PAM TRANSPORTATION SERVICES INC - Quarter Report: 2008 March (Form 10-Q)
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-Q
ý QUARTERLY REPORT
PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF
1934
For the
quarterly period ended March 31, 2008
o TRANSITION REPORT
PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF
1934
For the
transition period from __________to__________
Commission
File Number: 0-15057
P.A.M. TRANSPORTATION
SERVICES, INC.
(Exact
name of registrant as specified in its charter)
|
Delaware
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71-0633135
|
|
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(State
or other jurisdiction of incorporation)
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(I.R.S.
Employer Identification no.)
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297 West Henri De Tonti,
Tontitown, Arkansas 72770
(Address
of principal executive offices) (Zip Code)
Registrant’s
telephone number, including area code: (479)
361-9111
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N/A
|
|
(Former
name, former address and former fiscal year, if changed since last
report)
|
Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to the filing requirements for
the past 90 days.
|
Yes
ý
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No
o
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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 ý
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|||
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Non-accelerated
filer o (Do not check if
a smaller reporting company)
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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 Exchange Act).
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Yes
o
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No
ý
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Indicate
the number of shares outstanding of each of the issuer’s classes of common
stock, as of the latest practicable date:
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Class
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Outstanding
at May 2, 2008
|
|
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Common
Stock, $.01 Par Value
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9,709,607
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Form
10-Q
For The
Quarter Ended March 31, 2008
Table of
Contents
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Part
I. Financial Information
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Item
1.
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Item
2.
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Item
3.
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Item
4.
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Part
II. Other Information
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Item
1.
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Item
2.
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Item
6.
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2
Item 1. Financial
Statements.
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Condensed
Consolidated Balance Sheets
(in
thousands, except share and per share data)
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||||||||
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March
31,
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December
31,
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|||||||
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2008
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2007
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|||||||
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ASSETS
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(unaudited)
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(see
note)
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||||||
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Current
assets:
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||||||||
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Cash
and cash equivalents
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$ | 643 | $ | 407 | ||||
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Accounts
receivable-net:
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||||||||
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Trade
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64,633 | 58,397 | ||||||
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Other
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5,280 | 5,349 | ||||||
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Inventories
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792 | 905 | ||||||
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Prepaid
expenses and deposits
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13,337 | 14,978 | ||||||
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Marketable
equity securities
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18,060 | 17,269 | ||||||
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Income
taxes refundable
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857 | 2,199 | ||||||
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Total
current assets
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103,602 | 99,504 | ||||||
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Property
and equipment:
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||||||||
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Land
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2,674 | 2,674 | ||||||
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Structures
and improvements
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9,920 | 9,795 | ||||||
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Revenue
equipment
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304,571 | 292,133 | ||||||
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Office
furniture and equipment
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7,570 | 7,482 | ||||||
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Total
property and equipment
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324,735 | 312,084 | ||||||
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Accumulated
depreciation
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(113,699 | ) | (107,841 | ) | ||||
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Net
property and equipment
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211,036 | 204,243 | ||||||
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Other
assets:
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||||||||
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Goodwill
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15,413 | 15,413 | ||||||
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Non-compete
agreements, net
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- | 17 | ||||||
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Other
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722 | 727 | ||||||
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Total
other assets
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16,135 | 16,157 | ||||||
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TOTAL
ASSETS
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$ | 330,773 | $ | 319,904 | ||||
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LIABILITIES
AND SHAREHOLDERS' EQUITY
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||||||||
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Current
liabilities:
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||||||||
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Accounts
payable
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$ | 40,892 | $ | 25,346 | ||||
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Accrued
expenses and other liabilities
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12,314 | 10,323 | ||||||
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Current
maturities of long-term debt
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1,523 | 2,065 | ||||||
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Deferred
income taxes-current
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4,290 | 5,117 | ||||||
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Total
current liabilities
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59,019 | 42,851 | ||||||
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Long-term
debt-less current portion
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46,209 | 44,172 | ||||||
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Deferred
income taxes-less current portion
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51,708 | 53,504 | ||||||
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Total
liabilities
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156,936 | 140,527 | ||||||
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SHAREHOLDERS'
EQUITY
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||||||||
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Preferred
stock, $.01 par value, 10,000,000 shares authorized; none
issued
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- | - | ||||||
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Common
stock, $.01 par value, 40,000,000 shares authorized; 11,368,207
and
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||||||||
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11,368,207
shares issued; 9,709,607 and 9,838,107 shares outstanding
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||||||||
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at
March 31, 2008 and December 31, 2007, respectively
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114 | 114 | ||||||
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Additional
paid-in capital
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77,643 | 77,557 | ||||||
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Accumulated
other comprehensive income
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1,054 | 1,921 | ||||||
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Treasury
stock, at cost; 1,658,600 and 1,530,100 shares,
respectively
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(27,131 | ) | (25,200 | ) | ||||
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Retained
earnings
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122,157 | 124,985 | ||||||
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Total
shareholders’ equity
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173,837 | 179,377 | ||||||
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TOTAL
LIABILITIES AND SHAREHOLDERS' EQUITY
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$ | 330,773 | $ | 319,904 | ||||
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Note: The
consolidated balance sheet at December 31, 2007 has been derived from the
audited financial statements at that date but does not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements. See notes to condensed
consolidated financial statements.
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||||||||
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Condensed
Consolidated Statements of Operations
(unaudited)
(in
thousands, except per share data)
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||||||||
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Three
Months Ended
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||||||||
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March
31,
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||||||||
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2008
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2007
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|||||||
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OPERATING
REVENUES:
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||||||||
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Revenue,
before fuel surcharge
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$ | 86,445 | $ | 87,544 | ||||
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Fuel
surcharge
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19,375 | 11,265 | ||||||
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Total
operating revenues
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105,820 | 98,809 | ||||||
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OPERATING
EXPENSES AND COSTS:
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||||||||
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Salaries,
wages and benefits
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34,497 | 33,705 | ||||||
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Fuel
expense
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37,422 | 24,592 | ||||||
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Rents
and purchased transportation
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9,520 | 10,034 | ||||||
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Depreciation
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8,987 | 9,349 | ||||||
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Operating
supplies and expenses
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8,019 | 7,482 | ||||||
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Operating
taxes and licenses
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4,359 | 4,351 | ||||||
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Insurance
and claims
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4,552 | 4,536 | ||||||
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Communications
and utilities
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812 | 768 | ||||||
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Other
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1,384 | 1,640 | ||||||
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Loss
on disposition of equipment
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234 | 18 | ||||||
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Total
operating expenses and costs
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109,786 | 96,475 | ||||||
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OPERATING
(LOSS) INCOME
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(3,966 | ) | 2,334 | |||||
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NON-OPERATING
(EXPENSE) INCOME
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(206 | ) | 241 | |||||
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INTEREST
EXPENSE
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(568 | ) | (487 | ) | ||||
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(LOSS)
INCOME BEFORE INCOME TAXES
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(4,740 | ) | 2,088 | |||||
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FEDERAL
AND STATE INCOME TAX (BENEFIT) EXPENSE:
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||||||||
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Current
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- | 512 | ||||||
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Deferred
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(1,912 | ) | 311 | |||||
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Total
federal and state income tax (benefit) expense
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(1,912 | ) | 823 | |||||
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NET
(LOSS) INCOME
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$ | (2,828 | ) | $ | 1,265 | |||
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(LOSS)
EARNINGS PER COMMON SHARE:
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||||||||
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Basic
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$ | (0.29 | ) | $ | 0.12 | |||
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Diluted
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$ | (0.29 | ) | $ | 0.12 | |||
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AVERAGE
COMMON SHARES OUTSTANDING:
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||||||||
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Basic
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9,795 | 10,305 | ||||||
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Diluted
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9,795 | 10,308 | ||||||
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See
notes to condensed consolidated financial statements.
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||||||||
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Condensed
Consolidated Statements of Cash Flows
(unaudited)
(in
thousands)
|
||||||||
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Three
Months Ended
|
||||||||
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March
31,
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||||||||
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2008
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2007
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|||||||
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OPERATING
ACTIVITIES:
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||||||||
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Net
(loss) income
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$ | (2,828 | ) | $ | 1,265 | |||
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Adjustments
to reconcile net (loss) income to net cash provided by operating
activities:
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||||||||
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Depreciation
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8,987 | 9,349 | ||||||
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Bad
debt expense
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6 | 136 | ||||||
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Stock
compensation-net of excess tax benefits
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86 | 107 | ||||||
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Non-compete
agreement amortization-net of payments
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(17 | ) | 16 | |||||
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Provision
for deferred income taxes
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(1,912 | ) | 311 | |||||
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Reclassification
of unrealized loss on marketable equity securities
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369 | 12 | ||||||
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Loss
(gain) on sale of marketable equity securities
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75 | (120 | ) | |||||
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Loss
on sale or disposal of equipment
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234 | 18 | ||||||
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Changes
in operating assets and liabilities:
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||||||||
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Accounts
receivable
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(6,444 | ) | (4,653 | ) | ||||
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Prepaid
expenses, inventories, and other assets
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1,759 | 3,842 | ||||||
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Income
taxes refundable
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1,342 | 498 | ||||||
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Trade
accounts payable
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796 | (1,193 | ) | |||||
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Accrued
expenses
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2,024 | 2,670 | ||||||
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Net
cash provided by operating activities
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4,477 | 12,258 | ||||||
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INVESTING
ACTIVITIES:
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||||||||
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Purchases
of property and equipment
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(2,973 | ) | (32,294 | ) | ||||
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Proceeds
from sale or disposal of equipment
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1,711 | 3,161 | ||||||
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Changes
in restricted cash
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270 | - | ||||||
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Net
purchases of marketable equity securities
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(2,813 | ) | (1,227 | ) | ||||
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Net
cash used in investing activities
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(3,805 | ) | (30,360 | ) | ||||
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FINANCING
ACTIVITIES:
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||||||||
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Borrowings
under line of credit
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120,738 | 133,774 | ||||||
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Repayments
under line of credit
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(118,497 | ) | (114,964 | ) | ||||
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Repayments
of long-term debt
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(746 | ) | (679 | ) | ||||
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Repurchases
of common stock
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(1,931 | ) | - | |||||
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Exercise
of stock options
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- | 83 | ||||||
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Net
cash (used in) provided by financing activities
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(436 | ) | 18,214 | |||||
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NET
INCREASE IN CASH AND CASH EQUIVALENTS
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236 | 112 | ||||||
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CASH
AND CASH EQUIVALENTS-Beginning of period
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407 | 1,040 | ||||||
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CASH
AND CASH EQUIVALENTS-End of period
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$ | 643 | $ | 1,152 | ||||
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SUPPLEMENTAL
DISCLOSURES OF CASH FLOW INFORMATION-
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||||||||
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Cash
paid during the period for:
|
||||||||
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Interest
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$ | 612 | $ | 501 | ||||
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Income
taxes
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$ | 48 | $ | 76 | ||||
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NONCASH
INVESTING AND FINANCING ACTIVITIES-
|
||||||||
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Purchases
of property and equipment included in accounts payable
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$ | 14,773 | $ | 1,858 | ||||
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See
notes to condensed consolidated financial statements.
|
||||||||
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Condensed
Consolidated Statements of Stockholders’ Equity
(unaudited)
(in
thousands)
|
||||||||||||||||||||||||||||||||
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Common
Stock
Shares
/ Amount
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Additional
Paid-In Capital
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Other
Comprehensive Income (Loss)
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Accumulated
Other Comprehensive Income
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Treasury
Stock
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Retained
Earnings
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Total
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||||||||||||||||||||||||||
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Balance
at December 31, 2007
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9,838 | $ | 114 | $ | 77,557 | $ | 1,921 | $ | (25,200 | ) | $ | 124,985 | $ | 179,377 | ||||||||||||||||||
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Components
of comprehensive loss:
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||||||||||||||||||||||||||||||||
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Net
loss
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$ | (2,828 | ) | (2,828 | ) | (2,828 | ) | |||||||||||||||||||||||||
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Other
comprehensive loss:
|
||||||||||||||||||||||||||||||||
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Unrealized
loss on marketable
|
||||||||||||||||||||||||||||||||
|
securities,
net of tax of $(711)
|
(867 | ) | (867 | ) | (867 | ) | ||||||||||||||||||||||||||
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Total
comprehensive loss
|
$ | (3,695 | ) | |||||||||||||||||||||||||||||
|
Treasury
stock repurchases
|
(128 | ) | (1,931 | ) | (1,931 | ) | ||||||||||||||||||||||||||
|
Share-based
compensation
|
86 | 86 | ||||||||||||||||||||||||||||||
|
Balance
at March 31, 2008
|
9,710 | $ | 114 | $ | 77,643 | $ | 1,054 | $ | (27,131 | ) | $ | 122,157 | $ | 173,837 | ||||||||||||||||||
|
See
notes to condensed consolidated financial statements.
|
||||||||||||||||||||||||||||||||
Notes
to Condensed Consolidated Financial Statements (unaudited)
March
31, 2008
NOTE A: BASIS OF
PRESENTATION
The
accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In management’s opinion, all adjustments (consisting of
normal recurring accruals) necessary for a fair presentation have been included.
Operating results for the three-month period ended March 31, 2008 are not
necessarily indicative of the results that may be expected for the year ending
December 31, 2008. For further information, refer to the consolidated financial
statements and the footnotes thereto included in the Company’s annual report on
Form 10-K for the year ended December 31, 2007.
NOTE B: RECENT
ACCOUNTING PRONOUNCEMENTS
In March
2008, the Financial Accounting Standards Board (“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. Management does not expect
the adoption of SFAS No. 161 to 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. Management
does not expect the adoption of SFAS No. 160 to 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. Beginning on January 1, 2009, adoption of SFAS
No. 141(R) will impact our accounting for business combinations completed
on or after that date.
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. See Note J for additional discussion on fair value
measurements.
NOTE
C: 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 either 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 the first three months of 2008, there were no sales
or reclassifications of marketable securities. 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. 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
March 31, 2008, equity securities classified as available-for-sale and equity
securities classified as trading had a cost basis of approximately $15,706,000
and $661,000, respectively and fair market values of approximately $17,474,000
and $586,000, respectively. For the three months ended March 31, 2008, the
Company had net unrealized losses in market value on securities classified as
available-for-sale of approximately $867,000, net of deferred income taxes. Also
during this period, the Company recognized losses on trading securities of
approximately $44,000, net of deferred income taxes. The Company’s marketable
securities that are classified as available-for-sale had gross unrealized gains
of approximately $4,096,000 and gross unrealized losses of approximately
$2,329,000. The Company’s marketable securities that are classified as trading
had gross recognized gains of approximately $3,000 and gross recognized losses
of approximately $77,000. As of March 31, 2008, the total net unrealized gain,
net of deferred income taxes, in accumulated other comprehensive income was
approximately $1,054,000.
The
following table shows the Company’s investments’ approximate gross unrealized
losses and fair value at March 31, 2008 and December 31, 2007. These investments
consist of equity securities. As of March 31, 2008 and December 31, 2007 there
were no investments that had been in a continuous unrealized loss position for
twelve months or longer.
|
March
31, 2008
|
December
31, 2007
|
|||||||||||||||
|
(in
thousands)
|
||||||||||||||||
|
Fair
Value
|
Unrealized
Losses
|
Fair
Value
|
Unrealized
Losses
|
|||||||||||||
|
Equity
securities – Available for sale
|
$ | 6,700 | $ | 2,329 | $ | 5,308 | $ | 1,541 | ||||||||
|
Equity
securities – Trading
|
450 | 77 | 409 | 31 | ||||||||||||
|
Totals
|
$ | 7,150 | $ | 2,406 | $ | 5,717 | $ | 1,572 | ||||||||
NOTE D: STOCK
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 March 31, 2008, 702,000 shares were available for granting future
options.
Outstanding
incentive stock options at March 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 March 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 have been 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
have been at least 90% of net income for the most recent year with positive
income. As of March 31, 2008, options for 180,000 shares had 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.
At March
31, 2008, the Company had stock-based compensation plans with total unrecognized
stock compensation expense of approximately $17,000 which will be amortized on a
straight-line basis during the remainder of 2008. As a result, the Company
expects to recognize approximately $17,000 in additional compensation expense
related to unvested options awards during the remainder of 2008. Total pre-tax
stock-based compensation expense, recognized in Salaries, wages and benefits was
approximately $85,000 during the first three months of 2008 and includes
approximately $80,000 recognized as a result of the annual grant of an option
for 2,000 shares to each non-employee director during the first quarter of 2008.
The recognition of stock-based compensation expense decreased diluted and basic
earnings per common share by approximately $0.01 during the three months ending
March 31, 2008. Total pre-tax stock-based compensation expense, recognized in
Salaries, wages and benefits was approximately $107,000 during the first three
months of 2007 and includes approximately $101,000 recognized as a result of the
annual grant of an option for 2,000 shares to each non-employee director during
the first quarter of 2007. The recognition of stock-based compensation expense
decreased diluted and basic earnings per common share by approximately $0.01
during the three months ending March 31, 2007. The weighted average grant date
fair value of options granted during the first three months of 2008 and 2007 was
$4.98 per share and $6.32 per share, respectively.
The fair
value of the Company’s stock options was estimated at the date of grant using a
Black-Scholes-Merton (“BSM”) option-pricing model using the following
assumptions:
|
Three
Months Ended
|
|||
|
March
31,
|
|||
|
2008
|
2007
|
||
|
Dividend
yield
|
0%
|
0%
|
|
|
Volatility
range
|
36.67%
- 38.54%
|
37.34%
- 38.54%
|
|
|
Risk-free
rate range
|
2.50%
- 4.38%
|
4.38%
- 4.48%
|
|
|
Expected
life
|
4.3
years - 5 years
|
2.5
years - 5 years
|
|
|
Fair
value of options
|
$4.98
- $8.89
|
$6.32
- $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 were 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 option activity for the three months ended March 31, 2008 is as
follows:
|
Shares
Under Options
|
Weighted-Average
Exercise Price
|
Weighted-
Average Remaining Contractual Term
|
Aggregate
Intrinsic Value*
|
|||||||||||||
|
(per
share)
|
(in
years)
|
|||||||||||||||
|
Outstanding-beginning
of year
|
248,500 | $ | 22.81 | |||||||||||||
|
Granted
|
16,000 | 14.98 | ||||||||||||||
|
Exercised
|
- | - | ||||||||||||||
|
Cancelled/forfeited/expired
|
(10,000 | ) | 22.68 | |||||||||||||
|
Outstanding
at March 31, 2008
|
254,500 | $ | 22.32 | 4.0 | $ | 11,360 | ||||||||||
|
Exercisable
at March 31, 2008
|
254,500 | $ | 22.32 | 4.0 | $ | 11,360 | ||||||||||
|
___________________________
|
||||||||||||||||
|
*
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 March 31, 2008, was $15.69.
|
||||||||||||||||
The
number, weighted average exercise price and weighted average remaining
contractual life of options outstanding as of March 31, 2008 and the number and
weighted average exercise price of options exercisable as of March 31, 2008 are
as follows:
|
Exercise
Price
|
Shares
Under Outstanding Options
|
Weighted-Average
Remaining Contractual Term
|
Shares
Under Exercisable Options
|
|||
|
(in
years)
|
||||||
|
$14.98
|
16,000
|
5.0
|
16,000
|
|||
|
$16.99
|
8,000
|
0.9
|
8,000
|
|||
|
$18.27
|
10,000
|
1.9
|
10,000
|
|||
|
$19.88
|
12,500
|
0.5
|
12,500
|
|||
|
$22.92
|
14,000
|
4.0
|
14,000
|
|||
|
$23.22
|
180,000
|
4.5
|
180,000
|
|||
|
$26.73
|
14,000
|
3.2
|
14,000
|
|||
|
254,500
|
4.0
|
254,500
|
During
the three months ended March 31, 2007, the Company received cash from option
exercises in the amount of approximately $83,000. There were no option exercises
during the three months ended March 31, 2008. The Company issues new shares upon
option exercise.
NOTE E: SEGMENT
INFORMATION
The
Company considers the guidance provided by Statement of Financial Accounting
Standards No. 131, Disclosures
about Segments of an Enterprise and Related Information (“SFAS No. 131”),
in its identification of operating segments. The Company has determined that it
has a total of eight operating segments whose primary operations can be
characterized as either Truckload Services or Brokerage and Logistics Services,
however in accordance with the aggregation criteria provided by SFAS No. 131 the
Company has determined that the operations of the eight operating segments can
be aggregated into a single reporting segment, motor carrier operations.
Truckload Services revenues and Brokerage and Logistics Services revenues, each
before fuel surcharges, were as follows:
|
Three
Months Ended March 31,
|
||||||||||||||||
|
2008
|
2007
|
|||||||||||||||
|
Amount
|
%
|
Amount
|
%
|
|||||||||||||
|
(in
thousands, except percentage data)
|
||||||||||||||||
|
Truckload
Services revenue
|
$ | 78,356 | 90.6 | $ | 78,374 | 89.5 | ||||||||||
|
Brokerage
and Logistics Services revenue
|
8,089 | 9.4 | 9,170 | 10.5 | ||||||||||||
|
Total
revenues
|
$ | 86,445 | 100.0 | $ | 87,544 | 100.0 | ||||||||||
NOTE F: TREASURY
STOCK
The
Company accounts for Treasury stock using the cost method and as of March 31,
2008, 1,658,600 shares were held in the treasury at an aggregate cost of
approximately $27,131,000. During the three months ending March 31, 2008, the
Company repurchased 128,500 shares of its common stock at an aggregate cost of
approximately $1,931,000.
NOTE
G: COMPREHENSIVE INCOME
Comprehensive
income was comprised of net income plus or minus market value adjustments
related to our marketable securities. The components of comprehensive income
were as follows:
|
Three
Months Ended
|
||||||||
|
March
31,
|
||||||||
|
2008
|
2007
|
|||||||
|
(in
thousands)
|
||||||||
|
Net
(loss) income
|
$ | (2,828 | ) | $ | 1,265 | |||
|
Other
comprehensive income (loss):
|
||||||||
|
Reclassification
adjustment for unrealized losses on marketable
|
||||||||
|
securities
included in net income, net of income taxes
|
220 | 7 | ||||||
|
Change
in fair value of marketable securities, net of income
taxes
|
(1,087 | ) | 85 | |||||
|
Total
comprehensive income
|
$ | (3,695 | ) | $ | 1,357 | |||
NOTE H: EARNINGS
PER SHARE
Diluted
earnings per share computations assume the exercise of stock options to purchase
shares of common stock. The shares assumed exercised are based on the weighted
average number of shares under options outstanding during the period and only
include those options for which the exercise price is less than the average
share price during the period. The net additional shares issuable are calculated
based on the treasury stock method and are added to the weighted average number
of shares outstanding during the period.
A
reconciliation of the basic and diluted income per share computations for the
three months ended March
31,
2008 and
2007 is as
follows:
|
Three
Months Ended
|
||||||||
|
March
31,
|
||||||||
|
2008
|
2007
|
|||||||
|
(in
thousands, except per share data)
|
||||||||
|
Net
(loss) income
|
$ | (2,828 | ) | $ | 1,265 | |||
|
Basic
weighted average common shares outstanding
|
9,795 | 10,305 | ||||||
|
Dilutive
effect of common stock equivalents
|
- | 3 | ||||||
|
Diluted
weighted average common shares outstanding
|
9,795 | 10,308 | ||||||
|
Basic
(loss) earnings per share
|
$ | (0.29 | ) | $ | 0.12 | |||
|
Diluted
(loss) earnings per share
|
$ | (0.29 | ) | $ | 0.12 | |||
Options
to purchase 238,500 and 264,000 shares of common stock were outstanding at March
31, 2008 and 2007, respectively, but were not included in the computation of
diluted earnings per share because to do so would have an anti-dilutive
effect.
NOTE I: INCOME
TAXES
The
Company adopted the provisions of FASB Interpretation 48, Accounting for Uncertainty in Income
Taxes (“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 March
31, 2008, an adjustment to the Company’s consolidated financial statements for
uncertain tax positions was not required as management believes that the
Company’s 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 2004 through 2007 remain open to examination in those
jurisdictions. The Company recognizes interest and penalties related to
uncertain income tax positions, if any, in income tax expense. During the three
months ended March 31, 2008, the Company has not recognized or accrued any
interest or penalties related to uncertain income tax positions.
NOTE J: FAIR
VALUE OF FINANCIAL INSTRUMENTS
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.
Assets
and liabilities measured at fair value on a recurring basis and subject to
the disclosure requirements of SFAS No. 157 as of March 31, 2008 are
summarized below:
|
Total
|
Level
1
|
Level
2
|
Level
3
|
|||||||||||||
|
(in
thousands)
|
||||||||||||||||
|
Marketable
securities
|
$ | 18,060 | $ | 18,060 | - | - | ||||||||||
The
Company’s investments in marketable securities are recorded at fair value based
on quoted market prices. The Company does not have other financial instruments
requiring fair value disclosure. The carrying value of other financial
instruments, including cash, accounts receivable, accounts payable, and accrued
liabilities approximate fair value due to their short maturities.
We have
adopted SFAS No. 159 effective January 1, 2008 and have not elected
the fair value option for our financial instruments.
FORWARD-LOOKING
INFORMATION
Certain
information included in this Quarterly Report on Form 10-Q constitutes
“forward-looking statements” within the meaning of the Private Securities
Litigation Reform Act of 1995. Such forward-looking statements may relate to
expected future financial and operating results or events, and are thus
prospective. Such forward-looking statements are subject to risks, uncertainties
and other factors which could cause actual results to differ materially from
future results expressed or implied by such forward-looking statements.
Potential risks and uncertainties include, but are not limited to, excess
capacity in the trucking industry; surplus inventories; recessionary economic
cycles and downturns in customers’ business cycles; increases or rapid
fluctuations in fuel prices, interest rates, fuel taxes, tolls, license and
registration fees; the resale value of the Company’s used equipment and the
price of new equipment; increases in compensation for and difficulty in
attracting and retaining qualified drivers and owner-operators; increases in
insurance premiums and deductible amounts relating to accident, cargo, workers'
compensation, health, and other claims; unanticipated increases in the number or
amount of claims for which the Company is self insured; inability of the Company
to continue to secure acceptable financing arrangements; seasonal factors such
as harsh weather conditions that increase operating costs; competition from
trucking, rail, and intermodal competitors including reductions in rates
resulting from competitive bidding; the ability to identify acceptable
acquisition candidates, consummate acquisitions, and integrate acquired
operations; a significant reduction in or termination of the Company's trucking
service by a key customer; and other factors, including risk factors, included
from time to time in filings made by the Company with the SEC. The Company
undertakes no obligation to update or clarify forward-looking statements,
whether as a result of new information, future events or otherwise.
CRITICAL ACCOUNTING
POLICIES
There
have been no material changes to our critical accounting policies and estimates
from the information provided in Item 7, Management’s Discussion and Analysis
of Financial Condition and Results of Operations, included in our Form
10-K for the fiscal year ended December 31, 2007.
BUSINESS
OVERVIEW
The
Company’s administrative headquarters are in Tontitown, Arkansas. From this
location we manage operations conducted through 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 90.6% and 89.5% of
total revenues, excluding fuel surcharges for the three months ended March 31,
2008 and 2007, respectively with remaining revenues, excluding fuel surcharges,
being generated from brokerage and logistics services.
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 the
three months ending March 31, 2008 and 2007, approximately $19.4 million and
$11.3 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.
|
Three
Months Ended
|
||||||||
|
March
31,
|
||||||||
|
2008
|
2007
|
|||||||
|
(percentages)
|
||||||||
|
Operating
revenues, before fuel surcharge
|
100.0 | 100.0 | ||||||
|
Operating
expenses:
|
||||||||
|
Salaries,
wages and benefits
|
43.4 | 42.3 | ||||||
|
Fuel
expense, net of fuel surcharge
|
23.2 | 17.3 | ||||||
|
Rent
and purchased transportation
|
2.8 | 2.2 | ||||||
|
Depreciation
|
11.5 | 11.9 | ||||||
|
Operating
supplies and expenses
|
10.2 | 9.6 | ||||||
|
Operating
taxes and licenses
|
5.6 | 5.6 | ||||||
|
Insurance
and claims
|
5.8 | 5.8 | ||||||
|
Communications
and utilities
|
1.0 | 0.9 | ||||||
|
Other
|
1.6 | 1.8 | ||||||
|
Loss
on sale or disposal of property
|
0.3 | 0.0 | ||||||
|
Total
operating expenses
|
105.4 | 97.4 | ||||||
|
Operating
(loss) income
|
(5.4 | ) | 2.6 | |||||
|
Non-operating
(expense) income
|
(0.3 | ) | 0.3 | |||||
|
Interest
expense
|
(0.7 | ) | (0.6 | ) | ||||
|
Income
(loss) before income taxes
|
(6.4 | ) | 2.3 | |||||
THREE
MONTHS ENDED MARCH 31, 2008 VS. THREE MONTHS ENDED MARCH 31, 2007
For the
quarter ended March 31, 2008, truckload services revenue, before fuel
surcharges, remained stable at $78.4 million as compared to $78.4 million for
the quarter ended March 31, 2007. The average number of trucks decreased from
2,070 to 2,053 for the periods compared, resulting in a slight increase in
utilization measured in miles traveled per truck each day. However, the
continued weak demand and intense price competition in the truckload freight
market has continued to depress freight rates resulting in a decrease in our
average rate per total mile, before fuel surcharges, to $1.26 for the first
quarter of 2008 compared to $1.29 for the first quarter of 2007.
Salaries,
wages and benefits increased from 42.3% of revenues, before fuel surcharges, in
the first quarter of 2007 to 43.4% of revenues, before fuel surcharges, during
the first quarter of 2008. The increase relates primarily to an increase in
driver wages as the number of company driver compensated miles increased from
60.6 million miles during the first quarter of 2007 to 62.1 million miles during
the first quarter of 2008. Also contributing to the increase was an increase in
amounts paid for driver lease expense, which is a component of salaries, wages
and benefits, as the average number of owner operators under contract increased
from 52 during the first quarter of 2007 to 54 during the first quarter of 2008.
Partially offsetting the increases discussed above was a decrease in amounts
expensed for employee health benefits for the periods compared.
Fuel
expense, net of fuel surcharge, increased from 17.3% of revenues, before fuel
surcharges, during the first quarter of 2007 to 23.2% of revenues, before fuel
surcharges, during the first quarter of 2008 which represented an increase from
$13.5 million during the first quarter of 2007 to $18.2 million during the first
quarter of 2008. The increase was related to an increase in the average price
paid per gallon of diesel fuel from $2.39 during the first quarter of 2007 to an
average cost of $3.39 during the first quarter of 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 $0.96 per gallon during the first quarter of 2007
to $1.62 during the first quarter of 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
falling fuel prices.
Rent and
purchased transportation increased from 2.2% of revenues, before fuel
surcharges, during the first quarter of 2007 to 2.8% of revenues, before fuel
surcharges, during the first quarter of 2008. The increase relates to an
increase in amounts paid to third party transportation companies for intermodal
services.
Depreciation
and amortization decreased from 11.9% of revenues, before fuel surcharges,
during the first quarter of 2007 to 11.5% of revenues, before fuel surcharges,
during the first quarter of 2008. Depreciation expense decreased from $9.3
million during the first quarter of 2007 to $9.0 million during the first
quarter of 2008 as the Company continues to reduce the size of its truck fleet
in response to weak demand in the truckload freight market.
Operating
supplies and expenses increased from 9.6% of revenues, before fuel surcharges,
during the first quarter of 2007 to 10.2% of revenues, before fuel surcharges,
during the first quarter of 2008. The increase relates primarily to an increase
in amounts paid for tolls, driver layover pay, and for truck repairs
expense.
The
truckload services division operating ratio, which measures the ratio of
operating expenses, net of fuel surcharges, to operating revenues, before fuel
surcharges, increased from 97.4% for the first quarter 2007 to 105.4% for the
first quarter of 2008.
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.
|
Three
Months Ended
|
||||||||
|
March
31,
|
||||||||
|
2008
|
2007
|
|||||||
|
(percentages)
|
||||||||
|
Operating
revenues, before fuel surcharge
|
100.0 | 100.0 | ||||||
|
Operating
expenses:
|
||||||||
|
Salaries,
wages and benefits
|
6.2 | 6.2 | ||||||
|
Fuel
expense
|
0.0 | 0.0 | ||||||
|
Rent
and purchased transportation, net of fuel surcharge
|
88.6 | 88.0 | ||||||
|
Depreciation
|
0.0 | 0.0 | ||||||
|
Operating
supplies and expenses
|
0.0 | 0.0 | ||||||
|
Operating
taxes and licenses
|
0.0 | 0.0 | ||||||
|
Insurance
and claims
|
0.1 | 0.1 | ||||||
|
Communications
and utilities
|
0.3 | 0.3 | ||||||
|
Other
|
1.4 | 2.2 | ||||||
|
(Gain)
loss on sale or disposal of property
|
0.0 | 0.0 | ||||||
|
Total
operating expenses
|
96.6 | 96.8 | ||||||
|
Operating
income
|
3.4 | 3.2 | ||||||
|
Non-operating
income
|
0.0 | 0.0 | ||||||
|
Interest
expense
|
(0.3 | ) | (0.4 | ) | ||||
|
Income
before income taxes
|
3.1 | 2.8 | ||||||
THREE
MONTHS ENDED MARCH 31, 2008 VS. THREE MONTHS ENDED MARCH 31, 2007
For the
quarter ended March 31, 2008, logistics and brokerage services revenue, before
fuel surcharges, decreased 11.8% to $8.1 million as compared to $9.2 million for
the quarter ended March 31, 2007. The decrease was primarily the result of a
12.7% decrease in the number of loads brokered during the first quarter of 2008
as compared to the first quarter of 2007.
Rent and
purchased transportation increased from 88.0% of revenues, before fuel
surcharges, during the first quarter of 2007 to 88.6% of revenues, before fuel
surcharges during the first quarter of 2008. The increase relates to an increase
in amounts charged by third party logistics and brokerage service
providers.
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, decreased from 96.8% for the first quarter 2007 to 96.6%
for the first quarter of 2008.
RESULTS OF OPERATIONS –
COMBINED SERVICES
THREE
MONTHS ENDED MARCH 31, 2008 VS. THREE MONTHS ENDED MARCH 31, 2007
Net loss
for all divisions was approximately $2.8 million, or 3.3% of revenues, before
fuel surcharge for the first quarter of 2008 as compared to net income of $1.3
million or 1.4% of revenues, before fuel surcharge for the first quarter of
2007. The decrease in income resulted in a decrease in diluted earnings per
share from $0.12 for the first quarter of 2007 to a diluted loss per share of
$0.29 for the first quarter of 2008.
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.
During
the first three months of 2008, we generated $4.5 million in cash from operating
activities. Investing activities used $3.8 million in cash in the first three
months of 2008. Financing activities used $0.4 million in cash in the first
three months of 2008.
Our
primary use of funds is for the purchase of revenue equipment. We typically use
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 the first three months of 2008, we
utilized cash on hand and our lines of credit to finance revenue equipment
purchases of approximately $2.9 million.
Occasionally
we finance the acquisition of revenue equipment through installment notes with
fixed interest rates and terms ranging from 36 to 48 months, however as of March
31, 2008, we had no outstanding indebtedness under such installment
notes.
During
the remainder of the year, we expect to purchase approximately 300 new trucks
and approximately 200 new trailers while continuing to sell or trade older
equipment, which we expect to result in net capital expenditures of
approximately $21.0 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 recent operating results, current cash
position, 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.
We
maintain two separate $30.0 million revolving lines of credit (Line A and Line
B, respectively) with separate financial institutions. Amounts outstanding under
Line A bear interest at LIBOR (determined as of the first day of each month)
plus 1.25% (4.37% at March 31, 2008), are secured by our accounts receivable and
mature on May 31, 2009. At March 31, 2008 outstanding advances on line A were
approximately $24.7 million, including $300,000 in letters of credit, with
availability to borrow $5.3 million. Amounts outstanding under Line B bear
interest at LIBOR (determined on the last day of the previous month) plus 1.15%
(4.26% at March 31, 2008), are secured by revenue equipment and mature on June
30, 2008, however the Company has the intent and ability to extend the terms of
this line of credit for an additional one year period until June 30, 2009. At
March 31, 2008, $22.7 million, including $1.7 million in letters of credit were
outstanding under Line B with availability to borrow $7.3 million.
Trade
accounts receivable at March 31, 2008 increased approximately $6.2 million as
compared to December 31, 2007. Certain of the Company's largest customers
regularly schedule plant shutdowns for various periods during December and the
volume of freight we ship is reduced during such scheduled shutdowns. This
reduction in freight volume results in a reduction in accounts receivable at the
end of each year. The remaining increase relates to a general increase in
revenue, which flows through the accounts receivable account, during the month
of March 2008 as compared to the revenues generated during the month of December
2007.
Prepaid
expenses and deposits at March 31, 2008 decreased approximately $1.6 million as
compared to December 31, 2007. The decrease reflects 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. These prepaid expenses will continue to be amortized to expense
through the remainder of the year.
Marketable
equity securities at March 31, 2008 increased approximately $0.8 million as
compared to December 31, 2007. During the three months ended March 31, 2008, the
Company purchased approximately $2.8 million of equity securities with the
remaining increase or decrease attributable to changes in the market value of
the investments, net of other-than-temporary write-downs. These securities,
combined with equity securities purchased in prior periods, have a combined cost
basis of approximately $16.4 million and a combined fair market value of
approximately $18.1 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 the
first three months of 2008 the Company had net unrealized pre-tax losses of
approximately $1.6 million and received dividends of approximately $190,000. The
holding term of these securities depends largely on the general economic
environment, the equity markets, borrowing rates and the Company's cash
requirements.
Revenue
equipment, which generally consists of trucks, trailers, and revenue equipment
accessories such as Qualcomm™ satellite tracking units, increased approximately
$12.4 million as compared to December 31, 2007. This increase relates primarily
to the purchase of new trucks to replace older trucks which have not yet been
retired or are otherwise in the process of being traded or sold. Also
contributing to the increase, was the purchase of new trailers as the Company
intends to increase its trailer fleet in order to reduce third-party trailer
rental expense.
Accounts
payable at March 31, 2008 increased approximately $15.5 million as compared to
December 31, 2007. The increase is primarily related to $14.8 million in truck
and trailer purchases made during March 2008 for which payment is not due until
April 2008. The net increase also reflects an increase of approximately $2.2
million in amounts accrued for fuel purchases, an increase of approximately $3.0
million accrued for auto liability insurance premiums, and a decrease of
approximately $4.3 million in amounts reclassified as bank drafts outstanding at
March 31, 2008 as compared to December 31, 2007.
Accrued
expenses and other liabilities at March 31, 2008 increased approximately $2.0
million as compared to December 31, 2007. The increase is primarily related to
an increase 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.
Long-term
debt at March 31, 2008 increased approximately $2.0 million as compared to
December 31, 2007. The increase is primarily related to an increase in the
balance due on the Company’s lines of credit at March 31, 2008 as compared to
December 31, 2007. During the first three months of 2008 the Company borrowed
approximately $2.2 million more than it repaid under its lines of credit in
order to finance the purchase of revenue equipment during the first quarter of
2008.
NEW ACCOUNTING
PRONOUNCEMENTS
See Note
B to the condensed consolidated financial statements for a description of the
most recent accounting pronouncements and their impact, if any, on the
Company.
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 and the general strategies we employ to
manage such 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
increased to $18.1 million at March 31, 2008 from $17.3 million at December 31,
2007. The increase during the first three months of 2008 reflects additional
purchases of $2.8 million, write-downs of $0.4 million and a decrease in the
fair market value of approximately $1.6 million. 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 $1.8
million. For additional information with respect to the marketable equity
securities, see Note C to our consolidated financial statements.
Interest Rate
Risk
Our two
lines of credit each bear 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 lines of credit. Assuming $45.0 million of variable rate debt
outstanding, a hypothetical 100 basis point increase in LIBOR for a one year
period would result in approximately $450,000 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 2007 fuel
consumption, a 10% increase in the average annual price per gallon of diesel
fuel would increase our annual fuel expenses by $11.4 million.
Evaluation
of disclosure controls and procedures. In accordance with Rule
13a-15(b) of the Securities Exchange Act of 1934 (the "Exchange Act"), the
Company's management evaluated, with the participation of the Company's
President and Chief Executive Officer and Chief Financial Officer, the
effectiveness of the design and operation of the Company's disclosure controls
and procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the Exchange
Act) as of March 31, 2008. Based upon that evaluation of these disclosure
controls and procedures, the President and Chief Executive Officer and the Chief
Financial Officer concluded that the disclosure controls and procedures were
effective as of March 31, 2008 so that material information relating to the
Company, including its consolidated subsidiaries, was made known to them by
others within those entities, particularly during the period in which this
quarterly report on Form 10-Q was being prepared.
Changes
in internal controls over financial reporting. There was no change in the
Company's internal control over financial reporting that occurred during the
quarter ended March 31, 2008 that has materially affected, or is reasonably
likely to materially affect, the Company's internal control over financial
reporting.
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.
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. The following table summarizes the
Company’s common stock repurchases during the first quarter of 2008 made
pursuant to this authorization. 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”.
|
Issuer
Purchases of Equity Securities
|
||||||||||||||||
|
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
|
|||||||||||||
|
Period
|
||||||||||||||||
|
January
1-31, 2008
|
- | - | - | 128,500 | ||||||||||||
|
February
1-29, 2008
|
74,000 | $ | 15.04 | 74,000 | 54,500 | |||||||||||
|
March
1-31, 2008
|
54,500 | 14.93 | 54,500 | - | ||||||||||||
|
Total
|
128,500 | $ | 14.99 | 128,500 | ||||||||||||
|
Exhibits
required by Item 601 of Regulation S-K:
|
|
|
3.1
|
Amended
and Restated Certificate of Incorporation of the Registrant (incorporated
by reference to Exhibit 3.1 of the Company's Form 10-Q filed on May 15,
2002)
|
|
3.2
|
Amended
and Restated By-Laws of the Registrant (incorporated by reference to
Exhibit 3.2 of the Company's Form 8-K filed on December 11,
2007.)
|
|
Rule
13a-14(a) Certification of Principal Executive Officer
|
|
|
Rule
13a-14(a) Certification of Principal Financial Officer
|
|
|
Section
1350 Certification of Chief Executive Officer
|
|
|
Section
1350 Certification of Chief Financial
Officer
|
|
Pursuant
to the requirements of the Securities Exchange Act of 1934, the Registrant has
duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.
|
P.A.M.
TRANSPORTATION SERVICES, INC.
|
|
|
Dated: May
7, 2008
|
By: /s/ Robert W. Weaver
|
|
Robert
W. Weaver
|
|
|
President
and Chief Executive Officer
|
|
|
(principal
executive officer)
|
|
|
Dated: May
7, 2008
|
By: /s/ Larry J. Goddard
|
|
Larry
J. Goddard
|
|
|
Vice
President-Finance, Chief Financial
|
|
|
Officer,
Secretary and Treasurer
|
|
|
(principal
accounting and financial officer)
|
|
Index to
Exhibits to Form 10-Q
|
Exhibit
Number
|
Exhibit
Description
|
|
|
3.1
|
Amended
and Restated Certificate of Incorporation of the Registrant (incorporated
by reference to Exhibit 3.1 of the Company's Form 10-Q filed on May 15,
2002.)
|
|
|
3.2
|
Amended
and Restated By-Laws of the Registrant (incorporated by reference to
Exhibit 3.2 of the Company's Form 8-K filed on December 11,
2007.)
|
|
|
Rule
13a-14(a) Certification of Principal Executive Officer
|
||
|
Rule
13a-14(a) Certification of Principal Financial Officer
|
||
|
Section
1350 Certification of Chief Executive Officer
|
||
|
Section
1350 Certification of Chief Financial
Officer
|
||
21