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. In this Quarterly Report, the words "believe,"
"may," "will," "estimate," "continue," "anticipate," "intend," "expect,"
"project," "could," "should," "would" and similar expressions, as they relate to
us, out management, and our industry are intended to identify forward-looking
statements. 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, ongoing and
potential future economic, business and operational disruptions and
uncertainties due to the COVID-19 pandemic or other public health crises; 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, and 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; 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 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
BUSINESS OVERVIEW
The Company's administrative headquarters are in
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 66.9% and 81.7% of
total revenues, excluding fuel surcharges, for the three months 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.
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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
IMPACT OF COVID-19
The Company's primary concern during the COVID-19 pandemic has been to do its part to protect its employees, customers, vendors and the general public from the spread of COVID-19 while continuing to serve the vital role of supplying essential goods to the nation. Where feasible, our employees are working remotely from their homes. For essential functions, including our driving professionals, we distribute cleaning and protective supplies to various terminals so that they are available to those that need them. We provide employees direction on precautionary measures, such as sanitizing truck interiors, personal hygiene, and social distancing. We will continue to adapt our operations as required to ensure safety while continuing to provide a high level of service to our customers.
While we and most of our customers have returned to normal operations and economic activity continued to increase during the first quarter of 2021, we continue to monitor ongoing developments with the COVID-19 pandemic. Any future waves or outbreaks of alternative strains of the virus could adversely impact our future operations and financial results. The ultimate extent of the pandemic's impact on the Company's financial and operating results, which could be material, will be determined by the length of time the pandemic continues, its continued severity, and further government regulations imposed in response to the pandemic, and its continued effect on the economy and transportation demand.
While operating cash flows may be negatively impacted by the pandemic, the Company believes we will be able to continue to finance our near term needs for working capital over the next twelve months, as well as any planned capital expenditures during such period, with cash balances, cash flows from operations, and borrowings believed to be available from financing sources.
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,
2021 2020
(percentages)
Operating revenues, before fuel surcharge 100.0 100.0
Operating expenses:
Salaries, wages and benefits 34.7 34.7
Operating supplies and expenses 10.8 6.9
Rent and purchased transportation 22.7 26.9
Depreciation 15.8 15.6
Insurance and claims 3.6 0.0
Other 2.6 6.0
(Gain)/ loss on sale or disposal of property (0.1 ) 0.1 Total operating expenses
90.1 90.2
Operating income 9.9 9.8
Non-operating income/(expense) 4.2 (8.7 )
Interest expense (2.0 ) (2.2 )
Income/(loss) before income taxes 12.1 (1.1 )
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THREE MONTHS ENDED
During the first quarter of 2021, truckload services revenue, before fuel
surcharges, decreased 1.0% to
Operating supplies and expenses increased from 6.9% of revenues, before fuel surcharges, during the first quarter of 2020 to 10.8% of revenues, before fuel surcharges, during the first quarter of 2021. The increase relates primarily to an increase in the average surcharge-adjusted fuel price paid per gallon of diesel fuel, which was a result of decreased fuel surcharge collections from customers. Fuel surcharge collections can fluctuate significantly 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. Also contributing to the increase was an increase in the proportion of total miles driven by company drivers during the first quarter of 2021 compared to the first quarter of 2020. This increase in miles driven by company drivers has the effect of increasing our net operating supplies and expenses while decreasing the rent and purchased transportation category, as fuel surcharge revenue generated from transportation services performed by owner-operators is reflected as a reduction in net operating supplies and expenses, while fuel surcharges paid to owner-operators for their services is reported along with their base rate of pay in the rent and purchased transportation category.
Rent and purchased transportation decreased from 26.9% of revenues, before fuel surcharges, during the first quarter of 2020 to 22.7% of revenues, before fuel surcharges, during the first quarter of 2021. The decrease was primarily due to a decrease in the number of loads transported by third-party carriers during the first quarter of 2021 compared to the first quarter of 2020.
Insurance and claims expense increased from 0.0% of revenues, before fuel
surcharges, during the first quarter of 2020 to 3.6% of revenues, before fuel
surcharges, during the first quarter of 2021. The first quarter of 2020 included
the reversal of a lawsuit reserve which resulted in a credit to claims expense
in the amount of approximately
Other expense decreased from 6.0% of revenues, before fuel surcharges, during the first quarter of 2020 to 2.6% of revenues, before fuel surcharges, during the first quarter of 2021. This decrease is primarily attributable to a decrease in legal fees associated with our defense against certain litigation.
Non-operating income / (expense) increased from an expense of 8.7% of revenues,
before fuel surcharges, during the first quarter of 2020 to income of 4.2% of
revenues, before fuel surcharges, during the first quarter of 2021. This
increase primarily resulted from the change in the market values of our
portfolio of marketable equity securities. The Company recorded a
The truckload services division operating ratio, which measures the ratio of operating expenses, net of fuel surcharges, to operating revenues, before fuel surcharges, improved from 90.2% for the first quarter of 2020 to 90.1% for the first quarter of 2021.
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,
2021 2020
(percentages)Operating revenues, before fuel surcharge 100.0 100.0
Operating expenses:
Salaries, wages and benefits 4.5 5.4
Rent and purchased transportation 83.7 89.4
Other 1.3 2.7
Total operating expenses 89.5 97.5
Operating income 10.5 2.5
Non-operating income/(expense) 2.0 (5.2 )
Interest expense (1.0 ) (1.2 )
Income/(Loss) before income taxes 11.5 (3.9 )
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THREE MONTHS ENDED
During the first quarter of 2021, logistics and brokerage services revenue,
before fuel surcharges, increased 118.3% to
Salaries, wages and benefits decreased from 5.4% of revenues, before fuel surcharges, in the first quarter of 2020 to 4.5% of revenues, before fuel surcharges, during the first quarter of 2021. The decrease relates primarily to the effect of higher revenues without a corresponding increase in those wages with fixed-cost characteristics, such as general and administrative wages.
Rents and purchased transportation decreased from 89.4% of revenues, before fuel surcharges, during the first quarter of 2020 to 83.7% of revenues, before fuel surcharges, during the first quarter of 2021. The increase results from paying third party carriers a lower 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, improved from 97.5% for the first quarter of 2020 to 89.5% for the first quarter of 2021.
Non-operating income / (expense) increased from an expense of 5.2% of revenues,
before fuel surcharges, during the first quarter of 2020 to income of 2.0% of
revenues, before fuel surcharges, during the first quarter of 2021. This
increase primarily resulted from the change in the market values of our
portfolio of marketable equity securities. The Company recorded a
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 2021, 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
2021, we utilized cash on hand, installment notes, 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 2021, the Company's subsidiary,
During the remainder of 2021, we expect to purchase approximately 165 new trucks
while continuing to sell or trade older equipment, which we expect to result in
net proceeds of approximately
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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 2021, we maintained a revolving line of credit.
Amounts outstanding under the line bear interest at LIBOR (determined as of the
first day of each month) plus 1.25% and are secured by our trade accounts
receivable and mature on
Trade accounts receivable increased from
Prepaid expenses and deposits decreased from
Marketable equity securities increased from
Accounts payable decreased 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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