007 to 42.1% of revenues, before fuel surcharges, during 2008, however,
based on a dollar comparison, salaries, wages and benefits decreased from $133.5
million during 2007 to $121.9 million during 2008 as the number of driver
compensated miles decreased from 246.8 million miles during 2007 to 221.4
million miles during 2008. The increase, as a percentage of revenues, resulted
primarily from the fixed cost characteristics of wages which do not fluctuate
with changes in revenue, such as general and administrative, maintenance, and
operations wages. Partially offsetting the increase was a decrease in driver
lease expense and a decrease in amounts recorded for employee health insurance
expense. Driver lease expense, which is a component of salaries, wages and
benefits,
decreased
from $7.8 million in 2007 to $6.2 million in 2008, as the average number of
owner operators under contract decreased from 57 during 2007 to 44 during 2008.
Employee health insurance expense decreased from $6.3 million in 2007 to $5.0
million in 2008 as a result of a decrease in the total number of covered
employees and a decrease in the number and severity of health claims reported
during 2008 as compared to 2007.
Fuel
expense, net of fuel surcharge, increased from 18.2% of revenues, before fuel
surcharges, during 2007 to 19.9% of revenues, before fuel surcharges, during
2008. On a dollar basis, fuel expense decreased from $57.8 million during 2007
to $57.5 million during 2008 as the number of gallons of diesel fuel purchased
during 2008 were significantly lower than the number of gallons purchased during
2007 due to the decrease in miles traveled for the periods compared. The
increase, as a percentage of revenue, was related to an increase in the average
price paid per gallon of diesel fuel from $2.75 during 2007 to an average cost
of $3.59 during 2008. Partially offsetting the increase related to the increase
in average price paid per gallon of diesel fuel was an increase in amounts
collected from customers in the form of fuel surcharges from an average of $1.24
per gallon of diesel fuel during 2007 to $1.98 per gallon during 2008. Fuel
surcharge collections vary from period to period as they are generally based on
changes in fuel prices from period to period so that during periods of rising
fuel prices fuel surcharge collections increase while fuel surcharge collections
decrease during periods of declining fuel prices.
Rent and
purchased transportation increased from 2.5% of revenues, before fuel
surcharges, in 2007 to 3.2% of revenues, before fuel surcharges, in 2008. The
increase relates primarily to an increase in amounts paid to third party
transportation service providers for intermodal services.
Depreciation
and amortization increased from 12.2% of revenues, before fuel surcharges, in
2007 to 12.9% of revenues, before fuel surcharges, in 2008. The increase, as a
percentage of revenue, relates primarily to the effect of lower revenues during
2008 as compared to 2007 and the fixed cost nature of depreciation expense. On a
dollar basis, depreciation and amortization expense decreased from $38.7 million
during 2007 to $37.5 million during 2008 as the average size of the
Company-owned truck fleet decreased from 2,027 trucks during 2007 to 1,949
trucks during 2008.
Goodwill
impairment was recorded during the Company’s annual test of goodwill impairment
as required by Generally Accepted Accounting Principles. The impairment of our
goodwill was triggered by the sustained decline of our market capitalization
caused by a decrease in our stock price during 2008. In the fourth quarter of
2008, we determined that our market capitalization compared to the carrying
amount of the Company indicated that impairment was probable and that the second
step of impairment testing was necessary. The second step of our impairment test
required the calculation of the fair value of the Company and the subsequent
allocation of the fair value to the assets and liabilities of the Company. The
excess fair value after this allocation is performed represents the implied
goodwill of the Company, if any, and was zero at December 31, 2008. As a result
we incurred an impairment expense of $15.4 million which represented the entire
balance of our goodwill.
Operating
supplies and expenses increased from 9.7% of revenues, before fuel surcharges,
during 2007 to 10.5% of revenues, before fuel surcharges, during 2008. The
increase relates primarily to an increase in amounts paid for tolls, new tire
amortization, driver layovers, and miscellaneous operations expense. The
increase was partially offset by a decrease in amounts paid to third party
driver training schools which the Company uses to recruit new truck
drivers.
Operating
taxes and licenses remained constant at 5.5% of revenues, before fuel
surcharges, for both 2007 and 2008. On a dollar basis however, operating taxes
and licenses, which consists primarily of fuel taxes, decreased from $17.5
million during 2007 to $15.9 million during 2008. Fuel tax expense is primarily
affected by the number of gallons of diesel fuel purchased which is directly
related to the number of miles traveled. During 2008, a decrease in the number
of miles traveled to 221.4 million in 2008 from 246.8 million miles in 2007,
resulted in a decrease in the number of diesel fuel gallons
purchased.
Insurance
and claims expense remained constant at 5.5% of revenues, before fuel
surcharges, for both 2007 and 2008. On a dollar basis however, insurance and
claims expense decreased from $17.6 million during 2007 to $16.0 million during
2008. The decrease relates primarily to a decrease in auto liability insurance
premiums which
are
determined based on a negotiated rate-per-mile (“NRPM”) with the Company’s
insurance carrier. During 2008, the number of miles used to calculate the
premiums decreased to 221.4 million miles as compared to 2007 miles of 246.8
million and translated into a decrease in auto liability insurance expense.
During October 2008, the Company’s auto liability insurance policy was renewed
at a rate which represented a 2.6% reduction in the NRPM and this lower
rate-per-mile has also contributed to the dollar-based decrease for the periods
compared.
Other
expenses decreased from 2.0% of revenues, before fuel surcharges, during 2007 to
1.7% of revenues, before fuel surcharges, during 2008. The decrease relates
primarily to a decrease in various expenses such as advertising, miscellaneous
operating supplies, uncollectible revenue, and rents.
The
truckload services division operating ratio, which measures the ratio of
operating expenses, net of fuel surcharges, to operating revenues, before fuel
surcharges, increased to 105.5% for 2008 from 98.5% for 2007.
Non-operating
income and expenses increased from income of 0.5% of revenues, before fuel
surcharges, during 2007 to expense of 1.7% of revenues, before fuel
surcharges, during 2008. During 2008, certain of the Company’s investments in
marketable equity securities were determined by management to be
other-than-temporarily impaired and were therefore written down to fair market
value. The amount of the year-to-date write-downs approximated $5.2 million and
was determined based on the difference between recorded cost and quoted market
prices at the end of the period.
2007
Compared to 2006
For the
year ended December 31, 2007, truckload services revenue, before fuel
surcharges, increased 3.0% to $317.9 million as compared to $308.7 million for
the year ended December 31, 2006. The increase was primarily due to an 11.6%
increase in the average size of the Company’s truck fleet from 1,866 units in
2006 to 2,083 units in 2007. However, a 4.1% decrease in the average rate per
total mile charged to customers from approximately $1.34 during 2006 to
approximately $1.29 during 2007 and a decrease in the average daily miles
traveled per unit from 509 miles in 2006 to 488 miles in 2007 partially offset
revenue growth attributable to fleet growth.
Salaries,
wages and benefits increased from 40.6% of revenues, before fuel surcharges, in
2006 to 42.0% of revenues, before fuel surcharges, in 2007 which represents an
increase from $125.4 million in 2006 to $133.5 million in 2007. The increase
relates primarily to an increase in driver wages as the number of company driver
compensated miles increased from 229.8 million miles in 2006 to 246.8 million
miles in 2007. Also contributing to the increase was an increase in driver lease
expense and amounts recorded for employee health insurance expense. Driver lease
expense, which is a component of salaries, wages and benefits, increased from
$6.2 million in 2006 to $7.8 million in 2007, as the average number of owner
operators under contract increased from 45 during 2006 to 57 during 2007.
Employee health insurance expense increased from $4.3 million in 2006 to $6.3
million in 2007 as a result of healthcare cost increases, in general, and to an
increase in the number and severity of health claims reported during 2007 as
compared to 2006. Partially offsetting the increases discussed above was a
decrease in amounts accrued for employee bonus plans during 2007 as compared to
2006.
Fuel
expense increased from 16.0% of revenues, before fuel surcharges, in 2006 to
18.2% of revenues, before fuel surcharges, in 2007 which represents an increase
from $49.4 million during 2006 to $57.8 million during 2007. The increase was
primarily due to higher fuel prices as the average price paid per gallon of
diesel fuel increased from $2.55 per gallon during 2006 to $2.76 per gallon
during 2007. During periods of rising fuel prices the Company is often able to
partially offset fuel cost increases through the use of fuel surcharges charged
to customers. The Company collected fuel surcharges of approximately $47.8
million during 2006 compared to fuel surcharge collections of $56.4 million
during 2007.
Rent and
purchased transportation increased from 1.7% of revenues, before fuel
surcharges, in 2006 to 2.5% of revenues, before fuel surcharges, in 2007. The
increase relates primarily to an increase in amounts paid to third party
transportation service providers for intermodal services.
Depreciation
and amortization increased from 11.0% of revenues, before fuel surcharges, in
2006 to 12.2% of revenues, before fuel surcharges, in 2007 representing an
increase from $33.9 million during 2006 to $38.7 million during 2007.
Depreciation expense increased primarily due to an increase in the average size
of the Company-owned truck fleet from 1,820 trucks during 2006 to 2,027 trucks
during 2007. To a lesser extent, a larger trailer fleet and higher new trailer
prices also contributed to the increase.
Operating
supplies and expenses increased from 8.3% of revenues, before fuel surcharges,
in 2006 to 9.7% of revenues, before fuel surcharges, in 2007. The increase
relates primarily to an increase in amounts paid to third party driver training
schools, driver layover pay, and for truck repairs expense.
Operating
taxes and licenses increased from 5.3% of revenues, before fuel surcharges, in
2006 to 5.5% of revenues, before fuel surcharges, in 2007. Operating taxes and
licenses, which consists primarily of fuel taxes, increased from $16.4 million
during 2006 to $17.5 million during 2007. Fuel tax expense is primarily affected
by the number of gallons of diesel fuel purchased which is primarily a factor of
the number of miles traveled and the miles-per-gallon (“mpg”) achieved. During
2007, a decrease in the average mpg to 5.91 from an average mpg of 5.94 during
2006 combined with an increase in the number of miles traveled to 246.8 million
in 2007 from 229.8 million miles in 2006, resulted in an increase in the number
of diesel fuel gallons purchased.
Insurance
and claims expense increased from 5.3% of revenues, before fuel surcharges, in
2006 to 5.5% of revenues, before fuel surcharges, in 2007. The increase
represents an increase from $16.4 million during 2006 to $17.6 million during
2007. The increase relates primarily to an increase in auto liability insurance
premiums which are determined based on a negotiated rate-per-mile (“NRPM”) with
the Company’s insurance carrier. During 2007, the number of miles used to
calculate the premiums increased to 246.8 million miles from 229.8 million miles
which translated into increased auto liability insurance expense. During October
2007 the Company’s auto liability insurance policy was renewed at a rate which
represented a 5.5% reduction in the NRPM and since that time this lower
rate-per-mile has helped to partially offset the increase in auto liability
insurance expense associated with the increase in miles traveled during 2007 as
compared to 2006.
Other
expenses increased from 1.6% of revenues, before fuel surcharges, in 2006 to
2.0% of revenues, before fuel surcharges, in 2007. The increase relates
primarily to an increase in amounts paid for outsourcing shop employees at the
Company’s terminals during 2007 as compared to 2006. Also contributing to the
increase was a one-time expense accrual of approximately $300,000 during
December 2007 to settle a 1986 environmental remediation claim in which the
Company was found partly liable for remediation.
The
truckload services division operating ratio, which measures the ratio of
operating expenses, net of fuel surcharges, to operating revenues, before fuel
surcharges, increased to 98.6% for 2007 from 90.6% for 2006.
Results
of Operations - Logistics and Brokerage Services
The
following table sets forth, for logistics and brokerage services, the percentage
relationship of expense items to operating revenues, before fuel surcharges, for
the periods indicated. Brokerage service operations occur specifically in
certain divisions; however, brokerage operations occur throughout the Company in
similar operations having substantially similar economic characteristics. Rent
and purchased transportation, which includes costs paid to third party carriers,
are shown net of fuel surcharges.
|
Years
Ended December 31,
|
||||||||||||
|
2008
|
2007
|
2006
|
||||||||||
|
Operating
revenues, before fuel surcharge
|
100.0 | % | 100.0 | % | 100.0 | % | ||||||
|
Operating
expenses:
|
||||||||||||
|
Salaries,
wages and benefits
|
6.2 | 6.3 | 5.0 | |||||||||
|
Fuel
expense
|
0.0 | 0.0 | 0.0 | |||||||||
|
Rent
and purchased transportation, net of fuel surcharge
|
89.5 | 88.9 | 88.3 | |||||||||
|
Depreciation
and amortization
|
0.0 | 0.0 | 0.0 | |||||||||
|
Goodwill
impairment
|
20.6 | 0.0 | 0.0 | |||||||||
|
Operating
supplies and expenses
|
0.0 | 0.0 | 0.0 | |||||||||
|
Operating
taxes and licenses
|
0.0 | 0.0 | 0.0 | |||||||||
|
Insurance
and claims
|
0.1 | 0.1 | 0.0 | |||||||||
|
Communications
and utilities
|
0.3 | 0.3 | 0.3 | |||||||||
|
Other
|
1.0 | 2.1 | 1.4 | |||||||||
|
Loss
on sale or disposal of property
|
0.0 | 0.0 | 0.0 | |||||||||
|
Total
operating expenses
|
117.7 | 97.7 | 95.0 | |||||||||
|
Operating
(loss) income
|
(17.7 | ) | 2.3 | 5.0 | ||||||||
|
Non-operating
(loss) income
|
0.0 | 0.0 | 0.0 | |||||||||
|
Interest
expense
|
(0.2 | ) | (0.4 | ) | (0.4 | ) | ||||||
|
(Loss)
income before income taxes
|
(17.9 | )% | 1.9 | % | 4.6 | % | ||||||
2008
Compared to 2007
For the
year ended December 31, 2008, logistics and brokerage services revenues, before
fuel surcharges, decreased 0.2% to $33.7 million as compared to $33.8 million
for the year ended December 31, 2007. The decrease was primarily the result of a
slight decrease in the number of loads brokered during 2008 as compared to
2007.
Rent and
purchased transportation increased from 88.9% of revenues, before fuel
surcharges, in 2007 to 89.5% of revenues, before fuel surcharges, in 2008. The
increase relates to an increase in amounts charged by third party logistics and
brokerage service providers primarily as a result of higher fuel
costs.
Goodwill
impairment was discovered during the Company’s annual test of goodwill
impairment as required by Generally Accepted Accounting Principles. The
impairment of our goodwill was triggered by the sustained decline of our market
capitalization caused by a decrease in our stock price during 2008. In the
fourth quarter of 2008, we determined that our market capitalization compared to
the carrying amount of the Company indicated that impairment was probable and
that the second step of impairment testing was necessary. The second step of our
impairment test required the calculation of the fair value of the Company and
the subsequent allocation of the fair value to the assets and liabilities of the
Company. The excess fair value after this allocation is performed represents the
implied goodwill of the Company, if any, and was zero at December 31, 2008. As a
result we incurred an impairment expense of $15.4 million which represented the
entire balance of our goodwill.
Other
expenses decreased from 2.1% of revenues, before fuel surcharges, during 2007 to
1.0% of revenues, before fuel surcharges during 2008. The decrease relates to a
decrease in non-compete amortization expense as the non-compete agreement with
the former owner of East Coast Transport, LLC expired in January
2008.
The
logistics and brokerage services division operating ratio, which measures the
ratio of operating expenses, net of fuel surcharges, to operating revenues,
before fuel surcharges, increased to 117.7% for 2008 from 97.7% for
2007.
2007
Compared to 2006
For the
year ended December 31, 2007, logistics and brokerage services revenues, before
fuel surcharges, decreased 20.9% to $33.8 million as compared to $42.7 million
for the year ended December 31, 2006. The decrease was primarily the result of a
22.2% decrease in the number of loads brokered during 2007 as compared to
2006.
Rent and
purchased transportation increased from 88.3% of revenues, before fuel
surcharges, in 2006 to 88.9% of revenues, before fuel surcharges, in 2007. The
increase relates to an increase in amounts charged by third party logistics and
brokerage service providers primarily as a result of higher fuel
costs.
Other
expenses increased from 1.4% of revenues, before fuel surcharges, in 2006 to
2.1% of revenues, before fuel surcharges, in 2007. The increase relates
primarily to an increase in amounts considered as uncollectible revenue during
2007 as compared to 2006.
The
logistics and brokerage services division operating ratio, which measures the
ratio of operating expenses, net of fuel surcharges, to operating revenues,
before fuel surcharges, increased to 97.7% for 2007 from 95.0% for
2006.
Results
of Operations - Combined Services
2008
Compared to 2007
Income
tax benefit was approximately $10.6 million in 2008 resulting in an effective
rate of 36.1%, as compared to income tax expense of approximately $2.0 million
in 2007 which resulted in an effective rate of 42.6%. The effective tax rate
differs from the statutory rate primarily due to the existence of partially
non-deductible meal and incidental expense per-diem payments to company drivers.
These per-diem payments may cause a significant difference in the Company’s
effective tax rate from period-to-period as the proportion of non-deductible
expenses to pre-tax net income increases or decreases.
We have
determined, based on significant judgment, that a valuation allowance against
our deferred tax assets has not been necessary. Management evaluates the
realizability of its deferred tax assets based upon negative and positive
evidence available and, based on the evidence available at this time, management
concludes that it is "more likely than not" that we will be able to realize the
benefit of our deferred tax assets in the near future.
As of
December 31, 2008, there were no unrecognized tax benefits and an adjustment to
the Company’s consolidated financial statements for uncertain tax positions was
not required as management believes that the Company’s significant tax positions
taken in income tax returns filed or to be filed are supported by clear and
unambiguous income tax laws.
The
Company and its subsidiaries are subject to U.S. and Canadian federal income tax
laws as well as the income tax laws of multiple state jurisdictions. The major
tax jurisdictions in which we operate generally provide for a deficiency
assessment statute of limitation period of three years and as a result, the
Company’s tax years 2005 through 2007 remain open to examination in those
jurisdictions. During 2008, the Company has not recognized or accrued any
interest or penalties related to uncertain income tax positions and does not
believe it is reasonably possible that our unrecognized tax benefits will
significantly change within the next twelve months.
The
combined net loss for all divisions was $18.8 million, or 5.8% of revenues,
before fuel surcharge, for 2008 as compared to combined net income for all
divisions of $2.7 million or 0.8% of revenues, before fuel surcharge, for 2007.
The decrease in income combined with the effect of treasury stock repurchases
resulted in a decrease in diluted earnings per share from $0.26 for 2007 to a
diluted loss per share of $1.94 for 2008.
2007
Compared to 2006
Income
tax expense was approximately $2.0 million in 2007 resulting in an effective
rate of 42.6% as compared to income tax expense of approximately $12.1 million
in 2006 which resulted in an effective rate of 40.2%. The effective tax rate
differs from the statutory rate primarily due to the existence of partially
non-deductible meal and incidental expense per-diem payments to company drivers.
These per-diem payments may cause a significant difference in the Company’s
effective tax rate from period-to-period as the proportion of non-deductible
expenses to pre-tax net income increases or decreases.
We have
determined, based on significant judgment, that a valuation allowance against
our deferred tax assets has not been necessary. Management evaluates the
realizability of its deferred tax assets based upon negative and positive
evidence available and based on the evidence available at this time, management
concludes that it is "more likely than not" that we will be able to realize the
benefit of our deferred tax assets in the near future.
The
Company adopted the provisions of Financial Accounting Standards Board (“FASB”)
Interpretation 48, Accounting
for Uncertainty in Income Taxes-an interpretation of FASB Statement No.
109 (“FIN 48”), on January 1, 2007. FIN 48 addressed the determination of
how tax benefits claimed or expected to be claimed on a tax return should be
recorded in the financial statements. Under FIN 48, the Company may recognize
the tax benefit from an uncertain tax position only if it is more likely than
not that the position will be sustained on examination by taxing authorities,
based on the technical merits of the position. Upon adoption and as of December
31, 2007, there were no unrecognized tax benefits and an adjustment to the
Company’s consolidated financial statements for uncertain tax positions was not
required as management believes that the Company’s significant tax positions
taken in income tax returns filed or to be filed are supported by clear and
unambiguous income tax laws.
The
Company and its subsidiaries are subject to U.S. and Canadian federal income tax
laws as well as the income tax laws of multiple state jurisdictions. The major
tax jurisdictions in which we operate generally provide for a deficiency
assessment statute of limitation period of three years and as a result, during
2007, the Company’s tax years 2004 through 2006 remained open to examination in
those jurisdictions. During 2007, the Company did not recognize or accrue any
interest or penalties related to uncertain income tax positions and did not
believe it was reasonably possible that our unrecognized tax benefits would
significantly change within the next twelve months.
Net
income for all divisions was $2.7 million, or 0.8% of revenues, before fuel
surcharge, for 2007 as compared to $18.0 million or 5.1% of revenues, before
fuel surcharge, for 2006. The decrease in net income combined with the effect of
treasury stock repurchases resulted in a decrease in diluted earnings per share
to $0.26 for 2007 compared to $1.74 for 2006.
Quarterly
Results of Operations
The
following table presents selected consolidated financial information for each of
our last eight fiscal quarters through December 31, 2008. The information has
been derived from unaudited consolidated financial statements that, in the
opinion of management, reflect all adjustments, consisting of normal recurring
adjustments, necessary for a fair presentation of the quarterly
information.
|
Quarter
Ended
|
||||||||||||||||||||||||||||||||
|
Mar.
31,
2008
|
June
30,
2008
|
Sept.
30,
2008
|
Dec.
31,
2008
|
Mar.
31,
2007
|
June
30,
2007
|
Sept.
30,
2007
|
Dec.
31,
2007
|
|||||||||||||||||||||||||
|
(unaudited)
|
||||||||||||||||||||||||||||||||
|
(in
thousands, except earnings per share data)
|
||||||||||||||||||||||||||||||||
|
Operating
revenues
|
$ | 105,820 | $ | 110,930 | $ | 105,958 | $ | 84,014 | $ | 98,809 | $ | 106,700 | $ | 101,171 | $ | 102,162 | ||||||||||||||||
|
Total
operating expenses
|
109,786 | 112,460 | 107,240 | 99,190 | 96,475 | 102,528 | 100,688 | 103,785 | ||||||||||||||||||||||||
|
Operating
(loss) income
|
(3,966 | ) | (1,530 | ) | (1,282 | ) | (15,176 | ) | 2,334 | 4,172 | 483 | (1,623 | ) | |||||||||||||||||||
|
Net
(loss) income
|
(2,828 | ) | (1,332 | ) | (3,181 | ) | (11,424 | ) | 1,265 | 2,192 | 36 | (840 | ) | |||||||||||||||||||
|
(Loss)
earnings per common share:
|
||||||||||||||||||||||||||||||||
|
Basic
|
$ | (0.29 | ) | $ | (0.14 | ) | $ | (0.33 | ) | $ | (1.19 | ) | $ | 0.12 | $ | 0.21 | $ | 0.00 | $ | (0.08 | ) | |||||||||||
|
Diluted
|
$ | (0.29 | ) | $ | (0.14 | ) | $ | (0.33 | ) | $ | (1.19 | ) | $ | 0.12 | $ | 0.21 | $ | 0.00 | $ | (0.08 | ) | |||||||||||
Liquidity
and Capital Resources
The
growth of our business has required, and will continue to require, a significant
investment in new revenue equipment. Our primary sources of liquidity have been
funds provided by operations, proceeds from the sales of revenue equipment,
issuances of equity securities, and borrowings under our lines of credit and
installment notes.
During
2008, we generated $40.6 million in cash from operating activities compared to
$45.2 million and $60.7 million in 2007 and 2006, respectively. Investing
activities used $48.3 million in cash during 2008 compared to $61.7 million and
$42.7 million in 2007 and 2006, respectively. The cash used in all three years
related primarily to the purchase of revenue equipment (trucks and trailers)
used in our operations. Financing activities provided $8.1 million in cash
during 2008 compared to financing activities in 2007 and 2006 which provided
$15.9 million and used $18.1 million, respectively. See the Consolidated
Statements of Cash Flows in Item 8 of this Report.
Our
primary use of funds is for the purchase of revenue equipment. We typically use
installment notes, our existing lines of credit on an interim basis, proceeds
from the sale or trade of equipment, and cash flows from operations, to finance
capital expenditures and repay long-term debt. During 2008 and 2007, we utilized
cash on hand, installment notes, and our lines of credit to finance revenue
equipment purchases of approximately $53.5 million and $72.6 million,
respectively.
Occasionally
we finance the acquisition of revenue equipment through installment notes with
fixed interest rates and terms ranging from 12 to 48 months. At December 31,
2008, the Company’s subsidiaries had combined outstanding indebtedness under
such installment notes of $45.7 million. These installment notes are payable in
monthly installments ranging from 12 months to 36 months at a weighted average
interest rate of 4.80%. At December 31, 2007, no such outstanding indebtedness
existed under installment notes.
In order
to maintain our truck and trailer fleet count it is often necessary to purchase
replacement units and place them in service before trade units are removed from
service. The timing of this process often requires the Company to pay for new
units without any reduction in price for trade units. In this situation, the
Company later receives payment for the trade units as they are delivered to the
equipment vendor and have passed vendor inspection. During the twelve months
ended December 31, 2008 and 2007, the Company received approximately $4.3
million and $5.9 million, respectively, for units delivered for
trade.
During
the first six months of 2008 we maintained two $30.0 million revolving lines of
credit (Line A and Line B, respectively) with separate financial institutions.
Amounts outstanding under Line B were paid in full on it’s maturity date of June
30, 2008 and was not renewed by the Company. Amounts outstanding under Line A
bear interest at LIBOR (determined as of the first day of each month) plus 1.25%
(3.15% at December 31, 2008), are secured by our accounts receivable and mature
on May 31, 2009. However the Company has the intent and ability to extend the
terms of this line of credit for an additional one year period until May 31,
2010. At December 31, 2008, outstanding advances on Line A were approximately
$5.7 million, including $2.0 million in letters of credit, with availability to
borrow $24.3 million.
Trade
accounts receivable at December 31, 2008 decreased approximately $14.6 million
as compared to December 31, 2007. The decrease was related to a general decrease
in revenues, which flow through the trade accounts receivable account, during
the quarter ending December 31, 2008 as compared to the revenues generated
during the quarter ending December 31, 2007.
Accounts
receivable-other at December 31, 2008 decreased approximately $4.3 million as
compared to December 31, 2007. The decrease relates primarily to a decrease in
amounts receivable from the Company’s third-party qualified intermediary. During
2007, the Company contracted with a third-party qualified intermediary in order
to implement a like-kind exchange tax program. Under the program, dispositions
of eligible trucks or trailers and acquisitions of replacement trucks or
trailers are made in a form whereby any associated tax gains related to the
disposal are deferred. To qualify for like-kind exchange treatment, we exchange,
through our qualified intermediary, eligible trucks or trailers being disposed
with trucks or trailers being acquired. Amounts held by the Company’s
third-party qualified intermediary are dependant on the timing and extent of the
Company’s revenue equipment sales and/or purchase activities which can fluctuate
significantly from period to period. At December 31, 2008 approximately $31,000
of sales proceeds were being held by the third-party qualified intermediary as
compared to $4.1 million held by the third-party qualified intermediary at
December 31, 2007. The Company intends to use these sales proceeds during 2009
for the purchase of qualified replacement tractors or trailers.
Prepaid
expenses and deposits at December 31, 2008 decreased approximately $5.5 million
as compared to December 31, 2007. The primary reason for the decrease relates to
the amortization of prepaid tractor and trailer license fees and auto liability
insurance premiums. In December 2007, approximately $3.0 million of the 2008
license fees and approximately $3.0 million of the 2008 auto liability insurance
premiums were paid in advance. There were no corresponding prepayments made
during December 2008 for auto liability insurance premiums or license fees
related to 2009.
Marketable
equity securities available for sale at December 31, 2008 decreased
approximately $4.7 million as compared to December 31, 2007. During the year
ended December 31, 2008, the Company purchased approximately $4.3 million of
equity securities with the remaining increase or decrease attributable to
changes in the market value of the investments, net of sales and
other-than-temporary write-downs. These securities, combined with equity
securities purchased in prior periods, have a combined cost basis of
approximately $11.6 million and a combined fair market value of approximately
$12.5 million. The Company has developed a strategy to invest in securities from
which it expects to receive dividends that qualify for favorable tax treatment,
as well as appreciate in value. The Company anticipates that increases in the
market value of the investments combined with dividend payments will exceed
interest rates paid on borrowings for the same period. During 2008 the Company
had net unrealized pre-tax losses of approximately $2.4 million and received
dividends of approximately $818,000. The holding term of these securities
depends largely on the general economic environment, the equity markets,
borrowing rates and the Company's cash requirements.
Land at
December 31, 2008 increased approximately $2.2 million as compared to December
31, 2007. The increase is primarily related to the purchase of terminal
facilities in Laredo, Texas which were previously leased by the Company from a
related party. The purchase price was based on an appraisal performed by an
independent third party.
Structures
and improvements at December 31, 2008 increased approximately $3.8 million as
compared to December 31, 2007. The increase is primarily related to the purchase
of terminal facilities in Laredo, Texas which were previously leased by the
Company from a related party. The purchase price was based on an appraisal
performed by an independent third party.
Revenue
equipment, which generally consists of trucks, trailers, and revenue equipment
accessories such as Qualcomm™ satellite tracking units and auxiliary power
units, at December 31, 2008 increased approximately $28.1 million as compared to
December 31, 2007. The increase is primarily related to the net effect of
purchasing approximately 490 trucks and 460 trailers during 2008 while only
disposing of approximately 320 trucks and 365 trailers during 2008. Also
contributing to the increase was an increase in the cost of new truck and
trailer units as compared to the units they replaced and to the acquisition of
Qualcomm™ satellite tracking units and auxiliary power units. At December 31,
2008, approximately 200 trucks included in revenue equipment had been placed in
inactive status as they were prepared for sale or trade. The sale or trade of
these trucks in 2009 will reduce the carrying amount of the Company’s revenue
equipment and accumulated depreciation at the time of sale or
trade.
Goodwill
at December 31, 2008 decreased approximately $15.4 million as compared to
December 31, 2007. The decrease relates to the results of our annual goodwill
impairment test in which goodwill was determined to be fully impaired. The
impairment was triggered by the sustained decline of our market capitalization
caused by a decrease in our stock price during 2008. In the fourth quarter of
2008, we determined that our market capitalization compared to the carrying
amount of the Company indicated that impairment was probable and that the second
step of impairment testing was necessary. The second step of our impairment test
required the calculation of the fair value of the Company and the subsequent
allocation of the fair value to the assets and liabilities of the Company. The
excess fair value after this allocation is performed represents the implied
goodwill of the Company, if any, and was zero at December 31, 2008. As a result
we incurred an impairment expense for the entire balance of our goodwill or
$15.4 million in the fourth quarter of 2008.
Accounts
payable at December 31, 2008 decreased approximately $5.1 million as compared to
December 31, 2007. The decrease is primarily related to a decrease in the amount
of bank drafts outstanding in excess of bank balance as compared to bank drafts
outstanding at December 31, 2007. As of December 31, 2008 bank drafts of
approximately $5.3 million were reclassified to accounts payable as compared to
approximately $11.1 million reclassified as of December 31, 2007.
Accrued
expenses and other liabilities at December 31, 2008 increased approximately $5.4
million as compared to December 31, 2007. The increase is primarily related to
$6.9 million of margin account borrowings secured by the Company’s investments
in marketable equity securities. Partially offsetting the increase related to
margin account borrowings is a decrease in amounts accrued at the end of the
period for employee wages and benefits which can vary significantly throughout
the year depending on many factors, including the timing of the actual date
employees are paid in relation to the last day of the reporting
period.
Current
maturities of long-term debt at December 31, 2008 increased approximately $13.9
million as compared to December 31, 2007. The increase is primarily related to
monthly payments due within the next twelve months resulting from installment
note borrowings of approximately $51.7 million during 2008 for the purchase of
revenue equipment.
Long-term
debt at December 31, 2008 decreased approximately $8.7 million as compared to
December 31, 2007. The decrease is primarily related to a decrease in amounts
payable on the Company’s lines of credit as of December 31, 2008 when compared
to amounts payable as of December 31, 2007. During 2008, the Company began to
finance revenue equipment purchases primarily with installment notes instead of
line of credit borrowings. Also, one of the Company’s credit lines matured in
June 2008 and was not renewed by the Company.
Treasury
stock at December 31, 2008 increased approximately $3.9 million as the Company
purchased 428,500 shares of its common stock at various times throughout 2008 as
part of stock repurchase plans approved by the Company’s Board of
Directors.
For 2009,
we expect to purchase approximately 38 new trucks and approximately 58 trailers
while continuing to sell or trade older equipment. During 2008, and continuing
through 2009, the Company began purchasing and installing auxiliary power units
in order to minimize fuel consumption by trucks that are running at idle. During
2009, we expect to purchase approximately 700 of these auxiliary power units.
Management expects that proceeds from the sale or trade of older equipment
during 2009 will exceed capital expenditures during 2009 by approximately $1.0
million. Management believes we will be able to finance our near term needs for
working capital over the next twelve months, as well as acquisitions of revenue
equipment during such period, with cash balances, cash flows from operations,
and borrowings believed to be available from financing sources. We will continue
to have significant capital requirements over the long-term, which may require
us to incur debt or seek additional equity capital. The availability of
additional capital will depend upon prevailing market conditions, the market
price of our common stock and several other factors over which we have limited
control, as well as our financial condition and results of operations.
Nevertheless, based on our anticipated future cash flows and sources of
financing that we expect will be available to us, we do not expect that we will
experience any significant liquidity constraints in the foreseeable
future.
Contractual
Obligations and Commercial Commitments
The
following table sets forth the Company's contractual obligations and commercial
commitments as of December 31, 2008:
|
Payments due by period
(in
thousands)
|
||||||||||||||||||||
|
Total
|
Less
than
1 year
|
1
to 3
Years
|
3
to 5
Years
|
More
than
5 Years
|
||||||||||||||||
|
Long-term
debt (1)
|
$ | 55,505 | $ | 18,079 | $ | 33,473 | $ | 3,953 | $ | - | ||||||||||
|
Operating
leases (2)
|
917 | 256 | 389 | 272 | - | |||||||||||||||
|
Total
|
$ | 56,422 | $ | 18,335 | $ | 33,862 | $ | 4,225 | $ | - | ||||||||||
|
(1)
|
Including
interest.
|
|
(2)
|
Represents
building, facilities, and drop yard operating
leases.
|
Off-Balance
Sheet Arrangements
The
Company has no off-balance sheet arrangements as defined in Regulation S-K 303
(a)(4)(ii) issued by the Securities and Exchange Commission.
Insurance
With
respect to physical damage for trucks, cargo loss and auto liability, the
Company maintains insurance coverage to protect it from certain business risks.
These policies are with various carriers and have per occurrence deductibles of
$2,500, $10,000 and $2,500 respectively. The Company maintains workers’
compensation coverage in Arkansas, Ohio, Oklahoma, Mississippi, and Florida with
a $500,000 self-insured retention and a $500,000 per occurrence excess policy.
The Company has elected to opt out of workers' compensation coverage in Texas
and is providing coverage through the P.A.M. Texas Injury Plan. The Company has
reserved for estimated losses to pay such claims as well as claims incurred but
not yet reported. The Company has not experienced any adverse trends involving
differences in claims experienced versus claims estimates for workers’
compensation claims. Letters of credit aggregating $353,000 and certificates of
deposit totaling $200,000 are held by banks as security for workers’
compensation claims. The Company self insures for employee health claims with a
stop loss of $225,000 per covered employee per year and estimates its liability
for claims incurred but not reported.
Inflation
Inflation
has an impact on most of our operating costs. Recently, the effect of inflation
has been minimal.
Adoption
of Accounting Policies
See “Item
8. Financial Statements and Supplementary Data, Note 1 to the Consolidated
Financial Statements - Recent Accounting Pronouncements.”
Critical
Accounting Policies
The
Company's significant accounting policies are described in Note 1 to the
Consolidated Financial Statements. The policies described below represent those
that are broadly applicable to the Company's operations and involve additional
management judgment due to the sensitivity of the methods, assumptions and
estimates necessary in determining the related amounts.
Accounts Receivable. We
continuously monitor collections and payments from our customers, third parties
and vendors and maintain a provision for estimated credit losses based upon our
historical experience and any specific collection issues that we have
identified. While such credit losses have historically been within our
expectations and the provisions established, we cannot guarantee that we will
continue to experience the same credit loss rates that we have in the
past.
Property and equipment.
Management must use its judgment in the selection of estimated useful lives and
salvage values for purposes of depreciating trucks and trailers which in some
cases do not have guaranteed residual values. Estimates of salvage value at the
expected date of trade-in or sale are based on the expected market values of
equipment at the time of disposal which, in many cases include guaranteed
residual values by the manufacturers.
Self Insurance. The Company
is self-insured for health and workers' compensation benefits up to certain
stop-loss limits. Such costs are accrued based on known claims and an estimate
of incurred, but not reported (IBNR) claims. IBNR claims are estimated using
historical lag information and other data either provided by outside claims
administrators or developed internally. This estimation process is subjective,
and to the extent that future actual results differ from original estimates,
adjustments to recorded accruals may be necessary.
Revenue Recognition. Revenue
is recognized in full upon completion of delivery to the receiver's location.
For freight in transit at the end of a reporting period, the Company recognizes
revenue prorata based on relative transit time completed as a portion of the
estimated total transit time. Expenses are recognized as incurred.
Prepaid Tires. Tires
purchased with revenue equipment are capitalized as a cost of the related
equipment. Replacement tires are included in prepaid expenses and deposits and
are amortized over a 24-month period. Costs related to tire recapping are
expensed when incurred.
Income Taxes. Significant
management judgment is required to determine the provision for income taxes and
to determine whether deferred income tax assets will be realized in full or in
part. Deferred income tax assets and liabilities are measured using enacted tax
rates expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. When it is more likely that
all or some portion of specific deferred income tax assets will not be realized,
a valuation allowance must be established for the amount of deferred income tax
assets that are determined not to be realizable. A valuation allowance for
deferred income tax assets has not been deemed to be necessary. Accordingly, if
the facts or financial circumstances were to change, thereby impacting the
likelihood of realizing the deferred income tax assets, judgment would need to
be applied to determine the amount of valuation allowance required in any given
period.
Effective
January 1, 2007, the Company adopted the provisions of FIN 48. FIN 48 contains a
two-step approach to recognizing and measuring uncertain tax positions accounted
for in accordance with SFAS No. 109. The first step is to evaluate the tax
position for recognition by determining if the weight of available evidence
indicates it is more likely than not that the position will be sustained on
audit, including resolution of related appeals or litigation processes, if any.
The second step is to measure the tax benefit as the largest amount which is
more than 50% likely of being realized upon ultimate settlement. We
consider many factors when evaluating and estimating
our tax
positions and tax benefits, which may require periodic adjustments and which may
not accurately anticipate actual outcomes.
Business Combinations and
Goodwill. Upon acquisition of an entity, the cost of the acquired entity
must be allocated to assets and liabilities acquired. Identification of
intangible assets, if any, that meet certain recognition criteria is necessary.
This identification and subsequent valuation requires significant judgments. The
carrying value of goodwill is tested annually and as of December 31, 2008 the
Company determined that the recorded amount of goodwill was fully impaired. The
impairment testing requires an estimate of the value of the Company as a whole,
as the Company has determined it only has one reporting unit as defined in
Statement of Financial Accounting Standards No. 142, “Goodwill and Other
Intangible Assets.”
Item 7A. Quantitative and Qualitative Disclosures about Market
Risk.
Our
primary market risk exposures include equity price risk, interest rate risk, and
commodity price risk (the price paid to obtain diesel fuel for our trucks). The
potential adverse impact of these risks are discussed below.
The
following sensitivity analyses do not consider the effects that an adverse
change may have on the overall economy nor do they consider additional actions
we may take to mitigate our exposure to such changes. Actual results of changes
in prices or rates may differ materially from the hypothetical results described
below.
Equity
Price Risk
We hold
certain actively traded marketable equity securities which subjects the Company
to fluctuations in the fair market value of its investment portfolio based on
current market price. The recorded value of marketable equity securities
decreased to $12.5 million at December 31, 2008 from $17.3 million at December
31, 2007. The decrease includes additional purchases, net of sales or
write-downs, of approximately $2.4 million during 2008 and a decrease in the
fair market value of approximately $2.4 million during 2008. A 10% decrease in
the market price of our marketable equity securities would cause a corresponding
10% decrease in the carrying amounts of these securities, or approximately $1.3
million. For additional information with respect to the marketable equity
securities, see Note 3 to our consolidated financial statements.
Interest
Rate Risk
Our line
of credit bears interest at a floating rate equal to LIBOR plus a fixed
percentage. Accordingly, changes in LIBOR, which are effected by changes in
interest rates, will affect the interest rate on, and therefore our costs under,
the line of credit. Assuming $5.0 million of variable rate debt was outstanding
under our line of credit for a full fiscal year, a hypothetical 100 basis point
increase in LIBOR would result in approximately $50,000 of additional interest
expense.
Commodity
Price Risk
Prices
and availability of all petroleum products are subject to political, economic
and market factors that are generally outside of our control. Accordingly, the
price and availability of diesel fuel, as well as other petroleum products, can
be unpredictable. Because our operations are dependent upon diesel fuel,
significant increases in diesel fuel costs could materially and adversely affect
our results of operations and financial condition. Based upon our 2008 fuel
consumption, a 10% increase in the average annual price per gallon of diesel
fuel would increase our annual fuel expenses by $14.1 million.
Item 8. Financial Statements and Supplementary Data.
The
following statements are filed with this report:
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM
Board of
Directors and Shareholders
P.A.M.
Transportation Services, Inc. and Subsidiaries
We have
audited the accompanying consolidated balance sheets of P.A.M. Transportation
Services, Inc. (a Delaware corporation) and subsidiaries (collectively the
Company) as of December 31, 2008 and 2007, and the related consolidated
statements of operations, stockholders’ equity and other comprehensive income
(loss), and cash flows for each of the three years in the period ended December
31, 2008. These
financial statements are the responsibility of the Company’s management. Our responsibility is
to express an opinion on these financial statements based on our
audits.
We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (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, 2008 and 2007, and the
results of their operations and their cash flows for each of the three years in
the period ended December 31, 2008 in conformity with accounting principles
generally accepted in the United States of America.
We also
have audited, in accordance with the standards of the Public Company Accounting
Oversight Board (United States), P.A.M. Transportation Services, Inc. and
subsidiaries’ internal control over financial reporting as of December 31, 2008,
based on criteria established in Internal Control—Integrated
Framework issued by the Committee of Sponsoring Organizations of the
Treadway Commission (COSO)
and our report dated March 6, 2009 expressed an unqualified opinion
thereon.
/s/ GRANT
THORNTON LLP
Tulsa,
Oklahoma
March 6,
2009
|
P.A.M. TRANSPORTATION SERVICES, INC. AND
SUBSIDIARIES
CONSOLIDATED
BALANCE SHEETS
DECEMBER
31, 2008 AND 2007
(in
thousands, except share and per share data)
|
||||||||
|
ASSETS
|
2008
|
2007
|
||||||
|
CURRENT
ASSETS:
|
||||||||
|
Cash
and cash equivalents
|
$ | 858 | $ | 407 | ||||
|
Accounts
receivable—net:
|
||||||||
|
Trade
|
43,815 | 58,397 | ||||||
|
Other
|
1,088 | 5,349 | ||||||
|
Inventories
|
858 | 905 | ||||||
|
Prepaid
expenses and deposits
|
9,443 | 14,978 | ||||||
|
Marketable
equity securities
|
12,540 | 17,269 | ||||||
|
Income
taxes refundable
|
524 | 2,199 | ||||||
|
Total
current assets
|
69,126 | 99,504 | ||||||
|
PROPERTY
AND EQUIPMENT:
|
||||||||
|
Land
|
4,916 | 2,674 | ||||||
|
Structures
and improvements
|
13,596 | 9,795 | ||||||
|
Revenue
equipment
|
320,188 | 292,133 | ||||||
|
Office
furniture and equipment
|
7,606 | 7,482 | ||||||
|
Total
property and equipment
|
346,306 | 312,084 | ||||||
|
Accumulated
depreciation
|
(125,742 | ) | (107,841 | ) | ||||
|
Net
property and equipment
|
220,564 | 204,243 | ||||||
|
OTHER
ASSETS:
|
||||||||
|
Goodwill
|
- | 15,413 | ||||||
|
Non-compete
agreements, net
|
- | 17 | ||||||
|
Other
|
671 | 727 | ||||||
|
Total
other assets
|
671 | 16,157 | ||||||
|
TOTAL
ASSETS
|
$ | 290,361 | $ | 319,904 | ||||
|
(Continued)
|
||||||||
|
See
notes to consolidated financial statements.
|
||||||||
|
CONSOLIDATED
BALANCE SHEETS
DECEMBER
31, 2008 AND 2007
(in
thousands, except share and per share data)
|
||||||||
|
LIABILITIES
AND SHAREHOLDERS' EQUITY
|
2008
|
2007
|
||||||
|
CURRENT
LIABILITIES:
|
||||||||
|
Accounts
payable
|
$ | 20,269 | $ | 25,346 | ||||
|
Accrued
expenses and other liabilities
|
15,684 | 10,323 | ||||||
|
Current
maturities of long—term debt
|
15,928 | 2,065 | ||||||
|
Deferred
income taxes—current
|
157 | 5,117 | ||||||
|
Total
current liabilities
|
52,038 | 42,851 | ||||||
|
Long-term
debt—less current portion
|
35,492 | 44,172 | ||||||
|
Deferred
income taxes—less current portion
|
47,354 | 53,504 | ||||||
|
Total
liabilities
|
134,884 | 140,527 | ||||||
|
COMMITMENTS
AND CONTINGENCIES
|
||||||||
|
SHAREHOLDERS'
EQUITY
|
||||||||
|
Preferred
stock, $.01 par value, 10,000,000 shares
authorized;
none issued
|
- | - | ||||||
|
Common
stock, $.01 par value, 40,000,000 shares
authorized;
11,368,207 and 11,368,207 shares issued;
9,409,607
and 9,838,107 shares outstanding at
December
31, 2008 and December 31, 2007, respectively
|
114 | 114 | ||||||
|
Additional
paid-in capital
|
77,659 | 77,557 | ||||||
|
Accumulated
other comprehensive income
|
611 | 1,921 | ||||||
|
Treasury
stock, at cost; 1,958,600 and 1,530,100
shares,
respectively
|
(29,127 | ) | (25,200 | ) | ||||
|
Retained
earnings
|
106,220 | 124,985 | ||||||
|
Total
shareholders’ equity
|
155,477 | 179,377 | ||||||
|
TOTAL
LIABILITIES AND SHAREHOLDERS' EQUITY
|
$ | 290,361 | $ | 319,904 | ||||
|
(Concluded)
|
||||||||
|
See
notes to consolidated financial statements.
|
||||||||
|
P.A.M. TRANSPORTATION SERVICES, INC. AND
SUBSIDIARIES
CONSOLIDATED
STATEMENTS OF OPERATIONS
YEARS
ENDED DECEMBER 31, 2008, 2007 AND 2006
(in
thousands, except per share data)
|
||||||||||||
|
2008
|
2007
|
2006
|
||||||||||
|
OPERATING
REVENUES:
|
||||||||||||
|
Revenue,
before fuel surcharge
|
$ | 323,272 | $ | 351,701 | $ | 351,373 | ||||||
|
Fuel
surcharge
|
83,451 | 57,140 | 48,896 | |||||||||
|
Total
operating revenues
|
406,723 | 408,841 | 400,269 | |||||||||
|
OPERATING
EXPENSES AND COSTS:
|
||||||||||||
|
Salaries,
wages and benefits
|
123,961 | 135,606 | 127,539 | |||||||||
|
Fuel
expense
|
140,531 | 114,242 | 97,286 | |||||||||
|
Rents
and purchased transportation
|
39,887 | 38,718 | 43,844 | |||||||||
|
Depreciation
and amortization
|
37,477 | 38,759 | 33,929 | |||||||||
|
Goodwill
impairment charge
|
15,413 | - | - | |||||||||
|
Operating
supplies and expenses
|
30,514 | 30,845 | 25,682 | |||||||||
|
Operating
taxes and licenses
|
15,937 | 17,520 | 16,421 | |||||||||
|
Insurance
and claims
|
16,018 | 17,591 | 16,389 | |||||||||
|
Communications
and utilities
|
2,869 | 3,113 | 2,642 | |||||||||
|
Other
|
5,119 | 7,130 | 5,426 | |||||||||
|
Loss
(gain) on disposition of equipment
|
952 | (48 | ) | 47 | ||||||||
|
Total
operating expenses and costs
|
428,678 | 403,476 | 369,205 | |||||||||
|
OPERATING
(LOSS) INCOME
|
(21,955 | ) | 5,365 | 31,064 | ||||||||
|
NON-OPERATING
(EXPENSE) INCOME
|
(4,996 | ) | 1,707 | 448 | ||||||||
|
INTEREST
EXPENSE
|
(2,429 | ) | (2,453 | ) | (1,475 | ) | ||||||
|
(LOSS)
INCOME BEFORE INCOME TAXES
|
(29,380 | ) | 4,619 | 30,037 | ||||||||
|
FEDERAL
& STATE INCOME TAX (BENEFIT) EXPENSE:
|
||||||||||||
|
Current
|
314 | 217 | 9,768 | |||||||||
|
Deferred
|
(10,929 | ) | 1,749 | 2,305 | ||||||||
|
Total
federal & state income tax (benefit) expense
|
(10,615 | ) | 1,966 | 12,073 | ||||||||
|
NET
(LOSS) INCOME
|
$ | (18,765 | ) | $ | 2,653 | $ | 17,964 | |||||
|
(LOSS)
EARNINGS PER COMMON SHARE:
|
||||||||||||
|
Basic
|
$ | (1.94 | ) | $ | 0.26 | $ | 1.74 | |||||
|
Diluted
|
$ | (1.94 | ) | $ | 0.26 | $ | 1.74 | |||||
|
AVERAGE
COMMON SHARES OUTSTANDING:
|
||||||||||||
|
Basic
|
9,683 | 10,238 | 10,296 | |||||||||
|
Diluted
|
9,683 | 10,239 | 10,302 | |||||||||
|
See
notes to consolidated financial statements.
|
||||||||||||
|
P.A.M. TRANSPORTATION SERVICES, INC. AND
SUBSIDIARIES
CONSOLIDATED
STATEMENTS OF STOCKHOLDERS’ EQUITY AND OTHER COMPREHENSIVE INCOME
(LOSS)
YEARS
ENDED DECEMBER 31, 2008, 2007 AND 2006
(in
thousands)
|
||||||||||||||||||||||||||||||||
|
Common Stock
Shares
/ Amount
|
Additional
Paid-In Capital
|
Other
Comprehensive Income (Loss)
|
Accumulated
Other Comprehensive Income
|
Treasury
Stock
|
Retained
Earnings
|
Total
|
||||||||||||||||||||||||||
|
BALANCE—
January 1, 2006
|
10,285 | $ | 113 | $ | 76,429 | $ | 1,721 | $ | (17,869 | ) | $ | 104,368 | $ | 164,762 | ||||||||||||||||||
|
Components
of comprehensive income:
|
||||||||||||||||||||||||||||||||
|
Net
earnings
|
$ | 17,964 | 17,964 | 17,964 | ||||||||||||||||||||||||||||
|
Other
comprehensive gain:
|
||||||||||||||||||||||||||||||||
|
Unrealized
gain on hedge,
|
||||||||||||||||||||||||||||||||
|
net
of tax of $13
|
19 | 19 | 19 | |||||||||||||||||||||||||||||
|
Unrealized
gain on marketable
|
||||||||||||||||||||||||||||||||
|
securities,
net of tax of $923
|
1,402 | 1,402 | 1,402 | |||||||||||||||||||||||||||||
|
Total
comprehensive income
|
$ | 19,385 | ||||||||||||||||||||||||||||||
|
Exercise
of stock options-shares
|
||||||||||||||||||||||||||||||||
|
issued
including tax benefits
|
18 | 1 | 369 | 370 | ||||||||||||||||||||||||||||
|
Share-based
compensation
|
511 | 511 | ||||||||||||||||||||||||||||||
|
BALANCE—
December 31, 2006
|
10,303 | 114 | 77,309 | 3,142 | (17,869 | ) | 122,332 | 185,028 | ||||||||||||||||||||||||
|
Components
of comprehensive income:
|
||||||||||||||||||||||||||||||||
|
Net
earnings
|
$ | 2,653 | 2,653 | 2,653 | ||||||||||||||||||||||||||||
|
Other
comprehensive gain:
|
||||||||||||||||||||||||||||||||
|
Realized
gain on marketable
|
||||||||||||||||||||||||||||||||
|
securities,
net of tax of $241
|
(359 | ) | (359 | ) | (359 | ) | ||||||||||||||||||||||||||
|
Unrealized
loss on marketable
|
||||||||||||||||||||||||||||||||
|
securities,
net of tax of $(448)
|
(862 | ) | (862 | ) | (862 | ) | ||||||||||||||||||||||||||
|
Total
comprehensive income
|
$ | 1,432 | ||||||||||||||||||||||||||||||
|
Treasury
stock repurchases
|
(471 | ) | (7,331 | ) | (7,331 | ) | ||||||||||||||||||||||||||
|
Exercise
of stock options-shares
|
||||||||||||||||||||||||||||||||
|
issued
including tax benefits
|
6 | 125 | 125 | |||||||||||||||||||||||||||||
|
Share-based
compensation
|
123 | 123 | ||||||||||||||||||||||||||||||
|
BALANCE—
December 31, 2007
|
9,838 | 114 | 77,557 | 1,921 | (25,200 | ) | 124,985 | 179,377 | ||||||||||||||||||||||||
|
Components
of comprehensive income:
|
||||||||||||||||||||||||||||||||
|
Net
loss
|
$ | (18,765 | ) | (18,765 | ) | (18,765 | ) | |||||||||||||||||||||||||
|
Other
comprehensive gain:
|
||||||||||||||||||||||||||||||||
|
Realized
loss on marketable
|
||||||||||||||||||||||||||||||||
|
securities,
net of tax of $(6)
|
11 | 11 | 11 | |||||||||||||||||||||||||||||
|
Unrealized
loss on marketable
|
||||||||||||||||||||||||||||||||
|
securities,
net of tax of $(1,072)
|
(1,321 | ) | (1,321 | ) | (1,321 | ) | ||||||||||||||||||||||||||
|
Total
comprehensive income (loss)
|
$ | (20,075 | ) | |||||||||||||||||||||||||||||
|
Treasury
stock repurchases
|
(428 | ) | (3,927 | ) | (3,927 | ) | ||||||||||||||||||||||||||
|
Share-based
compensation
|
102 | 102 | ||||||||||||||||||||||||||||||
|
BALANCE—
December 31, 2008
|
9,410 | $ | 114 | $ | 77,659 | $ | 611 | $ | (29,127 | ) | $ | 106,220 | $ | 155,477 | ||||||||||||||||||
|
See
notes to consolidated financial statements.
|
||||||||||||||||||||||||||||||||
|
P.A.M. TRANSPORTATION SERVICES, INC. AND
SUBSIDIARIES
CONSOLIDATED
STATEMENTS OF CASH FLOWS
YEARS
ENDED DECEMBER 31, 2008, 2007 AND 2006
(in
thousands)
|
||||||||||||
|
2008
|
2007
|
2006
|
||||||||||
|
OPERATING
ACTIVITIES:
|
||||||||||||
|
Net
(loss) income
|
$ | (18,765 | ) | $ | 2,653 | $ | 17,964 | |||||
|
Adjustments
to reconcile net (loss) income to net cash provided by operating
activities:
|
||||||||||||
|
Depreciation
and amortization
|
37,477 | 38,759 | 33,929 | |||||||||
|
Goodwill
impairment charge
|
15,413 | - | - | |||||||||
|
Bad
debt expense
|
295 | 573 | 310 | |||||||||
|
Stock
compensation—net of excess tax benefits
|
102 | 118 | 441 | |||||||||
|
Non-compete
agreement amortization—net of payments
|
(17 | ) | - | - | ||||||||
|
Provision
for deferred income taxes
|
(10,929 | ) | 1,749 | 2,305 | ||||||||
|
Reclassification
of unrealized loss on marketable equity securities
|
5,227 | 95 | 120 | |||||||||
|
Gain
(loss) on sale of marketable equity securities
|
656 | (1,071 | ) | (30 | ) | |||||||
|
(Gain)
loss on sale or disposal of equipment
|
952 | (48 | ) | 47 | ||||||||
|
Changes
in operating assets and liabilities:
|
||||||||||||
|
Accounts
receivable
|
14,505 | 2,585 | 3,685 | |||||||||
|
Prepaid
expenses, inventories, and other assets
|
5,639 | (113 | ) | 440 | ||||||||
|
Income
taxes refundable (payable)
|
2,574 | (1,696 | ) | (202 | ) | |||||||
|
Trade
accounts payable
|
(11,007 | ) | 1,089 | 2,219 | ||||||||
|
Accrued
expenses
|
(1,477 | ) | 496 | (525 | ) | |||||||
|
Net
cash provided by operating activities
|
40,645 | 45,189 | 60,703 | |||||||||
|
INVESTING
ACTIVITIES:
|
||||||||||||
|
Purchases
of property and equipment
|
(60,218 | ) | (76,166 | ) | (53,514 | ) | ||||||
|
Proceeds
from disposition of equipment
|
11,398 | 22,273 | 11,987 | |||||||||
|
Changes
in restricted cash
|
4,042 | (4,073 | ) | - | ||||||||
|
Sales
of marketable equity securities
|
611 | 1,622 | 85 | |||||||||
|
Purchases
of marketable equity securities
|
(4,154 | ) | (5,389 | ) | (1,288 | ) | ||||||
|
Net
cash used in investing activities
|
(48,321 | ) | (61,733 | ) | (42,730 | ) | ||||||
|
FINANCING
ACTIVITIES:
|
||||||||||||
|
Borrowings
under line of credit
|
546,144 | 508,076 | 446,221 | |||||||||
|
Repayments
under line of credit
|
(585,592 | ) | (484,322 | ) | (463,967 | ) | ||||||
|
Borrowings
of long-term debt
|
53,470 | 2,067 | 1,996 | |||||||||
|
Repayments
of long-term debt
|
(8,839 | ) | (2,704 | ) | (2,682 | ) | ||||||
|
Borrowings
under margin account
|
19,800 | - | - | |||||||||
|
Repayments
under margin account
|
(12,929 | ) | - | - | ||||||||
|
Repurchases
of common stock
|
(3,927 | ) | (7,331 | ) | - | |||||||
|
Stock
compensation excess tax benefits
|
- | 5 | 70 | |||||||||
|
Exercise
of stock options
|
- | 120 | 300 | |||||||||
|
Net
cash provided by (used in) financing activities
|
8,127 | 15,911 | (18,062 | ) | ||||||||
|
NET
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
|
451 | (633 | ) | (89 | ) | |||||||
|
CASH
AND CASH EQUIVALENTS—Beginning of year
|
407 | 1,040 | 1,129 | |||||||||
|
CASH
AND CASH EQUIVALENTS—End of year
|
$ | 858 | $ | 407 | $ | 1,040 | ||||||
|
SUPPLEMENTAL
DISCLOSURES OF CASH FLOW INFORMATION—
|
||||||||||||
|
Cash
paid during the period for:
|
||||||||||||
|
Interest
|
$ | 2,430 | $ | 2,410 | $ | 1,481 | ||||||
|
Income
taxes
|
$ | 303 | $ | 1,976 | $ | 10,061 | ||||||
|
NONCASH
INVESTING AND FINANCING ACTIVITIES—
|
||||||||||||
|
Purchases
of revenue equipment included in accounts payable
|
$ | 5,951 | $ | - | $ | 14,276 | ||||||
|
See
notes to consolidated financial statements.
|
||||||||||||
P.A.M. TRANSPORTATION SERVICES, INC. AND
SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS
ENDED DECEMBER 31, 2008, 2007, AND 2006
|
1.
|
ACCOUNTING
POLICIES
|
Description of
Business and Principles of Consolidation–P.A.M. Transportation Services,
Inc. (the “Company”), through its subsidiaries, operates as a truckload
transportation and logistics company.
The
consolidated financial statements include the accounts of the Company and its
wholly owned operating subsidiaries: P.A.M. Transport, Inc., P.A.M. Dedicated
Services, Inc., Choctaw Express, Inc., Allen Freight Services, Inc., Decker
Transport Co., Inc., McNeill Express, Inc., T.T.X., Inc., Transcend Logistics,
Inc., and East Coast Transport and Logistics, LLC. The following subsidiaries
were inactive during all periods presented: P.A.M. International, Inc., P.A.M.
Logistics Services, Inc., Choctaw Brokerage, Inc., P.A.M. Canada, Inc. and S
& L Logistics, Inc. All significant intercompany accounts and transactions
have been eliminated.
Use of
Estimates–The preparation of financial statements in conformity with
accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities, disclosure of any contingent assets and
liabilities at the financial statement date and reported amounts of revenue and
expenses during the reporting period. The Company periodically reviews these
estimates and assumptions. The Company's estimates were based on its historical
experience and various other assumptions that the Company believes to be
reasonable under the circumstances. Actual results could differ from those
estimates.
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.
Restricted
Cash– Restricted cash consists of cash proceeds from the sale of
trucks and trailers under our like-kind exchange (“LKE”) tax program. See
Note 11, “Federal and State Income Taxes,” for a discussion of the
Company’s LKE tax program. We classify restricted cash as a current asset within
“Accounts receivable-other” as the exchange process must be completed within 180
days in order to qualify for income tax deferral treatment. The changes in
restricted cash balances are reflected as an investing activity in our
Consolidated Statements of Cash Flows as they relate to the sales and purchases
of revenue equipment.
Bank
Overdrafts–The Company classifies bank overdrafts in current liabilities
as an accounts payable and does not offset other positive bank account balances
located at the same or other financial institutions. Bank overdrafts generally
represent checks written that have not yet cleared the Company’s bank accounts.
The majority of the Company’s bank accounts are zero balance accounts that are
funded at the time items clear against the account by drawings against a line of
credit, therefore the outstanding checks represent bank overdrafts. Because the
recipients of these checks have generally not yet received payment, the Company
continues to classify bank overdrafts as accounts payable. Bank overdrafts are
classified as changes in accounts payable in the cash flows from operating
activities section of the Company’s Consolidated Statement of Cash Flows. Bank
overdrafts as of December 31, 2008 and 2007 were approximately $5,312,000 and
$11,088,000, respectively.
Accounts
Receivable Other–The components of accounts receivable other consist
primarily of amounts held by a third-party qualified intermediary that the
Company uses to effectuate deferral of income taxes on gains from sales of
trucks and trailers under the Company’s LKE tax program. Also included are
amounts representing company driver advances, owner operator advances and
equipment manufacturer warranties. Advances receivable from company drivers as
of December 31, 2008 and 2007, were approximately $345,000 and $483,000,
respectively.
Accounts
Receivable Allowance–An allowance is provided for accounts receivable
based on historical collection experience. Additionally, management considers
any accounts individually known to exhibit characteristics indicating a
collection problem.
Marketable Equity
Securities–Marketable equity securities are classified by the Company as
either available for sale or trading. Securities classified as available for
sale are carried at market value with unrealized gains and losses recognized in
accumulated other comprehensive income in the statements of stockholders’
equity. Securities classified as trading are carried at market value with
unrealized gains and losses recognized in the statements of operations. Realized
gains and losses are computed utilizing the specific identification
method.
Impairment of
Long-Lived Assets–The Company reviews its long-lived assets for
impairment whenever events or changes in circumstances indicate that the
carrying amount of a long-lived asset may not be recoverable. An impairment loss
would be recognized if the carrying amount of the long-lived asset is not
recoverable, and it exceeds its fair value. For long-lived assets classified as
held and used, if the carrying value of the long-lived asset exceeds the sum of
the future net cash flows, it is not recoverable. The Company does not
separately identify assets by subsidiary, as trucks and trailers are routinely
transferred from one division to another. As a result, none of the Company's
long-lived assets have identifiable cash flows from use that are largely
independent of the cash flows of other assets and liabilities. Thus, the asset
group used to assess impairment would include all assets and liabilities of the
Company.
Property and
Equipment–Property and equipment is recorded at cost, less accumulated
depreciation. 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.
Depreciation is recognized over the estimated asset life, considering the
estimated salvage value of the asset. Such salvage values are based on estimates
using expected market values for used equipment and the estimated time of
disposal which, in many cases include guaranteed residual values by the
manufacturers. Gains and losses are reflected in the year of disposal. The
following is a table reflecting estimated ranges of asset useful lives by major
class of depreciable assets:
|
Asset
Class
|
Estimated
Asset Life
|
|
Service
vehicles
|
3-5
years
|
|
Office
furniture and equipment
|
3-7
years
|
|
Revenue
equipment
|
3-10
years
|
|
Structure
and improvements
|
5-40
years
|
Prepaid
Tires–Tires purchased with revenue equipment are capitalized as a cost of
the related equipment. Replacement tires are included in prepaid expenses and
deposits and are amortized over a 24-month period. Amounts paid for the
recapping of tires are expensed when incurred.
Advertising
Expense–Advertising costs are expensed as incurred and totaled
approximately $307,000, $605,000 and $550,000 for the years ended December 31,
2008, 2007, and 2006, respectively.
Repairs and
Maintenance–Repairs and maintenance costs are expensed as
incurred.
Goodwill–The
Company follows the provisions of Statement of Financial Accounting Standards
No. 142, Goodwill and Other
Intangible Assets, (“SFAS No. 142”), which requires the Company to assess
acquired goodwill for impairment at least annually in the absence of an
indicator of possible impairment, and immediately upon an indicator of possible
impairment. The Company has selected December 31 for its annual impairment
testing and determined as of December 31, 2008 that there was
impairment.
Self Insurance
Liability—A liability is recognized for known health, workers’
compensation, cargo damage, property damage and auto liability damage. An
estimate of the incurred but not reported claims for each type of liability is
made based on historical claims made, estimated frequency of occurrence, and
considering changing factors that contribute to the overall cost of
insurance.
Income
Taxes–The Company applies the provisions of Statement of Financial
Accounting Standards No. 109, Accounting for Income Taxes
(“SFAS No. 109”). Under this method, deferred tax liabilities and assets are
determined based on the difference between the financial reporting basis and the
tax reporting basis of assets and liabilities using enacted tax rates. In June
2006, the Financial Accounting Standards Board (“FASB”) issued Interpretation
48, Accounting for Uncertainty
in Income Taxes-an interpretation of FASB Statement No. 109 (“FIN 48”),
which became effective for the Company on January 1, 2007. FIN 48 addressed the
determination of how tax benefits claimed or expected to be claimed on a tax
return should be recorded in the financial statements. Under FIN 48, the Company
may recognize the tax benefit from an uncertain tax position only if it is more
likely than not that the position will be sustained on examination by taxing
authorities, based on the technical merits of the position. The application of
income tax law to multi-jurisdictional operations such as those performed by the
Company, are inherently complex. Laws and regulations in this area are
voluminous and often ambiguous. As such, we may be required to make subjective
assumptions and judgments regarding our income tax exposures. Interpretations of
and guidance surrounding income tax laws and regulations may change over time
which could cause changes in our assumptions and judgments that could materially
affect amounts recognized in the consolidated financial statements.
Revenue
Recognition–Revenue is recognized in full upon completion of delivery to
the receiver’s location. For freight in transit at the end of a reporting
period, the Company recognizes revenue pro rata based on relative transit miles
completed as a portion of the estimated total transit miles. Expenses are
recognized as incurred.
Share-Based
Compensation–The Company adopted Statement of Financial Accounting
Standards No. 123(R), Share-Based Payments,
effective January 1, 2006, utilizing the “modified prospective” method as
described in the standard. Under the “modified prospective” method, compensation
cost is recognized for all share-based payments granted after the effective date
and for all unvested awards granted prior to the effective date. Prior to
adoption, the Company accounted for share-based payments under the recognition
and measurement principles of Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to
Employees, and related interpretations. The Company uses historical
volatility when estimating the expected volatility of its share price. For
additional information with respect to share-based compensation, see Note 12 to
our consolidated financial statements.
Earnings Per
Share–The Company computes and presents earnings per share (“EPS”) in
accordance with Statement of Financial Accounting Standards No. 128, Earnings per Share (“SFAS No.
128”). The difference between the Company's weighted-average shares outstanding
and diluted shares outstanding is due to the dilutive effect of stock options
for all periods presented. See Note 13 for computation of diluted
EPS.
Fair Value
Measurements–The Company adopted the provisions of Statement of Financial
Accounting Standards No. 157, Fair Value Measurements
(“SFAS No. 157”) effective January 1, 2008 for financial assets and liabilities
that are measured at fair value within the financial statements on a recurring
basis. SFAS No. 157 defines fair value as the exchange price that would be
received for an asset or paid to transfer a liability (an exit price) in the
principal or most advantageous market for the asset or liability in an
orderly
transaction
between market participants on the measurement date. SFAS No. 157 also
establishes a fair value hierarchy which requires an entity to maximize the use
of observable inputs and minimize the use of unobservable inputs when measuring
fair value. For additional information with respect to fair value measurements,
see Note 16 to our consolidated financial statements.
Business Segment
and Concentrations of Credit Risk–The Company operates in one business
segment, motor carrier operations. The Company provides truckload transportation
services as well as brokerage and logistics services to customers throughout the
United States and portions of Canada and Mexico. Truckload transportation
services revenues, excluding fuel surcharges, represented 89.6%, 90.4%, and
87.8% of total revenues, excluding fuel surcharges, for the twelve months ended
December 31, 2008, 2007, and 2006, respectively. Remaining revenues, excluding
fuel surcharges, for each respective year were generated by brokerage and
logistics services. The Company performs ongoing credit evaluations and
generally does not require collateral from its customers. The Company maintains
reserves for potential credit losses. In view of the concentration of the
Company’s revenues and accounts receivable among a limited number of customers
within the automobile industry, the financial health of this industry is a
factor in the Company’s overall evaluation of accounts receivable.
Recent Accounting
Pronouncements–In May 2008, the Financial Accounting Standards Board
(“FASB”) issued Statement of Financial Accounting Standards No. 162, The Hierarchy of Generally Accepted
Accounting Principles (“GAAP”) (“SFAS No. 162”). SFAS No. 162 provides a
consistent framework for determining what accounting principles should be used
when preparing U.S. GAAP financial statements. Previous guidance did not
properly rank the accounting literature. The new standard is effective 60 days
following the Securities and Exchange Commission’s (“SEC”) approval of the
Public Company Accounting Oversight Board amendments to AU Section 411, The Meaning of Present Fairly in
Conformity With Generally Accepted Accounting Principles. The adoption of
SFAS No. 162 did not have a material impact on the Company’s financial
condition, results of operations, or cash flow.
In March
2008, the FASB issued Statement of Financial Accounting Standards No. 161, Disclosures about Derivative
Instruments and Hedging Activities – an amendment to FASB Statement No. 133
(“SFAS No. 161”). SFAS No. 161 is intended to
improve financial standards for derivative instruments and hedging activities by
requiring enhanced disclosures to enable investors to better understand their
effects on an entity's financial position, financial performance, and cash
flows. Entities are required to provide enhanced disclosures about: (a) how and
why an entity uses derivative instruments; (b) how derivative instruments and
related hedged items are accounted for under Statement 133 and its related
interpretations; and (c) how derivative instruments and related hedged items
affect an entity’s financial position, financial performance, and cash flows. It
is effective for financial statements issued for fiscal years beginning after
November 15, 2008, with early adoption encouraged. The adoption of SFAS
No. 161 on January 1, 2009 did not have a material impact on the Company’s
financial condition, results of operations, or cash flow as the Company
presently has no derivative instruments or hedging activities.
In
December 2007, the FASB issued Statement of Financial Accounting Standards
No. 160, Noncontrolling
Interests in Consolidated Financial Statements (“SFAS No. 160”). SFAS No. 160
re-characterizes minority interests in consolidated subsidiaries as
non-controlling interests and requires the classification of minority interests
as a component of equity. Under SFAS No. 160, a change in control will be
measured at fair value, with any gain or loss recognized in earnings. The
effective date for SFAS No. 160 is for annual periods beginning on or after
December 15, 2008. Early adoption and retroactive application of SFAS No.
160 to fiscal years preceding the effective date are not permitted. The adoption
of SFAS No. 160 on January 1, 2009 did not have a material impact on the
Company’s financial condition, results of operations, or cash flow.
In
December 2007, the FASB issued Statement of Financial Accounting Standards
No. 141(R), Business
Combinations (“SFAS No. 141(R)”). SFAS No. 141(R) expands the
definition of transactions and events that qualify as business combinations;
requires that the acquired assets and liabilities, including contingencies, be
recorded at the fair value determined on the acquisition date and changes
thereafter reflected in earnings, not goodwill; changes the recognition timing
for restructuring costs; and requires acquisition costs to be
expensed
as incurred. Adoption of SFAS No. 141(R) is required for combinations
occurring in fiscal years beginning after December 15, 2008. Early adoption
and retroactive application of SFAS 141(R) to fiscal years preceding the
effective date are not permitted. The adoption of SFAS No. 141(R) on
January 1, 2009 did not have a material impact on the Company’s financial
condition, results of operations, or cash flow.
In
February 2007, the FASB issued Statement of Financial Accounting
Standards No. 159, The
Fair Value Option for Financial Assets and Financial Liabilities— Including an
Amendment of FASB Statement No. 115 (“SFAS No. 159”). SFAS No. 159
permits an entity the option to measure many financial instruments and certain
other items at fair value on specified election dates. Unrealized gains and
losses on items for which the fair value option has been elected will be
recognized in earnings at each subsequent reporting date. The fair value option:
(a) may be applied instrument by instrument, with few exceptions, such as
investments otherwise accounted for by the equity method; (b) is irrevocable
(unless a new election date occurs); and (c) is applied only to entire
instruments and not to portions of instruments. Most of the provisions in SFAS
No. 159 are elective; however, the amendment to FASB Statement No. 115,
Accounting for Certain Investments in Debt and Equity Securities, applies to all
entities with available-for-sale and trading securities. SFAS No. 159 is
effective as of the beginning of an entity’s first fiscal year that begins after
November 15, 2007 and was adopted by the Company on January 1, 2008. Adoption of
this statement had no impact on the Company’s financial condition, results of
operations, or cash flow, as the Company has not elected to apply the fair value
option to any of its financial instruments.
In
September 2006, the FASB issued Statement of Financial Accounting Standards
No. 157, Fair Value
Measurements (“SFAS No. 157”). SFAS No. 157 defines fair value,
establishes a framework for measuring fair value and expands the related
disclosure requirements. This statement applies under other accounting
pronouncements that require or permit fair value measurements. On
February 6, 2008, the FASB deferred the effective date of SFAS 157 until
January 1, 2009 for all non-financial assets and non-financial liabilities,
except those that are recognized or disclosed at fair value in the financial
statements on a recurring basis. SFAS No. 157 is effective for financial
statements issued for fiscal years beginning after November 15, 2007 and
was adopted by the Company on January 1, 2008. The adoption of SFAS
No. 157 had no impact on the Company’s financial condition, results of
operations, or cash flow.
|
2.
|
TRADE
ACCOUNTS RECEIVABLE
|
The
Company's receivables result primarily from the sale of transportation and
logistics services. The Company performs ongoing credit evaluations of its
customers and generally does not require collateral for accounts receivable.
Accounts receivable which consist of both billed and unbilled receivables are
recorded at their invoiced amount and are presented net of an allowance for
doubtful accounts. Accounts outstanding longer than contractual payment terms
are considered past due and are reviewed individually for collectibility.
Accounts receivable balances consist of the following components as of December
31, 2008 and 2007:
|
2008
|
2007
|
|||||||
|
(in
thousands)
|
||||||||
|
Billed
|
$ | 41,247 | $ | 53,439 | ||||
|
Unbilled
|
4,724 | 6,849 | ||||||
|
Allowance
for doubtful accounts
|
(2,156 | ) | (1,891 | ) | ||||
|
Total
accounts receivable—net
|
$ | 43,815 | $ | 58,397 | ||||
An
analysis of changes in the allowance for doubtful accounts for the years ended
December 31, 2008, 2007, and 2006 follows:
|
2008
|
2007
|
2006
|
||||||||||
|
(in
thousands)
|
||||||||||||
|
Balance—beginning
of year
|
$ | 1,891 | $ | 1,457 | $ | 2,030 | ||||||
|
Provision
for bad debts
|
353 | 607 | 354 | |||||||||
|
Charge-offs
|
(104 | ) | (361 | ) | (960 | ) | ||||||
|
Recoveries
|
16 | 188 | 33 | |||||||||
|
Balance—end
of year
|
$ | 2,156 | $ | 1,891 | $ | 1,457 | ||||||
|
3.
|
MARKETABLE
EQUITY SECURITIES
|
The
Company accounts for its marketable securities in accordance with Statement of
Financial Accounting Standards No. 115, Accounting for Certain Investments
in Debt and Equity Securities (“SFAS No. 115”). SFAS No. 115 requires
companies to classify their investments as trading, available-for-sale or
held-to-maturity. The Company’s investments in marketable securities are
classified as either trading or available-for-sale and consist of equity
securities. Management determines the appropriate classification of these
securities at the time of purchase and re-evaluates such designation as of each
balance sheet date. During 2008, the Company sold certain securities which were
held as available-for-sale and had a cost basis of approximately $718,000. The
proceeds on these sales totaled approximately $625,000 which resulted in a
realized loss of approximately $93,000. Also during 2008, three securities were
transferred from available-for-sale to trading. These securities were
transferred because, historically, they have significantly underperformed in
relation to their benchmarks. The resulting loss recognized was
$55,000. Also during 2008, two securities were transferred from trading to
available-for-sale. These securities were transferred at their market value at
the time of transfer. During 2007, the Company sold certain securities which
were held as available-for-sale and had a cost basis of approximately $550,000.
The proceeds on these sales totaled approximately $1,622,000 which resulted in a
realized gain of approximately $1,071,000. Also during 2007, two securities were
transferred from available-for-sale to trading. These securities were
transferred because, historically, they have significantly underperformed in
relation to their benchmarks. The resulting gain recognized was not
material.
Marketable
equity securities are carried at fair value, with the unrealized gains and
losses, net of tax, included as a component of accumulated other comprehensive
income in shareholders’ equity. Realized gains and losses, declines in value
judged to be other-than-temporary on available-for-sale securities, and
increases or decreases in value on trading securities, if any, are included in
the determination of net income. A quarterly evaluation is performed in order to
judge whether declines in value below cost should be considered temporary and
when losses are deemed to be other-than-temporary. Several factors are
considered in this evaluation process including the severity and duration of the
decline in value, the financial condition and near-term outlook for the specific
issuer and the Company’s ability to hold the securities. There were no
securities in a cumulative loss position for twelve months or longer at December
31, 2008. However, based on the severity of declines in certain securities
during 2008 and the fact that the Company has no evidence that indicates these
securities will regain a value equal to or greater than their cost basis, their
declines in value have been determined to be other-than-temporary. As a result
of this evaluation, the Company recorded an impairment charge of approximately
$5.2 million in its statement of operations for the year ending December 31,
2008. These declines came primarily from our equity securities in the financial
and insurance sectors, which have experienced severe declines recently in their
respective stock prices. The cost of securities sold is based on the specific
identification method and interest and dividends on securities are included in
non-operating income.
As of
December 31, 2008, equity securities classified as available-for-sale and equity
securities classified as trading had a cost basis of approximately $11,134,000
and $505,000, respectively and fair market values of approximately $12,090,000
and $450,000, respectively. For the year ended December 31, 2008, the Company
had net unrealized losses in market value on securities classified as
available-for-sale of approximately $1,310,000, net of deferred income taxes.
These securities had gross unrealized gains of approximately $2,193,000 and
gross unrealized losses of approximately $1,237,000. As of December 31, 2008,
the total unrealized gain, net of deferred income taxes, in accumulated other
comprehensive income was approximately $611,000.
As of
December 31, 2007, equity securities classified as available-for-sale and equity
securities classified as trading had a cost basis of approximately $13,272,000
and $661,000, respectively and fair market values of approximately $16,608,000
and $661,000, respectively. For the year ended December 31, 2007, the Company
had net unrealized losses in market value on securities classified as
available-for-sale of approximately $1,221,000, net of deferred income taxes.
These securities had gross unrealized gains of approximately $4,916,000 and
gross unrealized losses of approximately $1,572,000. As of December 31, 2007,
the total unrealized gain, net of deferred income taxes, in accumulated other
comprehensive income was approximately $1,921,000.
The
following table shows the Company’s investments’ approximate gross unrealized
losses and fair value at December 31, 2008 and 2007. These investments consist
of equity securities. As of December 31, 2008 and 2007 there were no investments
that had been in a continuous unrealized loss position for twelve months or
longer.
|
2008
|
2007
|
|||||||||||||||
|
(in
thousands)
|
||||||||||||||||
|
Unrealized
|
Unrealized
|
|||||||||||||||
|
Fair
Value
|
Losses
|
Fair
Value
|
Losses
|
|||||||||||||
|
Equity
securities – Available for sale
|
$ | 4,775 | $ | 1,237 | $ | 5,308 | $ | 1,541 | ||||||||
|
Equity
securities – Trading
|
372 | 67 | 409 | 31 | ||||||||||||
|
Totals
|
$ | 5,147 | $ | 1,304 | $ | 5,717 | $ | 1,572 | ||||||||
The
market value of the Company’s equity securities are used as collateral against
any outstanding margin account borrowings. As of December 31, 2008, the Company
had borrowed approximately $6.9 million under its margin account for the
purchase of marketable equity securities and as a source of short-term
liquidity.
|
4.
|
INTANGIBLE
ASSETS
|
The
Company has tested goodwill for impairment annually in accordance with the
provisions of Statement of Financial Accounting Standards No. 142, Goodwill and Other Intangible
Assets, since the adoption of the standard in January of
2002. In addition to the annual test performed on December 31 of each
year, goodwill is monitored for changes in events or circumstances that indicate
that impairment might exist in interim periods. Our test for
impairment of goodwill is performed on the Company as a whole, as we determined
at adoption of the standard that our reporting units can be aggregated, and
facts and circumstances subsequent to adoption have not changed this assessment.
The annual assessment of impairment was completed on December 31, 2008 and the
Company determined that there was impairment as of that date.
The
impairment of our goodwill was triggered by the sustained decline of our market
capitalization caused by a decrease in our stock price during 2008. In the
fourth quarter of 2008 we determined that our market capitalization compared to
the carrying amount of the Company indicated that impairment was probable and
that the second step of impairment testing was necessary. The second step of our
impairment test required
the
calculation of the fair value of the Company and the subsequent allocation of
the fair value to the assets and liabilities of the Company. The excess fair
value after this allocation is performed represents the implied goodwill of the
Company, if any, and was zero at December 31, 2008. As a result we incurred an
impairment expense for the entire balance of our goodwill or $15.4 million in
the fourth quarter of 2008.
Goodwill
at December 31 is summarized as follows:
|
2008
|
2007
|
2006
|
||||||||||
|
(in
thousands)
|
||||||||||||
|
Goodwill,
beginning of year
|
$ | 15,413 | $ | 15,413 | $ | 15,413 | ||||||
|
Goodwill
acquired
|
- | - | - | |||||||||
|
Goodwill
impairment
|
(15,413 | ) | - | - | ||||||||
|
Goodwill—end
of year
|
$ | - | $ | 15,413 | $ | 15,413 | ||||||
Non-compete
agreements are amortized on a straight-line basis over the contractual term of
the related agreement. Amortization expense associated with non-compete
agreements was approximately $17,000, $200,000 and $200,000, for the years
ending December 31, 2008, 2007 and 2006. The Company's non-compete agreements at
December 31 are summarized as follows:
|
2008
|
2007
|
|||||||
|
(in
thousands)
|
||||||||
|
Non-compete
agreements, original cost
|
$ | 1,000 | $ | 1,000 | ||||
|
Accumulated
amortization
|
(1,000 | ) | (983 | ) | ||||
|
Non-compete
agreements—net
|
$ | - | $ | 17 | ||||
|
5.
|
ACCRUED
EXPENSES AND OTHER LIABILITIES
|
Accrued
expenses and other liabilities at December 31 are summarized as
follows:
|
2008
|
2007
|
|||||||
|
(in
thousands)
|
||||||||
|
Payroll
|
$ | 1,039 | $ | 1,818 | ||||
|
Accrued
vacation
|
1,932 | 1,966 | ||||||
|
Taxes—other
than income
|
2,174 | 2,598 | ||||||
|
Interest
|
122 | 123 | ||||||
|
Driver
escrows
|
938 | 1,023 | ||||||
|
Margin
account borrowings
|
6,871 | - | ||||||
|
Self-insurance
claims reserves
|
2,608 | 2,795 | ||||||
|
Total
accrued expenses and other liabilities
|
$ | 15,684 | $ | 10,323 | ||||
|
6.
|
CLAIMS
LIABILITIES
|
With
respect to physical damage for trucks, cargo loss and auto liability, the
Company maintains insurance coverage to protect it from certain business risks.
These policies are with various carriers and have per occurrence deductibles of
$2,500, $10,000 and $2,500 respectively. Since 2002, the Company has elected to
self insure itself for physical damage to trailers. The Company maintains
workers’ compensation coverage in Arkansas, Ohio, Oklahoma, Mississippi, and
Florida with a $500,000 self-insured retention and a $500,000 per occurrence
excess policy. The Company has elected to opt out of workers' compensation
coverage in Texas and is providing coverage through the P.A.M. Texas Injury
Plan. The Company has reserved for estimated losses to pay such claims as well
as claims incurred but not yet reported. The Company has not experienced any
adverse trends involving differences in claims experienced versus claims
estimates for workers’ compensation claims. Letters of credit aggregating
$353,000 and certificates of deposit totaling $200,000 are held by banks as
security for workers’ compensation claims. The Company self insures for employee
health claims with a stop loss of $225,000 per covered employee per year and
estimates its liability for claims incurred but not reported.
|
7.
|
LONG-TERM
DEBT
|
Long-term
debt at December 31, consists of the following:
|
2008
|
2007
|
|||||||
|
(in
thousands)
|
||||||||
|
Line
of credit with a bank—due May 31, 2009, and
|
||||||||
|
collateralized
by accounts receivable (1)
|
$ | 3,744 | $ | 28,192 | ||||
|
Line
of credit with a bank—due June 30, 2008, and
|
||||||||
|
collateralized
by revenue equipment (2)
|
- | 15,000 | ||||||
|
Equipment
financing (3)
|
45,676 | - | ||||||
|
Note
payable (4)
|
980 | 1,767 | ||||||
|
Other
(5)
|
1,020 | 1,124 | ||||||
|
Other
(6)
|
- | 154 | ||||||
|
Total
long-term debt
|
$ | 51,420 | $ | 46,237 | ||||
|
Less
current maturities
|
(15,928 | ) | (2,065 | ) | ||||
|
Long-term
debt—net of current maturities
|
$ | 35,492 | $ | 44,172 | ||||
|
(1)
|
Line
of credit agreement with a bank provides for maximum borrowings of $30.0
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
1.25% (3.15% at December 31, 2008). Monthly payments of interest are
required under this agreement. Also, under the terms of the agreement the
Company must have (a) a debt to equity ratio of no more than 2:1, and (b)
maintain a tangible net worth of at least $125 million. The Company was in
compliance with all provisions of the agreement at December 31,
2008.
|
|
(2)
|
Matured
line of credit agreement with a bank which provided for maximum borrowings
of $30.0 million through the maturity date of June 30, 2008. The Company
did not renew the line of credit.
|
|
(3)
|
Equipment
financings consist of installment obligations for revenue equipment
purchases, payable in various monthly installments with various maturity
dates through January 2012, at a weighted average interest rate of 4.80%
and collateralized by revenue
equipment.
|
|
(4)
|
6.0%
note to the former owner of an acquired entity with an original face
amount of $4,974,612, payable in monthly installments of $72,672 through
March 2010 and secured by a letter of credit held by a
bank.
|
|
(5)
|
3.85%
note to insurance premium finance company at December 31, 2008 with an
original face amount of $1,740,528, payable in monthly installments of
$147,615 through August 2009.
|
|
(6)
|
5.23%
note to insurance premium finance company at December 31, 2007 with an
original face amount of $154,023, payable in monthly installments of
$19,547 through August 2008.
|
The
Company has provided letters of credit to third parties totaling approximately
$1,640,000 at December 31, 2008. The letters are held by these third parties to
assist such parties in collection of any amounts due by the Company should the
Company default in its commitments to the parties.
Scheduled
annual maturities on long-term debt outstanding at December 31, 2008,
are:
|
(in
thousands)
|
||||
|
2009
|
$ | 15,928 | ||
|
2010
|
12,688 | |||
|
2011
|
18,868 | |||
|
2012
|
3,936 | |||
|
2013
|
- | |||
|
Total
|
$ | 51,420 | ||
|
8.
|
CAPITAL
STOCK
|
The
Company's authorized capital stock consists of 40,000,000 shares of common
stock, par value $.01 per share, and 10,000,000 shares of preferred stock, par
value $.01 per share. At December 31, 2008, there were 11,368,207 shares of our
common stock issued and 9,409,607 shares outstanding. No shares of our preferred
stock were issued or outstanding at December 31, 2008.
Common
Stock
The
holders of our common stock, subject to such rights as may be granted to any
preferred stockholders, elect all directors and are entitled to one vote per
share. All shares of common stock participate equally in dividends when and as
declared by the Board of Directors and in net assets on liquidation. The shares
of common stock have no preference, conversion, exchange, preemptive or
cumulative voting rights.
Preferred
Stock
Preferred
stock may be issued from time to time by our Board of Directors, without
stockholder approval, in such series and with such preferences, conversion or
other rights, voting powers, restrictions, limitations as to dividends,
qualifications or other provisions, as may be fixed by the Board of Directors in
the resolution authorizing their issuance. The issuance of preferred stock by
the Board of Directors could adversely affect the rights of holders of shares of
common stock; for example, the issuance of preferred stock could result in a
class of securities outstanding that would have certain preferences with respect
to dividends and in liquidation over the common stock, and that could result in
a dilution of the voting rights, net income per share and net book value of the
common stock. As of December 31, 2008, we have no agreements or understandings
for the issuance of any shares of preferred stock.
Treasury
Stock
In April
2005, our Board of Directors authorized the repurchase of up to 600,000 shares
of our common stock during the six month period ending October 11, 2005. These
600,000 shares were all repurchased by September 30, 2005. On September 6, 2005
our Board of Directors authorized an extension of the stock repurchase program
until September 2006 and the repurchase of up to an additional 900,000 shares of
our common stock. The Company repurchased 458,600 of these additional shares
prior to December 31, 2005 and made no additional purchases during
2006.
In May
2007, our Board of Directors authorized the repurchase of up to 600,000 shares
of our common stock during the twelve month period following the announcement.
Subsequent to the date of the announcement and through the remainder of 2007,
the Company repurchased 471,500 shares of its common stock. The remaining
128,500 shares authorized were repurchased during the first three months of
2008.
In June
2008, our Board of Directors authorized the repurchase of up to 300,000 shares
of our common stock during the twelve month period following the announcement.
Subsequent to the date of the announcement and through the remainder of 2008,
the Company repurchased 300,000 shares of its common stock.
The
Company accounts for Treasury stock using the cost method and as of December 31,
2008, 1,958,600 shares were held in the treasury at an aggregate cost of
approximately $29,127,000.
|
9.
|
COMPREHENSIVE
INCOME (LOSS)
|
Comprehensive
income (loss) was comprised of net income (loss) plus or minus market value
adjustments related to fuel hedges, interest rate swap agreements and marketable
securities. The components of comprehensive income (loss) were as
follows:
|
2008
|
2007
|
2006
|
||||||||||
|
(in
thousands)
|
||||||||||||
|
Net
(loss) income
|
$ | (18,765 | ) | $ | 2,653 | $ | 17,964 | |||||
|
Other
comprehensive income (loss):
|
||||||||||||
|
Reclassification
adjustment for realized losses
|
||||||||||||
|
(gains)
on marketable securities, included
|
||||||||||||
|
in
net income, net of income taxes
|
11 | (359 | ) | - | ||||||||
|
Reclassification
adjustment for losses on
|
||||||||||||
|
derivative
instruments included in net income
|
||||||||||||
|
accounted
for as hedges, net of income taxes
|
- | - | 18 | |||||||||
|
Reclassification
adjustment for unrealized
|
||||||||||||
|
losses
on marketable securities, included in
|
||||||||||||
|
net
income, net of income taxes
|
3,214 | 55 | 53 | |||||||||
|
Change
in fair value of interest rate
|
||||||||||||
|
swap
agreements, net of income taxes
|
- | - | 1 | |||||||||
|
Change
in fair value of marketable
|
||||||||||||
|
securities,
net of income taxes
|
(4,535 | ) | (917 | ) | 1,349 | |||||||
|
Total
comprehensive (loss) income
|
$ | (20,075 | ) | $ | 1,432 | $ | 19,385 | |||||
|
10.
|
SIGNIFICANT
CUSTOMERS AND INDUSTRY
CONCENTRATION
|
In 2008,
2007, and 2006, one customer, who is in the automobile manufacturing industry,
accounted for 31%, 38% and 41% of revenues, respectively. The Company also
provides transportation services to other manufacturers who are suppliers for
automobile manufacturers including suppliers for the Company’s largest customer.
As a result, concentration of the Company’s business within the automobile
industry is significant. Of the Company’s revenues for 2008, 2007, and 2006,
40%, 49%, and 52%, respectively, were derived from transportation services
provided to the automobile manufacturing industry. Accounts receivable from the
largest customer totaled approximately $17,628,000 and $25,830,000 at December
31, 2008 and 2007, respectively.
|
11.
|
FEDERAL
AND STATE 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 for income tax reporting purposes.
Significant
components of the Company’s deferred tax liabilities and assets at December 31
are as follows:
|
2008
|
2007
|
|||||||||||||||
|
(in
thousands)
|
||||||||||||||||
|
Current
|
Long-Term
|
Current
|
Long-Term
|
|||||||||||||
|
Deferred
tax liabilities:
|
||||||||||||||||
|
Property
and equipment
|
$ | - | $ | 60,011 | $ | - | $ | 52,062 | ||||||||
|
Unrealized
gains on securities
|
345 | - | 1,423 | - | ||||||||||||
|
Prepaid
expenses and other
|
3,584 | - | 5,650 | 3,428 | ||||||||||||
|
Total
deferred tax liabilities
|
3,929 | 60,011 | 7,073 | 55,490 | ||||||||||||
|
Deferred
tax assets:
|
||||||||||||||||
|
Allowance
for doubtful accounts
|
801 | - | 718 | - | ||||||||||||
|
Alternative
minimum tax credit
|
- | 447 | - | 481 | ||||||||||||
|
Compensated
absences
|
597 | - | 630 | - | ||||||||||||
|
Self-insurance
allowances
|
248 | - | 492 | - | ||||||||||||
|
Share-based
compensation
|
- | 328 | - | 289 | ||||||||||||
|
Goodwill
|
- | 1,161 | - | - | ||||||||||||
|
Marketable
equity securities
|
2,101 | - | - | - | ||||||||||||
|
Net
operating loss carryover
|
- | 10,279 | - | 722 | ||||||||||||
|
Non-competition
agreement
|
- | 412 | - | 494 | ||||||||||||
|
Other
|
25 | 30 | 116 | - | ||||||||||||
|
Total
deferred tax assets
|
3,772 | 12,657 | 1,956 | 1,986 | ||||||||||||
|
Net
deferred tax liability
|
$ | 157 | $ | 47,354 | $ | 5,117 | $ | 53,504 | ||||||||
The
reconciliation between the effective income tax rate and the statutory Federal
income tax rate for the years ended December 31, 2008, 2007 and 2006 is
presented in the following table:
|
2008
|
2007
|
2006
|
||||||||||||||||||||||
|
(in
thousands)
|
||||||||||||||||||||||||
|
Amount
|
Percent
|
Amount
|
Percent
|
Amount
|
Percent
|
|||||||||||||||||||
|
Income
tax at the
|
||||||||||||||||||||||||
|
statutory
federal rate
|
$ | (9,989 | ) | 34.0 | $ | 1,571 | 34.0 | $ | 10,513 | 35.0 | ||||||||||||||
|
Nondeductible
expense
|
923 | (3.1 | ) | 381 | 8.3 | 378 | 1.3 | |||||||||||||||||
|
State
income taxes—net
|
||||||||||||||||||||||||
|
of
federal benefit
|
(1,549 | ) | 5.2 | 14 | 0.3 | 1,182 | 3.9 | |||||||||||||||||
|
Total
income taxes
|
$ | (10,615 | ) | 36.1 | $ | 1,966 | 42.6 | $ | 12,073 | 40.2 | ||||||||||||||
The
provision for income taxes consisted of the following:
|
2008
|
2007
|
2006
|
||||||||||
|
(in
thousands)
|
||||||||||||
|
Current:
|
||||||||||||
|
Federal
|
$ | (26 | ) | $ | 305 | $ | 8,397 | |||||
|
State
|
340 | (88 | ) | 1,371 | ||||||||
| 314 | 217 | 9,768 | ||||||||||
|
Deferred:
|
||||||||||||
|
Federal
|
(8,865 | ) | 1,295 | 1,768 | ||||||||
|
State
|
(2,064 | ) | 454 | 537 | ||||||||
| (10,929 | ) | 1,749 | 2,305 | |||||||||
|
Total
income tax expense
|
$ | (10,615 | ) | $ | 1,966 | $ | 12,073 | |||||
The
Company has alternative minimum tax credits of approximately $450,000 at
December 31, 2008, which have no expiration date under the current federal
income tax laws. The Company also has a net operating loss carryover for federal
income purposes of approximately $10.3 million which will expire after the year
2029.
The
Company does not have any material accrued interest or penalties associated with
any unrecognized tax benefits. The Company's policy is to account for interest
and penalties related to uncertain tax positions, if any, in income tax expense.
There was no change in total gross unrecognized tax benefit liabilities for the
year ended December 31, 2008.
The
Company and its subsidiaries are subject to U.S. and Canadian federal income tax
laws as well as the income tax laws of multiple state jurisdictions. The major
tax jurisdictions in which the Company operates generally provide for a
deficiency assessment statute of limitation period of three years and as a
result, the Company’s tax years 2005 through 2007 remain open to examination in
those jurisdictions.
During
2007, the Company contracted with a third-party qualified intermediary in order
to implement a like-kind exchange tax program. Under the program, dispositions
of eligible trucks or trailers and acquisitions of replacement trucks or
trailers are made in a form whereby any associated tax gains related to the
disposal are deferred. To qualify for like-kind exchange treatment, we exchange,
through our qualified intermediary, eligible trucks or trailers being disposed
with trucks or trailers being acquired that allows us to generally carryover the
tax basis of the trucks or trailers sold. The program is expected to result in a
significant deferral of federal and state income taxes. Under the program, the
proceeds from the sale of eligible trucks or trailers carry a Company-imposed
restriction for the acquisition of replacement trucks or trailers.
These
proceeds
may be disqualified under the program at any time and at the Company’s sole
discretion, however income tax deferral would not be available on any sale for
which the Company disqualifies the related proceeds. At December 31, 2008,
the Company had $31,000 of restricted cash held by the third-party qualified
intermediary. At December 31, 2007, the Company had $4.1 million of
restricted cash held by the third-party qualified intermediary. There were no
cash restrictions for any periods prior to the program implementation occurring
during 2007.
|
12.
|
SHARE-BASED
COMPENSATION
|
The
Company maintains a stock option plan under which incentive stock options and
nonqualified stock options may be granted. On March 2, 2006, the Company’s Board
of Director’s adopted, and shareholders later approved, the 2006 Stock Option
Plan (the “2006 Plan”). The 2006 Plan replaces the expired 1995 Stock Option
Plan which had 263,500 options remaining which were never issued. Under the 2006
Plan 750,000 shares are reserved for the issuance of stock options to directors,
officers, key employees and others. The option exercise price under the 2006
Plan is the fair market value of the stock on the date the option is granted.
The fair market value is determined by the average of the highest and lowest
sales prices for a share of the Company’s common stock, on its primary exchange,
on the same date that the option is granted. During 2008, options for 16,000
shares were issued under the 2006 Plan at an option exercise price of $14.98 per
share and at December 31, 2008, 702,000 shares were available for granting
future options.
Outstanding
incentive stock options at December 31, 2008, 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, 2008, must be exercised within five
to ten years from the date of grant.
In August
2002, the Company granted performance-based variable stock options for 300,000
shares to certain key executives. The exercise price for these awards was fixed
at the grant date and was equal to the fair market value of the stock on that
date. On the date of grant, options for 60,000 shares vested immediately and
vesting of the options for the remaining 240,000 shares was scheduled to occur
on a straight-line basis each year from March 15, 2003 through March 15, 2008
upon meeting performance criteria. In order to meet the performance criteria,
net income for each fiscal year must be at least equal to 1.05 times net income
for the preceding fiscal year, unless net income for the preceding fiscal year
was zero or negative, in which case net income for the fiscal year must be at
least 90% of net income for the most recent year with positive income. As of
December 31, 2008, options for 180,000 shares have vested under this 300,000
share option grant (including those options which immediately vested upon grant)
while options for 120,000 shares have been forfeited as the performance criteria
were not met for the fiscal years 2003, 2004 and 2007.
The total
fair value of options vested during 2008, 2007, and 2006 was approximately
$102,000, $501,000, and $511,000, respectively. As of December 31, 2008,
the Company did not have any stock-based compensation plans with unrecognized
stock-based compensation expense. Total pre-tax stock-based compensation
expense, recognized in Salaries, wages and benefits was approximately $102,000
during 2008 and includes approximately $80,000 recognized as a result of the
annual grant of 2,000 shares to each non-employee director during the first
quarter of 2008. The Company recognized a total income tax benefit of
approximately $29,000 related to stock-based compensation expense during 2008.
The recognition of stock-based compensation expense decreased diluted and basic
earnings per common share by approximately $0.01 during 2008. Total pre-tax
stock-based compensation expense, recognized in Salaries, wages and benefits
during 2007 was approximately $123,000 and includes approximately $101,000
recognized as a result of the annual grant of 2,000 shares to each non-employee
director during the second quarter of 2007. The Company recognized a total
income tax benefit of approximately $43,000 related to stock-based compensation
expense during 2007. The recognition of stock-based compensation expense
decreased diluted and basic earnings per common share by approximately $0.01
during 2007. Total pre-tax stock-based compensation expense, recognized in
Salaries, wages and benefits during 2006 was approximately $511,000 and includes
approximately $111,000 recognized as a result of the annual grant of 2,000
shares to each non-employee director during the second quarter of 2006. The
Company recognized a total income tax benefit of approximately $197,000 related
to stock-based compensation expense during 2006. The recognition of
stock-
based
compensation expense decreased diluted and basic earnings per common share by
approximately $0.03 during 2006.
Transactions
in stock options under these plans are summarized as follows:
|
Shares
Under
Option
|
Weighted-
Average
Exercise
Price
|
|||||||
|
Outstanding—January
1, 2006:
|
286,500 | $ | 22.22 | |||||
|
Granted
|
16,000 | 26.73 | ||||||
|
Exercised
|
(18,000 | ) | 16.67 | |||||
|
Outstanding—December
31, 2006:
|
284,500 | $ | 22.83 | |||||
|
Granted
|
16,000 | 22.92 | ||||||
|
Exercised
|
(6,000 | ) | 19.95 | |||||
|
Canceled
|
(46,000 | ) | 23.34 | |||||
|
Outstanding—December
31, 2007:
|
248,500 | $ | 22.81 | |||||
|
Granted
|
16,000 | 14.98 | ||||||
|
Canceled
|
(10,000 | ) | 22.68 | |||||
|
Outstanding—December
31, 2008:
|
254,500 | $ | 22.32 | |||||
|
Options
exercisable—December 31, 2008:
|
254,500 | $ | 22.32 | |||||
The fair
value of the Company’s employee stock options was estimated at the date of grant
using a Black-Scholes-Merton (“BSM”) option-pricing model using the following
assumptions:
|
2008
|
2007
|
2006
|
|
|
Dividend
yield
|
0%
|
0%
|
0%
|
|
Volatility
range
|
36.67%—38.54%
|
37.34%—38.54%
|
33.34%—38.54%
|
|
Risk-free
rate range
|
2.50%—4.38%
|
4.38%—4.48%
|
4.38%—5.02%
|
|
Expected
life
|
4.3
years—5 years
|
2.5
years—5 years
|
2.5
years—5 years
|
|
Fair
value of options (per share)
|
$4.98—$8.89
|
$6.32—$9.45
|
$6.93—$9.45
|
The
Company has never paid any cash dividends on its common stock and we do not
anticipate paying any cash dividends in the foreseeable future. The estimated
volatility is based on the historical volatility of our stock. The risk free
rate for the periods within the expected life of the option is based on the U.S.
Treasury yield curve in effect at the time of grant. The expected life of the
options was calculated based on the historical exercise behavior. Prior to 2008,
the expected life of the options was calculated using temporary guidance
provided by the SEC which allowed companies to elect a “simplified method” where
the expected life is the average of the vesting period and the original
contractual term. This simplified method is generally not available for share
option grants after December 31, 2007.
Information
related to the Company’s option activity as of December 31, 2008, and changes
during the year then ended is presented below:
|
Shares
Under Option
|
Weighted-
Average Exercise Price
|
Weighted-
Average Remaining Contractual Term
|
Aggregate
Intrinsic Value*
|
|||||||||||||
|
(per
share)
|
(in
years)
|
|||||||||||||||
|
Outstanding
at January 1, 2008
|
248,500 | $ | 22.81 | |||||||||||||
|
Granted
|
16,000 | 14.98 | ||||||||||||||
|
Canceled/forfeited/expired
|
(10,000 | ) | 22.68 | |||||||||||||
|
Outstanding
at December 31, 2008
|
254,500 | $ | 22.32 |
3.4
|
$ | - | ||||||||||
|
Fully
vested and exercisable
at December 31, 2008
|
254,500 | $ | 22.32 | 3.4 | $ | - | ||||||||||
|
___________________________
|
||||||||||||||||
|
*
The intrinsic value of a stock option is the amount by which the market
value of the underlying stock exceeds the exercise price of the option.
The per share market value of our common stock, as determined by the
closing price on December 31, 2008, was $7.00.
|
||||||||||||||||
The
weighted-average grant-date fair value of options granted during the years 2008,
2007, and 2006 was $4.98, $6.32, and $6.93 per share, respectively. The total
intrinsic value of options exercised during the years ended December 31, 2008,
2007, and 2006, was approximately $0, $11,000, and $175,000,
respectively.
A summary
of the status of the Company’s nonvested options as of December 31, 2008 and
changes during the year ended December 31, 2008, is presented
below:
|
Number
of Options
|
Weighted-
Average Grant Date Fair Value
|
|||||||
|
Nonvested
at January 1, 2008
|
- | $ | - | |||||
|
Granted
|
16,000 | 4.98 | ||||||
|
Vested
|
(16,000 | ) | 4.98 | |||||
|
Nonvested
at December 31, 2008
|
- | $ | - | |||||
The
number, weighted average exercise price and weighted average remaining
contractual life of options outstanding as of December 31, 2008 and the number
and weighted average exercise price of options exercisable as of December 31,
2008 is as follows:
|
Exercise
Price
|
Shares
Under Outstanding Options
|
Weighted-Average
Remaining Contractual Term
|
Shares
Under Exercisable Options
|
|||
|
(in
years)
|
||||||
|
$14.98
|
16,000
|
4.2
|
16,000
|
|||
|
$16.99
|
8,000
|
0.2
|
8,000
|
|||
|
$18.27
|
10,000
|
1.2
|
10,000
|
|||
|
$19.88
|
12,500
|
3.8
|
12,500
|
|||
|
$22.92
|
14,000
|
3.2
|
14,000
|
|||
|
$23.22
|
180,000
|
3.7
|
180,000
|
|||
|
$26.73
|
14,000
|
2.5
|
14,000
|
|||
|
254,500
|
3.4
|
254,500
|
Cash
received from option exercises totaled approximately $0, $120,000, and $300,000
during the years ended December 31, 2008, 2007, and 2006, respectively. The
Company issues new shares upon option exercise.
|
13.
|
EARNINGS
PER SHARE
|
The
Company applies SFAS No. 128 for computing and presenting earnings per share.
Basic earnings per common share were computed by dividing net income by the
weighted average number of shares outstanding during the period. Diluted
earnings per common share were calculated as follows:
|
For
the Year Ended December 31,
|
||||||||||||
|
2008
|
2007
|
2006
|
||||||||||
|
(in
thousands, except per share data)
|
||||||||||||
|
Net
(loss) income
|
$ | (18,765 | ) | $ | 2,653 | $ | 17,964 | |||||
|
Basic
weighted average common shares outstanding
|
9,683 | 10,238 | 10,296 | |||||||||
|
Dilutive
effect of common stock equivalents
|
- | 1 | 6 | |||||||||
|
Diluted
weighted average common shares outstanding
|
9,683 | 10,239 | 10,302 | |||||||||
|
Basic
(loss) earnings per share
|
$ | (1.94 | ) | $ | 0.26 | $ | 1.74 | |||||
|
Diluted
(loss) earnings per share
|
$ | (1.94 | ) | $ | 0.26 | $ | 1.74 | |||||
Options
to purchase 253,484, 234,456, and 229,337 shares of common stock were
outstanding as of December 31, 2008, 2007, and 2006, respectively, but were not
included in the computation of diluted earnings per share because to do so would
have an anti-dilutive effect.
|
14.
|
BENEFIT
PLAN
|
The
Company sponsors a benefit 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
and vests at the rate of 20% each year until fully vested after five years.
Total employer matching contributions to the plan totaled approximately
$305,000, $340,000 and $330,000 in 2008, 2007 and 2006,
respectively.
|
15.
|
COMMITMENTS
AND CONTINGENCIES
|
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.
The
Company leases certain premises under noncancelable operating lease agreements.
Future minimum annual lease payments under these leases are as
follows:
|
2009
|
$ | 255,765 | ||
|
2010
|
202,400 | |||
|
2011
|
187,000 | |||
|
2012
|
192,000 | |||
|
2013
|
80,000 | |||
|
Total
|
$ | 917,165 |
Total
rental expense, net of amounts reimbursed for the years ended December 31, 2008,
2007 and 2006 was approximately $2,243,000, $3,035,000, and $2,369,000,
respectively.
|
16.
|
FAIR
VALUE OF FINANCIAL INSTRUMENTS
|
Our
financial instruments consist of cash and cash equivalents, marketable equity
securities, accounts receivable, trade accounts payable, and
borrowings.
The
Company adopted SFAS No. 157 effective January 1, 2008 for financial
assets and liabilities measured on a recurring basis. SFAS No. 157 defines fair
value as the exchange price that would be received for an asset or paid to
transfer a liability (an exit price) in the principal or most advantageous
market for the asset or liability in an orderly transaction between market
participants on the measurement date. SFAS No. 157 also establishes a fair value
hierarchy which requires an entity to maximize the use of observable inputs and
minimize the use of unobservable inputs when measuring fair value. The standard
describes three levels of inputs that may be used to measure fair
value:
|
Level
1:
|
Quoted
market prices in active markets for identical assets or
liabilities.
|
||
|
Level
2:
|
Inputs
other than Level 1 inputs that are either directly or indirectly
observable such as quoted prices for similar assets or liabilities in
active markets; quoted prices for identical or similar assets or
liabilities in markets that are not active; inputs other than quoted
prices that are observable; or other inputs not directly observable, but
derived principally from, or corroborated by, observable market
data.
|
||
|
Level
3:
|
Unobservable
inputs that are supported by little or no market activity.
|
The
Company utilizes the market approach to measure fair value for its financial
assets and liabilities. The market approach uses prices and other relevant
information generated by market transactions involving identical or comparable
assets or liabilities.
The
following items are measured at fair value on a recurring basis and therefore
subject to the disclosure requirements of SFAS No. 157 at December 31,
2008:
|
Total
|
Level
1
|
Level
2
|
Level
3
|
|||||||||||||
|
(in
thousands)
|
||||||||||||||||
|
Marketable
equity securities
|
$ | 12,540 | $ | 12,540 | - | - | ||||||||||
The
Company’s investments in marketable equity securities are recorded at fair value
based on quoted market prices. The carrying value of cash and cash equivalents,
accounts receivable, trade accounts payable, and accrued liabilities approximate
fair value due to their short maturities.
The
carrying amount for the line of credit approximates fair value because the line
of credit interest rate is adjusted frequently.
For
long-term debt other than the lines of credit, the fair values are estimated
using discounted cash flow analyses, based on the Company’s current incremental
borrowing rates for similar types of borrowing arrangements. The carrying values
and estimated fair values of this other long-term debt at December 31, 2008 and
2007 are summarized as follows:
|
2008
|
2007
|
|||||||||||||||
|
Carrying
Value
|
Estimated Fair
Value
|
Carrying
Value
|
Estimated
Fair Value
|
|||||||||||||
|
(in
thousands)
|
||||||||||||||||
|
Long-term
debt
|
$ | 47,676 | $ | 47,432 | $ | 3,045 | $ | 3,032 | ||||||||
The
Company adopted SFAS No. 159 effective January 1, 2008 and have not
elected the fair value option for our financial instruments.
|
17.
|
RELATED
PARTY TRANSACTIONS
|
In the
normal course of business, the Company provides and receives transportation,
repair and other services for and from companies affiliated with a major
stockholder, and recognized $114,112, $1,861,773, and $46,576 in operating
revenue and $1,749,955, $1,909,585, and $1,558,371 in operating expenses in
2008, 2007, and 2006, respectively. In addition, also in the normal
course of business, the Company purchased a terminal in Laredo, TX from an
affiliate of a major stockholder for $5,920,969, of which $4,500,000
was paid as of December 31, 2008. The remaining $1,420,969 was paid
in February 2009, subsequent to the completion of an independent appraisal, and
is included in amounts payable to affiliates described below.
The
Company purchased physical damage insurance through an unaffiliated insurance
broker which was written by an insurance company affiliated with a major
stockholder. Annual premiums were $2,232,309, $1,927,964 and $1,816,759 for
2008, 2007 and 2006, respectively.
Amounts
owed to the Company by these affiliates were $851,471 and $1,183,266 at December
31, 2008 and 2007 respectively. Of the accounts receivable at December 31, 2008,
$76,441 represents revenue resulting from maintenance performed in the Company’s
maintenance facilities and maintenance charges paid by the Company to third
parties on behalf of their affiliate and charged back at the amount paid,
$86,358 represents freight transportation and $688,672 represents a prepayment
of physical damage insurance premiums. Amounts payable to affiliates at December
31, 2008 and 2007 were $1,526,428 and $198,416 respectively.
|
18.
|
QUARTERLY
RESULTS OF OPERATIONS (UNAUDITED)
|
The
tables below present quarterly financial information for 2008 and
2007:
|
2008
|
||||||||||||||||
|
Three
Months Ended
|
||||||||||||||||
|
March
31
|
June
30
|
September
30
|
December
31
|
|||||||||||||
|
(in
thousands, except per share data)
|
||||||||||||||||
|
Operating
revenues
|
$ | 105,820 | $ | 110,930 | $ | 105,958 | $ | 84,014 | ||||||||
|
Operating
expenses
|
109,786 | 112,460 | 107,240 | 99,190 | ||||||||||||
|
Operating
(loss) income
|
(3,966 | ) | (1,530 | ) | (1,282 | ) | (15,176 | ) | ||||||||
|
Non-operating
(expense) income
|
(206 | ) | (14 | ) | (3,377 | ) | (1,400 | ) | ||||||||
|
Interest
expense
|
568 | 532 | 614 | 714 | ||||||||||||
|
Income
tax (benefit) expense
|
(1,912 | ) | (744 | ) | (2,092 | ) | (5,866 | ) | ||||||||
|
Net
(loss) income
|
$ | (2,828 | ) | $ | (1,332 | ) | $ | (3,181 | ) | $ | (11,424 | ) | ||||
|
Net
(loss) income per common share:
|
||||||||||||||||
|
Basic
|
$ | (0.29 | ) | $ | (0.14 | ) | $ | (0.33 | ) | $ | (1.19 | ) | ||||
|
Diluted
|
$ | (0.29 | ) | $ | (0.14 | ) | $ | (0.33 | ) | $ | (1.19 | ) | ||||
|
Average
common shares outstanding:
|
||||||||||||||||
|
Basic
|
9,795 | 9,708 | 9,665 | 9,564 | ||||||||||||
|
Diluted
|
9,795 | 9,708 | 9,665 | 9,564 | ||||||||||||
|
2007
|
||||||||||||||||
|
Three
Months Ended
|
||||||||||||||||
|
March
31
|
June
30
|
September
30
|
December
31
|
|||||||||||||
|
(in
thousands, except per share data)
|
||||||||||||||||
|
Operating
revenues
|
$ | 98,809 | $ | 106,700 | $ | 101,171 | $ | 102,162 | ||||||||
|
Operating
expenses
|
96,475 | 102,528 | 100,688 | 103,785 | ||||||||||||
|
Operating
income
|
2,334 | 4,172 | 483 | (1,623 | ) | |||||||||||
|
Non-operating
income
|
241 | 167 | 199 | 1,099 | ||||||||||||
|
Interest
expense
|
487 | 676 | 620 | 670 | ||||||||||||
|
Income
tax expense (benefit)
|
823 | 1,471 | 26 | (354 | ) | |||||||||||
|
Net
income (loss)
|
$ | 1,265 | $ | 2,192 | $ | 36 | $ | (840 | ) | |||||||
|
Net
income (loss) per common share:
|
||||||||||||||||
|
Basic
|
$ | 0.12 | $ | 0.21 | $ | 0.00 | $ | (0.08 | ) | |||||||
|
Diluted
|
$ | 0.12 | $ | 0.21 | $ | 0.00 | $ | (0.08 | ) | |||||||
|
Average
common shares outstanding:
|
||||||||||||||||
|
Basic
|
10,305 | 10,306 | 10,265 | 10,077 | ||||||||||||
|
Diluted
|
10,308 | 10,307 | 10,266 | 10,077 | ||||||||||||
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure.
None.
Item 9A. Controls and Procedures.
Evaluation
of Disclosure Controls and Procedures
Our
management, with the participation of our chief executive officer and chief
financial officer, evaluated the effectiveness of our disclosure controls and
procedures pursuant to Rule 13a-15 under the Securities Exchange Act of 1934, as
amended (the “Exchange Act”). In designing and evaluating the disclosure
controls and procedures, management recognizes that any controls and procedures,
no matter how well designed and operated, can provide only reasonable assurance
of achieving the desired control objectives. In addition, the design of
disclosure controls and procedures must reflect the fact that there are resource
constraints and that management is required to apply its judgment in evaluating
the benefits of possible controls and procedures relative to their
costs.
Based on
management’s evaluation, our chief executive officer and chief financial officer
concluded that, as of December 31, 2008, our disclosure controls and procedures
are designed at a reasonable assurance level and are effective to provide
reasonable assurance that information we are required to disclose in reports
that we file or submit under the Exchange Act is recorded, processed, summarized
and reported within the time periods specified in Securities and Exchange
Commission rules and forms, and that such information is accumulated and
communicated to our management, including our chief executive officer and chief
financial officer, as appropriate, to allow timely decisions regarding required
disclosure.
Changes
in Internal Control Over Financial Reporting
We
regularly review our system of internal control over financial reporting and
make changes to our processes and systems to improve controls and increase
efficiency, while ensuring that we maintain an effective internal control
environment. Changes may include such activities as implementing new, more
efficient systems, consolidating activities, and migrating
processes.
There
were no changes in our internal control over financial reporting that occurred
during the period covered by this Annual Report on Form 10-K that have
materially affected, or are reasonably likely to materially affect, our internal
control over financial reporting.
Management’s
Report on Internal Control Over Financial Reporting
Our
management is responsible for establishing and maintaining adequate internal
control over financial reporting, as defined in Exchange Act Rule 13a-15(f).
Management conducted an evaluation of the effectiveness of our internal control
over financial reporting based on the framework in Internal Control—Integrated
Framework issued by the Committee of Sponsoring Organizations of the Treadway
Commission. Based on this evaluation, management concluded that our internal
control over financial reporting was effective as of December 31, 2008.
Management reviewed the results of its assessment with our Audit Committee. The
effectiveness of our internal control over financial reporting as of December
31, 2008 has been audited by Grant Thornton LLP, an independent registered
public accounting firm, as stated in its report which is included
below.
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Board of
Directors and Shareholders
P.A.M.
Transportation Services, Inc. and Subsidiaries
We have
audited P.A.M. Transportation Services, Inc. (a Delaware Corporation) and
subsidiaries’ (collectively, the Company) internal control over
financial reporting as of December 31, 2008, based on criteria established in
Internal Control—Integrated
Framework issued by the Committee of Sponsoring Organizations of the
Treadway
Commission
(COSO). The Company’s management is responsible for maintaining effective
internal control over financial reporting and for its assessment of the
effectiveness of internal control over financial reporting, included in the
accompanying Management’s
Report on Internal Control Over Financial Reporting. Our
responsibility is to express an opinion on the Company’s internal control over
financial reporting based on our audit.
We
conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether effective
internal control over financial reporting was maintained in all material
respects. Our audit included obtaining an understanding of internal control over
financial reporting, assessing the risk that a material weakness exists, testing
and evaluating the design and operating effectiveness of internal control based
on the assessed risk, and performing such other procedures as we considered
necessary in the circumstances. We believe that our audit provides a reasonable
basis for our opinion.
A
company’s internal control over financial reporting is a process designed to
provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles. A company’s internal control over
financial reporting includes those policies and procedures that (1) pertain to
the maintenance of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the company; (2)
provide reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with generally accepted
accounting principles, and that receipts and expenditures of the company are
being made only in accordance with authorizations of management and directors of
the company; and (3) provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use, or disposition of the company’s
assets that could have a material effect on the financial
statements.
Because
of its inherent limitations, internal control over financial reporting may not
prevent or detect misstatements. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate.
In our
opinion, the Company maintained, in all material respects, effective internal
control over financial reporting as of December 31, 2008, based on criteria
established in Internal
Control—Integrated Framework issued by COSO.
We also
have audited, in accordance with the standards of the Public Company Accounting
Oversight Board (United States), the consolidated balance sheets of P.A.M.
Transportation Services, Inc. and subsidiaries as of December 31, 2008 and 2007,
and the related consolidated statements of operations, stockholders’ equity and
other comprehensive income (loss), and cash flows for each of the three years in
the period ended December 31, 2008, and our report dated
March 6, 2009 expressed an unqualified opinion on those consolidated
financial statements.
/s/ GRANT
THORNTON LLP
Tulsa,
Oklahoma
March 6,
2009
Item 9B. Other Information.
|
|
None.
|
PART
III
Portions
of the information required by Part III of Form 10-K are, pursuant to General
Instruction G (3) of Form 10-K, incorporated by reference from our definitive
proxy statement to be filed pursuant to Regulation 14A for our Annual Meeting of
Stockholders to be held on May 28, 2009. We will, within 120 days of the end of
our fiscal year, file with the Securities and Exchange Commission a definitive
proxy statement pursuant to Regulation 14A.
Item 10. Directors, Executive Officers and Corporate
Governance.
Information
concerning our executive officers is set forth in Item 1 of this Form 10-K under
the caption “Executive Officers of the Registrant.”
The
information presented under the captions “Election of Directors,” “Section 16(a)
Beneficial Ownership Compliance,” “Corporate Governance - Code of Ethics” and
“Corporate Governance–Audit Committee,” in the proxy statement is incorporated
here by reference.
We have a
separately designated standing audit committee established in accordance with
Section 3(a)(58)(A) of the Securities Exchange Act of 1934. The members of the
Audit Committee consist of Frank L. Conner, Christopher L. Ellis, and Charles F.
Wilkins.
Item 11. Executive Compensation.
The
information presented under the captions “Executive Compensation,” “Corporate
Governance–Compensation Committee Interlocks and Insider Participation,” and
“Compensation Committee Report” in the proxy statement is incorporated here by
reference.
Item 12. Security Ownership of Certain Beneficial Owners and
Management and Related Stockholder Matters.
The
information presented under the caption “Security Ownership of Certain
Beneficial Owners and Management” in the proxy statement is incorporated here by
reference.
Equity
Compensation Plan Information
The
following table summarizes, as of December 31, 2008, information about
compensation plans under which equity securities of the Company are authorized
for issuance:
|
Plan
Category
|
Number
of securities to be issued upon exercise of outstanding options, warrants
and rights
|
Weighted-average
exercise price of outstanding options, warrants and rights
|
Number
of securities remaining available for future issuance under equity
compensation plans
|
|||||||||
|
Equity
Compensation Plans approved by Security Holders
|
254,500 | $ | 22.32 | 702,000 | ||||||||
|
Equity
Compensation Plans not approved by Security Holders
|
-0- | -0- | -0- | |||||||||
|
Total
|
254,500 | $ | 22.32 | 702,000 | ||||||||
Item 13. Certain Relationships and Related Transactions, and
Director Independence.
The
information presented under the captions (i) “Transactions with Related
Persons,” including the information referenced there that is set forth under the
caption “Corporate Governance – Compensation Committee Interlocks and Insider
Participation” and (ii) “Corporate Governance – Director Independence” in the
proxy statement is incorporated here by reference.
Item 14. Principal Accounting Fees and Services.
The
information presented under the caption “Independent Public Accountants –
Principal Accountant Fees and Services” in the proxy statement is incorporated
here by reference.
PART
IV
Item 15. Exhibits, Financial Statement Schedules.
|
(a)
|
Financial
Statements and Schedules.
|
|
(1)
|
Financial
Statements: See Part II, Item 8
hereof.
|
Report of
Independent Registered Public Accounting Firm - Grant Thornton LLP
Consolidated
Balance Sheets - December 31, 2008 and 2007
Consolidated
Statements of Operations - Years ended December 31, 2008, 2007 and
2006
Consolidated
Statements of Shareholders’ Equity and Other Comprehensive Income (Loss) - Years
ended December 31, 2008, 2007 and 2006
Consolidated
Statements of Cash Flows - Years ended December 31, 2008, 2007 and
2006
Notes to
Consolidated Financial Statements
|
(2)
|
Financial
Statement Schedules.
|
All
schedules for which provision is made in the applicable accounting regulations
of the SEC are omitted as the requiredinformation is inapplicable, or because
the information is presented in the consolidated financial statements or related
notes.
|
(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 Quarterly Report on Form 10-Q for the quarter ended June 30,
1994 (“6/30/94 10-Q”); (iii) the Quarterly Report on Form 10-Q for the quarter
ended June 30, 1995 (“6/30/95 10-Q”); (iv) the Quarterly Report on Form 10-Q for
the quarter ended September 30, 1996 (“9/30/96 10-Q”); (v) the Form S-8
Registration Statement filed on June 11, 1999 (“6/11/99 S-8”); (vi) the Annual
Report on Form 10-K for the year ended December 31, 2001 (“2001 10-K”); (vii)
the Quarterly Report on Form 10-Q for the quarter ended March 31, 2002 (“3/31/02
10-Q”); (viii) the Quarterly Report on Form 10-Q for the quarter ended September
30, 2004 (“9/30/2004 10-Q”); (ix) Form 8-K filed on March 7, 2005 (“3/07/2005
8-K”); (x) Form 8-K filed on May 31, 2006 (“5/31/2006 8-K”); (xi) Form 8-K filed
on July 28, 2006 (“7/28/2006 8-K”); (xii) the Form 8-K filed on December 11,
2007 (“12/11/2007 8-K”); or (xiii) the Quarterly Report on Form 10-Q for the
quarter ended June 30, 2006 (“6/30/06 10-Q”); (xiv) the Annual Report on Form
10-K for the year ended December 31, 2007 (“2007 10-K”).
|
Exhibit #
|
Description of Exhibit
|
|
|
*3.1
|
Amended
and Restated Certificate of Incorporation of the Registrant (Exh. 3.1,
3/31/02 10-Q)
|
|
|
*3.2
|
Amended
and Restated By-Laws of the Registrant (Exh. 3.2, 12/11/07
8-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 dated 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 $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 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)
|
|
|
*4.5.1
|
Loan
Agreement dated as of November 22, 2000 by and between P.A.M. Transport,
Inc. and SunTrust Bank (Exh. 4.5.1, 2001 10-K)
|
|
|
*4.5.2
|
Revolving
Credit Note dated November 22, 2000 (Exh. 4.5.2, 2001
10-K)
|
|
|
*4.5.3
|
Security
Agreement by and between P.A.M. Transport, Inc. and SunTrust Bank (Exh.
4.5.3, 2001 10-K)
|
|
|
*4.5.4
|
First
Amendment to Loan Agreement, Revolving Credit Note and Security Deposit
(Exh. 4.5.4, 2001 10-K)
|
|
|
*4.6
|
Fourth
Amendment to Loan Agreement dated July 26, 1994 among First Tennessee Bank
National Association, Registrant and P.A.M. Transport, Inc. together with
Promissory Note (Exh. 4.6, 2007 10-K)
|
|
|
*10.1
|
(1)
|
Employment
Agreement between the Registrant and Robert W. Weaver, dated July 10, 2006
(Exh. 10.1, 7/28/2006 8-K)
|
|
*10.2
|
(1)
|
Employment
Agreement between the Registrant and W. Clif Lawson, dated June 1, 2006
(Exh. 10.2, 7/28/2006 8-K)
|
|
*10.3
|
(1)
|
Employment
Agreement between the Registrant and Larry J. Goddard, dated June 1, 2006
(Exh. 10.3, 7/28/2006 8-K)
|
|
*10.4
|
(1)
|
1995
Stock Option Plan, as Amended and Restated (Exh. 4.1, 6/11/99
S-8)
|
|
*10.4.1
|
(1)
|
Amendment
to 1995 Stock Option Plan (Exh. 10.1, 3/07/2005 8-K)
|
|
*10.4.2
|
(1)
|
2006
Stock Option Plan (Exh. 10.1, 5/31/2006 8-K)
|
|
*10.5
|
Interest
rate swap agreement, dated March 1, 2001 (Exh. 10.5, 2001
10-K)
|
|
|
*10.6
|
Interest
rate swap agreement dated June 1, 2001 (Exh. 10.6, 2001
10-K)
|
|
|
*10.7
|
(1)
|
Employee
Non-Qualified Stock Option Agreement (Exh. 10.1, 9/30/2004
10-Q)
|
|
*10.8
|
(1)
|
Director
Non-Qualified Stock Option Agreement (Exh. 10.2, 9/30/2004
10-Q)
|
|
*10.8.1
|
(1)
|
Form
of Non-Qualified Stock option Agreement for Non-Employee Director stock
options that are granted under the 2006 Stock Option Plan (Exh. 10.2,
5/31/2006 8-K)
|
|
*10.9
|
(1)
|
Executive
Incentive Plan (Exh. 10.2, 6/30/2006 10-Q)
|
|
*10.10
|
(1)
|
Consulting
Agreement between the Registrant and Manuel J. Moroun, dated December 6,
2007 (Exh. 10.10, 2007 10-K)
|
|
Subsidiaries
of the Registrant
|
||
|
Consent
of Grant Thornton LLP
|
||
|
Rule
13a-14(a) Certification of Principal Executive Officer
|
||
|
Rule
13a-14(a) Certification of Principal Financial Officer
|
||
|
Section
1350 Certifications of Chief Executive Officer and Chief Financial
Officer
|
||
|
(1) Management
contract or compensatory plan or
arrangement.
|
||
Pursuant
to the requirements of Section 13 or 15(d) of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
|
P.A.M.
TRANSPORTATION SERVICES, INC.
|
|||
|
Dated:
March 13, 2009
|
By:
|
/s/
Robert W. Weaver
|
|
|
ROBERT
W. WEAVER
|
|||
|
President
and Chief Executive Officer
|
|||
|
(principal
executive officer)
|
|||
|
Pursuant
to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant
and in the capacities and on the dates indicated.
|
|||
|
Dated:
March 13, 2009
|
By:
|
/s/
Frederick P. Calderone
|
|
|
FREDERICK
P. CALDERONE, Director
|
|||
|
Dated:
March 13, 2009
|
By:
|
/s/
Frank L. Conner
|
|
|
FRANK
L. CONNER, Director
|
|||
|
Dated:
March 13, 2009
|
By:
|
/s/
W. Scott Davis
|
|
|
W.
SCOTT DAVIS, Director
|
|||
|
Dated:
March 13, 2009
|
By:
|
/s/
Christopher L. Ellis
|
|
|
CHRISTOPHER
L. ELLIS, Director
|
|||
|
Dated:
March 13, 2009
|
By:
|
/s/
Larry J. Goddard
|
|
|
LARRY
J. GODDARD
|
|||
|
Vice
President-Finance, Chief Financial Officer,
|
|||
|
Secretary
and Treasurer
|
|||
|
(principal
financial and accounting officer)
|
|||
|
Dated:
March 13, 2009
|
By:
|
/s/
Manuel J. Moroun
|
|
|
MANUEL
J. MOROUN, Director
|
|||
|
Dated:
March 13, 2009
|
By:
|
/s/
Matthew T. Moroun
|
|
|
MATTHEW
T. MOROUN, Director and Chairman of the Board
|
|||
|
Dated:
March 13, 2009
|
By:
|
/s/
Daniel C. Sullivan
|
|
|
DANIEL
C. SULLIVAN, Director
|
|||
|
Dated:
March 13, 2009
|
By:
|
/s/
Robert W. Weaver
|
|
|
ROBERT
W. WEAVER,
|
|||
|
President
and Chief Executive Officer, Director
|
|||
|
(principal
executive officer)
|
|||
|
Dated:
March 13, 2009
|
By:
|
/s/
Charles F. Wilkins
|
|
|
CHARLES
F. WILKINS, Director
|
|||
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 Quarterly Report on Form 10-Q for the quarter ended June 30,
1994 (“6/30/94 10-Q”); (iii) the Quarterly Report on Form 10-Q for the quarter
ended June 30, 1995 (“6/30/95 10-Q”); (iv) the Quarterly Report on Form 10-Q for
the quarter ended September 30, 1996 (“9/30/96 10-Q”); (v) the Form S-8
Registration Statement filed on June 11, 1999 (“6/11/99 S-8”); (vi) the Annual
Report on Form 10-K for the year ended December 31, 2001 (“2001 10-K”); (vii)
the Quarterly Report on Form 10-Q for the quarter ended March 31, 2002 (“3/31/02
10-Q”); (viii) the Quarterly Report on Form 10-Q for the quarter ended September
30, 2004 (“9/30/2004 10-Q”); (ix) Form 8-K filed on March 7, 2005 (“3/07/2005
8-K”); (x) Form 8-K filed on May 31, 2006 (“5/31/2006 8-K”); (xi) Form 8-K filed
on July 28, 2006 (“7/28/2006 8-K”); (xii) the Form 8-K filed on December 11,
2007 (“12/11/2007 8-K”); or (xiii) the Quarterly Report on Form 10-Q for the
quarter ended June 30, 2006 (“6/30/06 10-Q”); (xiv) the Annual Report on Form
10-K for the year ended December 31, 2007 (“2007 10-K”).
|
Exhibit #
|
Description of Exhibit
|
|
|
*3.1
|
Amended
and Restated Certificate of Incorporation of the Registrant (Exh. 3.1,
3/31/02 10-Q)
|
|
|
*3.2
|
Amended
and Restated By-Laws of the Registrant (Exh. 3.2, 12/11/07
8-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 dated 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 $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 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)
|
|
*4.5.1
|
Loan
Agreement dated as of November 22, 2000 by and between P.A.M. Transport,
Inc. and SunTrust Bank (Exh. 4.5.1, 2001 10-K)
|
|
|
*4.5.2
|
Revolving
Credit Note dated November 22, 2000 (Exh. 4.5.2, 2001
10-K)
|
|
|
*4.5.3
|
Security
Agreement by and between P.A.M. Transport, Inc. and SunTrust Bank (Exh.
4.5.3, 2001 10-K)
|
|
|
*4.5.4
|
First
Amendment to Loan Agreement, Revolving Credit Note and Security Deposit
(Exh. 4.5.4, 2001 10-K)
|
|
|
*4.6
|
Fourth
Amendment to Loan Agreement dated July 26, 1994 among First Tennessee Bank
National Association, Registrant and P.A.M. Transport, Inc. together with
Promissory Note (Exh. 4.6, 2007 10-K)
|
|
|
*10.1
|
(1)
|
Employment
Agreement between the Registrant and Robert W. Weaver, dated July 10, 2006
(Exh. 10.1, 7/28/2006 8-K)
|
|
*10.2
|
(1)
|
Employment
Agreement between the Registrant and W. Clif Lawson, dated June 1, 2006
(Exh. 10.2, 7/28/2006 8-K)
|
|
*10.3
|
(1)
|
Employment
Agreement between the Registrant and Larry J. Goddard, dated June 1, 2006
(Exh. 10.3, 7/28/2006 8-K)
|
|
*10.4
|
(1)
|
1995
Stock Option Plan, as Amended and Restated (Exh. 4.1, 6/11/99
S-8)
|
|
*10.4.1
|
(1)
|
Amendment
to 1995 Stock Option Plan (Exh. 10.1, 3/07/2005 8-K)
|
|
*10.4.2
|
(1)
|
2006
Stock Option Plan (Exh. 10.1, 5/31/2006 8-K)
|
|
*10.5
|
Interest
rate swap agreement, dated March 1, 2001 (Exh. 10.5, 2001
10-K)
|
|
|
*10.6
|
Interest
rate swap agreement dated June 1, 2001 (Exh. 10.6, 2001
10-K)
|
|
|
*10.7
|
(1)
|
Employee
Non-Qualified Stock Option Agreement (Exh. 10.1, 9/30/2004
10-Q)
|
|
*10.8
|
(1)
|
Director
Non-Qualified Stock Option Agreement (Exh. 10.2, 9/30/2004
10-Q)
|
|
*10.8.1
|
(1)
|
Form
of Non-Qualified Stock option Agreement for Non-Employee Director stock
options that are granted under the 2006 Stock Option Plan (Exh. 10.2,
5/31/2006 8-K)
|
|
*10.9
|
(1)
|
Executive
Incentive Plan (Exh. 10.2, 6/30/2006 10-Q)
|
|
*10.10
|
(1)
|
Consulting
Agreement between the Registrant and Manuel J. Moroun, dated December 6,
2007 (Exh. 10.10, 2007 10-K)
|
|
Subsidiaries
of the Registrant
|
||
|
Consent
of Grant Thornton LLP
|
||
|
Rule
13a-14(a) Certification of Principal Executive Officer
|
||
|
Rule
13a-14(a) Certification of Principal Financial Officer
|
||
|
Section
1350 Certifications of Chief Executive Officer and Chief Financial
Officer
|
||
|
(1) Management
contract or compensatory plan or
arrangement.
|
||
64