P.A.M. TRANSPORTATION SERVICES, INC. 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, prospects, plans 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, inflation, interest rates, fuel taxes, tolls, and
license and registration fees; potential economic, business or operational
disruptions or uncertainties that may result from any future outbreaks of the
COVID-19 pandemic or other public health crises; 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;
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; our ability to develop and
implement suitable information technology systems and prevent failures in or
breaches of such systems; the impact of pending or future litigation; general
risks associated with doing business in
CRITICAL ACCOUNTING ESTIMATES
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
BUSINESS OVERVIEW
The Company is a holding company that owns subsidiaries engaged in providing
truckload dry van carrier services transporting general commodities throughout
the continental
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 64.7% and 63.7% of
total revenues, excluding fuel surcharges, for the quarters ended
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 benefits costs, independent broker costs (which we record as purchased transportation), insurance, maintenance and capital equipment costs.
In discussing our results of operations, we use revenue, before fuel surcharge
(and fuel expense, net of fuel 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 ended
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On
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 reported net of fuel surcharges.
Three Months Ended
March 31,
2023 2022
(percentages)Operating revenues, before fuel surcharge 100.0 100.0
Operating expenses: Salaries, wages and benefits 36.2 28.8 Operating supplies and expenses 10.0 6.5 Rent and purchased transportation 24.6 26.3 Depreciation 12.9 11.5 Insurance and claims 12.3 5.5 Other 3.8 2.9 Gain on sale or disposal of property (0.5 ) (0.1 ) Total operating expenses 99.3 81.4 Operating income 0.7 18.6 Non-operating income 0.6 1.2 Interest expense (1.5 ) (1.0 ) (Loss) / Income before income taxes (0.2 ) 18.8
THREE MONTHS ENDED
During the first quarter of 2023, truckload services revenue, before fuel
surcharges, was relatively flat at
Salaries, wages and benefits increased from 28.8% of revenues, before fuel surcharges, in the first quarter of 2022 to 36.2% of revenues, before fuel surcharges, during the first quarter of 2023. This percentage-based increase is primarily a result of the interaction of expenses with fixed-cost characteristics, such as general and administrative wages, maintenance wages, and operations wages with a decrease in revenue per mile for the periods compared, coupled with an increase in the number of employees during the first quarter of 2023 compared to the first quarter of 2022.
Operating supplies and expenses increased from 6.5% of revenues, before fuel surcharges, during the first quarter of 2022 to 10.0% of revenues, before fuel surcharges, during the first quarter of 2023. The increase relates primarily to a decrease in the average rate per mile charged to customers, coupled with an increase in miles driven.
Insurance and claims increased from 5.5% of revenues, before fuel surcharges,
during the first quarter 2022 to 12.3% of revenues, before fuel surcharges,
during the first quarter 2023. This increase relates primarily to an increase in
accident reserves recognized in the first quarter of 2023, as compared to the
first quarter of 2022. During the quarter ended
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 81.4% for the first quarter of 2022 to 99.3% for the first quarter of 2023.
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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.
Three Months Ended
March 31,
2023 2022
(percentages)Operating revenues, before fuel surcharge 100.0 100.0
Operating expenses: Salaries, wages and benefits 4.4 4.5 Rent and purchased transportation 82.4 82.2 Other 2.0 1.9 Total operating expenses 88.8 88.6 Operating income 11.2 11.4 Non-operating income 0.2 0.6 Interest expense (0.6 ) (0.6 ) Income before income taxes 10.8 11.4
THREE MONTHS ENDED
During the first quarter of 2023, logistics and brokerage services revenue,
before fuel surcharges, decreased 4.0% to
Rents and purchased transportation increased from 82.2% of revenues, before fuel surcharges, during the first quarter of 2022 to 82.4% of revenues, before fuel surcharges, during the first quarter of 2023. The increase resulted from paying third-party carriers a larger percentage of customer revenue.
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 from 88.6% for the first quarter of 2022 to 88.8% for the first quarter of 2023.
RESULTS OF OPERATIONS - COMBINED SERVICES
THREE MONTHS ENDED
Net income for all divisions was approximately
LIQUIDITY AND CAPITAL RESOURCES
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, and borrowings under our credit facilities, installment notes, and investment margin account.
During the first three months of 2023, we generated
Our primary use of funds is for the purchase of revenue equipment. We typically
use installment notes, our existing line 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
2023, we utilized cash on hand and our line of credit to finance purchases of
revenue equipment and other assets of approximately
We commonly finance the acquisition of revenue equipment through installment
notes with fixed interest rates and terms ranging from 36 to 84 months. During
the first three months of 2023, the Company's subsidiary,
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During the remainder of 2023, we expect to purchase approximately 340 new trucks
and 1,000 new trailers while continuing to sell or trade older equipment, which
we expect to result in net capital expenditures of approximately
We currently intend to retain our future earnings to finance our growth and do not anticipate paying cash dividends in the foreseeable future.
During the first three months of 2023, we maintained a revolving line of credit.
Amounts outstanding under the line bear interest at Term SOFR plus 1.35% (6.22%
at
Trade accounts receivable decreased from
Prepaid expenses and deposits decreased from
Revenue equipment decreased from
Accounts payable decreased from
Accrued expenses and other liabilities increased from
Long-term debt and current maturities of long term-debt are reviewed on an
aggregate basis, as the classification of amounts in each category are typically
affected merely by the passage of time. Long-term debt and current maturities of
long-term debt, on an aggregate basis, decreased from
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.
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