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<SEC-DOCUMENT>0000798287-04-000004.txt : 20040312
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ACCESSION NUMBER: 0000798287-04-000004
CONFORMED SUBMISSION TYPE: 10-K
PUBLIC DOCUMENT COUNT: 8
CONFORMED PERIOD OF REPORT: 20031231
FILED AS OF DATE: 20040312
FILER:
COMPANY DATA:
COMPANY CONFORMED NAME: PAM TRANSPORTATION SERVICES INC
CENTRAL INDEX KEY: 0000798287
STANDARD INDUSTRIAL CLASSIFICATION: TRUCKING (NO LOCAL) [4213]
IRS NUMBER: 710633135
STATE OF INCORPORATION: DE
FISCAL YEAR END: 1231
FILING VALUES:
FORM TYPE: 10-K
SEC ACT: 1934 Act
SEC FILE NUMBER: 000-15057
FILM NUMBER: 04666667
BUSINESS ADDRESS:
STREET 1: 297 WEST HENRI DE TONTI BLVD
CITY: TONTITOWN
STATE: AR
ZIP: 72770
BUSINESS PHONE: 4793619111
MAIL ADDRESS:
STREET 1: 297 WEST HENRI DE TONTI BLVD
CITY: TONTITOWN
STATE: AR
ZIP: 72770
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<DOCUMENT>
<TYPE>10-K
<SEQUENCE>1
<FILENAME>ptsi200310-k.txt
<DESCRIPTION>PTSI 2003 FORM 10-K
<TEXT>
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2003
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
COMMISSION FILE NO. 0-15057
P.A.M. TRANSPORTATION SERVICES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
Delaware 71-0633135
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
297 West Henri De Tonti Blvd
Tontitown, Arkansas 72770
(479) 361-9111
(Address of principal executive offices, including zip code,
and telephone number, including area code)
Securities registered pursuant to section 12(b) of the Act: None
Securities registered pursuant to section 12(g) of the Act: Common Stock,
$.01 par value
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes [X] No [_]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [_]
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act).
Yes [X] No [_]
<PAGE>
The aggregate market value of the common stock of the registrant held by
non-affiliates of the registrant computed by reference to the average of the
closing bid and asked prices of the common stock as of the last business day of
the registrant's most recently completed second quarter was $164,686,259. Solely
for the purposes of this response, executive officers, directors and beneficial
owners of more than five percent of the registrant's common stock are considered
the affiliates of the registrant at that date.
The number of shares outstanding of the issuer's common stock, as of February
28, 2004: 11,294,207 shares of $.01 par value common stock.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant's definitive Proxy Statement for its Annual Meeting
of Stockholders to be held in 2004 are incorporated by reference in answer to
Part III of this report, with the exception of information regarding executive
officers required under Item 10 of Part III, which information is included in
Part I, Item 1.
This Report contains forward-looking statements, including statements about our
operating and growth strategies, our expected financial position and operating
results, industry trends, our capital expenditure and financing plans and
similar matters. Such forward-looking statements are found throughout this
Report, including under Item 1, Business, Item 7, Management's Discussion and
Analysis of Financial Condition and Results of Operations, and Item 7A,
Quantitative and Qualitative Disclosures About Market Risk. In those and other
portions of this Report, the words "believe," "may," "will," "estimate,"
"continue," "anticipate," "intend," "expect," "project" and similar expressions,
as they relate to us, our management, and our industry are intended to identify
forward-looking statements. We have based these forward-looking statements
largely on our current expectations and projections about future events and
financial trends affecting our business. Actual results may differ materially.
Some of the risks, uncertainties and assumptions about P.A.M. that may cause
actual results to differ from these forward-looking statements are described
under the headings "Business - Risk Factors," "Management's Discussion and
Analysis of Financial Condition and Results of Operations," and "Quantitative
and Qualitative Disclosures About Market Risk."
All forward-looking statements attributable to us, or to persons acting on our
behalf, are expressly qualified in their entirety by this cautionary statement.
We undertake no obligation to publicly update or revise any forward-looking
statements, whether as a result of new information, future events or otherwise.
In light of these risks and uncertainties, the forward-looking events and
circumstances discussed in this Report might not transpire.
Unless the context otherwise requires, all references in this Annual Report on
Form 10-K to "P.A.M.," the "company," "we," "our," or "us" mean P.A.M.
Transportation Services, Inc. and its subsidiaries.
<PAGE>
PART I
ITEM 1. BUSINESS.
We are a truckload dry van carrier transporting general commodities throughout
the continental United States, as well as in the Canadian provinces of Ontario
and Quebec. We also provide transportation services in Mexico under agreements
with Mexican carriers. Our freight consists primarily of automotive parts,
consumer goods, such as general retail store merchandise, and manufactured
goods, such as heating and air conditioning units. During 2003 we began to more
aggressively enter the logistics market with the acquisition of a company which
provides logistics-only services. The logistics portion of our business, as
compared to trucking operations which require a significant capital equipment
investment, generally have lower operating margins and higher returns on assets.
Our logistics business consists of services such as transportation scheduling,
routing, mode selection, transloading and other value added services related to
the transportation of freight.
P.A.M. Transportation Services, Inc. is a holding company organized under the
laws of the State of Delaware in June 1986 which currently conducts operations
through the following wholly owned subsidiaries: P.A.M. Transport, Inc., T.T.X.,
Inc., P.A.M. Dedicated Services, Inc., P.A.M. Logistics Services, Inc., Choctaw
Express, Inc., Choctaw Brokerage, Inc., Transcend Logistics, Inc., Allen Freight
Services, Inc., Decker Transport Co., Inc., East Coast Transport and Logistics,
LLC and McNeill Express, Inc. Our operating authorities are held by P.A.M.
Transport, P.A.M. Dedicated Services, Inc., Choctaw Express, Inc., Choctaw
Brokerage, Inc., Allen Freight Services, Inc., T.T.X., Inc., Decker Transport
Co., Inc., East Coast Transport and Logistics, LLC, and McNeill Express, Inc.
We are headquartered and maintain our primary terminal and maintenance
facilities and our corporate and administrative offices in Tontitown, Arkansas,
which is located in northwest Arkansas, a major center for the trucking industry
and where the support services (including warranty repair services) for most
major tractor and trailer equipment manufacturers are readily available.
OPERATIONS
Our business strategy focuses on the following elements:
Maintaining Dedicated Fleets in High Density Lanes. We strive to maximize
utilization and increase revenue per tractor while minimizing our time and empty
miles between loads. In this regard, we seek to provide dedicated equipment to
our customers where possible and to concentrate our equipment in defined regions
and disciplined traffic lanes. During 2003, approximately 64% of our operating
revenues were generated through dedicated equipment and we maintained an empty
mile factor of 4.5%. Dedicated fleets in high density lanes enable us to:
- maintain more consistent equipment capacity;
- provide a high level of service to our customers, including
time-sensitive delivery schedules;
- attract and retain drivers; and
- maintain a sound safety record as drivers travel familiar routes.
<PAGE>
Providing Superior and Flexible Customer Service. Our wide range of services
includes dedicated fleet services, just-in-time delivery, two-man driving teams,
cross-docking and consolidation programs, specialized trailers, and
Internet-based customer access to delivery status. These services, combined with
a decentralized regional operating strategy, allow us to quickly and reliably
respond to the diverse needs of our customers, and provide an advantage in
securing new business. We also maintain ISO 9002 certification to ensure that we
operate in accordance with approved quality assurance standards.
Many of our customers depend on us to make delivery on a "just-in-time" basis,
meaning that parts or raw materials are scheduled for delivery as they are
needed on the manufacturer's production line. The need for this service is a
product of modern manufacturing and assembly methods that are designed to
drastically decrease inventory levels and handling costs. Such requirements
place a premium on the freight carrier's delivery performance and reliability.
Employing Stringent Cost Controls. We focus intently on controlling our costs
while not sacrificing customer service. We maintain this balance by
scrutinizing all expenditures, minimizing non-driver personnel, operating a
late-model fleet of tractors and trailers to minimize maintenance costs and
enhance fuel efficiency, and adopting new technology only when proven and cost
justified.
Making Strategic Acquisitions. We continually evaluate strategic acquisition
opportunities, focusing on those that complement our existing business or that
could profitably expand our business or services. Our operational integration
strategy is to centralize administrative functions of acquired businesses at our
headquarters, while maintaining the localized operations of acquired businesses.
We believe that allowing acquired businesses to continue to operate under their
pre-acquisition names and in their original regions allows such businesses to
maintain driver loyalty and customer relationships.
INDUSTRY
The U.S. market for truck-based transportation services approximates $500
billion in annual revenue. We believe that truckload services, such as those we
provide, include approximately $65 billion of for-hire revenues and $80 billion
of private fleet revenue. The truckload industry is highly fragmented and is
impacted by several economic and business factors, many of which are beyond the
control of individual carriers. The state of the economy, coupled with
equipment capacity levels, can impact freight rates. Volatility of various
operating expenses, such as fuel and insurance, make the predictability of
profit levels unclear. Availability, attraction, retention and compensation for
drivers affect operating costs, as well as equipment utilization. In addition,
the capital requirements for equipment, coupled with potential uncertainty of
used equipment values, impact the ability of many carriers to expand their
operations.
The current operating environment is characterized by the following:
- Price increases by insurance companies, rising fuel costs, and erosion of
equipment values in the used truck market.
- In the last few years, many less profitable or undercapitalized carriers
have been forced to consolidate or to exit the industry.
<PAGE>
COMPETITION
The trucking industry is highly competitive. We compete primarily with other
irregular route medium- to long-haul truckload carriers, with private carriage
conducted by our existing and potential customers, and, to a lesser extent, with
the railroads. Increased competition has resulted from deregulation of the
trucking industry and has generally exerted downward pressure on prices. We
compete on the basis of quality of service and delivery performance, as well as
price. Many of the other irregular route long-haul truckload carriers have
substantially greater financial resources, own more equipment or carry a larger
total volume of freight.
MARKETING AND MAJOR CUSTOMERS
Our marketing emphasis is directed to that segment of the truckload market which
is generally service-sensitive, as opposed to being solely price competitive.
We seek to become a "core carrier" for our customers in order to maintain high
utilization and capitalize on recurring revenue opportunities. Our marketing
efforts are diversified and designed to gain access to dedicated fleet services
(including those in Mexico and Canada), domestic regional freight traffic, and
cross-docking and consolidation programs.
Our marketing efforts are conducted by a sales staff of six employees who are
located in our major markets and supervised from our headquarters. These
individuals emphasize profitability by maintaining an even flow of freight
traffic (taking into account the balance between originations and destinations
in a given geographical area) and high utilization, and minimizing movement of
empty equipment.
Our five largest customers, for which we provide carrier services covering a
number of geographic locations, accounted for approximately 59%, 74% and 64% of
our total revenues in 2001, 2002 and 2003, respectively. General Motors
Corporation accounted for approximately 40%, 56% and 46% of our revenues in
2001, 2002 and 2003, respectively.
We also provide transportation services to other manufacturers who are suppliers
for automobile manufacturers. Approximately 55%, 68% and 58% of our revenues
were derived from transportation services provided to the automobile industry
during 2001, 2002 and 2003, respectively. This portion of our business,
however, is spread over 23 assembly plants and over 50 supplier/vendors located
throughout North America, which we believe reduces the risk of a material loss
of business.
<PAGE>
REVENUE EQUIPMENT
At December 31, 2003, we operated a fleet of 1,913 tractors and 4,175 trailers.
We operate late-model, well-maintained premium tractors to help attract and
retain drivers, promote safe operations, minimize maintenance and repair costs,
and improve customer service by minimizing service interruptions caused by
breakdowns. We evaluate our equipment decisions based on factors such as
initial cost, useful life, warranty terms, expected maintenance costs, fuel
economy, driver comfort, customer needs, manufacturer support, and resale value.
Our current policy is to replace most of our tractors within 500,000 miles,
which normally occurs 30 to 48 months after purchase. The following table
provides information regarding our tractor and trailer turnover and the age of
our fleet over the past three years:
2001 2002 2003
----- ----- -----
Tractors
--------
Additions 505 430 781
Deletions 258 309 649
End of year total 1,660 1,781 1,913
Average age at end of year (in years) 1.8 2.1 1.9
Trailers
--------
Additions 228 127 991
Deletions 55 86 789
End of year total 3,932 3,973 4,175
Average age at end of year (in years) 5.3 5.7 5.2
We historically have contracted with owner-operators to provide and operate a
small portion of our tractor fleet. Owner-operators provide their own tractors
and are responsible for all associated expenses, including financing costs,
fuel, maintenance, insurance, and taxes. We believe that a combined fleet
complements our recruiting efforts and offers greater flexibility in responding
to fluctuations in shipper demand. At December 31, 2003 the Company's tractor
fleet included 103 owner-operator tractors.
TECHNOLOGY
We have installed Qualcomm Omnitracs display units in all of our tractors. The
Omnitracs system is a satellite-based global positioning and communications
system that allows fleet managers to communicate directly with drivers. Drivers
can provide location status and updates directly to our computer which increases
productivity and convenience. The Omnitracs system provides us with accurate
estimated time of arrival information, which optimizes load selection and
service levels to our customers. In order to optimize our tractor-to-trailer
ratio, we have also installed Qualcomm TrailerTracs tracking units in all of our
trailers. The TrailerTracs system is a tethered trailer tracking product that
enables us to more efficiently track the location of all trailers in our
inventory as they connect to and disconnect from Qualcomm-equipped tractors.
Our computer system manages the information provided by the Qualcomm devices to
provide us real-time information regarding the location, status and load
assignment of all of our equipment, which permits us to better meet delivery
schedules, respond to customer inquiries and match equipment with the next
available load. Our system also provides electronically to our customers
real-time information regarding the status of freight shipments and anticipated
arrival times. This system provides our customers flexibility and convenience
by extending supply chain visibility through electronic data interchange, the
Internet and e-mail.
<PAGE>
MAINTENANCE
We have a strictly enforced comprehensive preventive maintenance program for our
tractors and trailers. Inspections and various levels of preventive maintenance
are performed at set mileage intervals on both tractors and trailers. Although
a significant portion of maintenance is performed at our maintenance facility in
Tontitown, Arkansas, we have additional maintenance facilities in West Memphis
and North Little Rock, Arkansas; Jacksonville, Florida; Effingham, Illinois;
Columbia, Mississippi; Springfield, Missouri; Riverdale, New Jersey; Warren and
Willard, Ohio; Oklahoma City, Oklahoma; and El Paso, Irving and Laredo, Texas.
These facilities enhance our preventive and routine maintenance operations and
are strategically located on major transportation routes where a majority of our
freight originates and terminates. A maintenance and safety inspection is
performed on all vehicles each time they return to a terminal.
Our tractors carry full warranty coverage for at least three years or 350,000
miles. Extended warranties are negotiated with the tractor manufacturer and
manufacturers of major components, such as engine, transmission and differential
manufacturers, for up to four years or 500,000 miles. Trailers carry full
warranties by the manufacturer and major component manufacturers for up to five
years.
DRIVERS
At December 31, 2003, we utilized 2,235 company drivers in our operations. We
also had 103 owner-operators under contract compensated on a per mile basis.
All of our drivers are recruited, screened, drug tested and trained and are
subject to the control and supervision of our operations and safety departments.
Our driver training program stresses the importance of safety and reliable,
on-time delivery. Drivers are required to report to their driver managers daily
and at the earliest possible moment when any condition en route occurs that
might delay their scheduled delivery time.
In addition to strict application screening and drug testing, before being
permitted to operate a vehicle our drivers must undergo classroom instruction on
our policies and procedures, safety techniques as taught by the Smith System of
Defensive Driving, and the proper operation of equipment, and must pass both
written and road tests. Instruction in defensive driving and safety techniques
continues after hiring, with seminars at our terminals in Tontitown, Arkansas;
Jacksonville, Florida; Riverdale, New Jersey; Warren, Ohio; Oklahoma City,
Oklahoma; and Irving, Texas. At December 31, 2003, we employed 72 persons on a
full-time basis in our driver recruiting, training and safety instruction
programs.
Our drivers are compensated on the basis of miles driven, loading and unloading,
extra stops and layovers in transit. Drivers can earn bonuses by recruiting
other qualified drivers who become employed by us and both cash and non-cash
prizes are awarded for consecutive periods of safe, accident-free driving.
Intense competition in the trucking industry for qualified drivers over the last
several years, along with difficulties and added expense in recruiting and
retaining qualified drivers, has had a negative impact on the industry. Our
operations have also been impacted and from time to time we have experienced
under-utilization and increased expenses due to a shortage of qualified drivers.
We place a high priority on the recruitment and retention of an adequate supply
of qualified drivers.
<PAGE>
FACILITIES
We are headquartered and maintain our primary terminal, maintenance facilities
and corporate and administrative offices in Tontitown, Arkansas, which is
located in northwest Arkansas, a major center for the trucking industry and
where support services, including warranty repair services, for most major
tractor and trailer equipment manufacturers are readily available. We also
maintain dispatch offices at our headquarters in Tontitown, Arkansas, as well as
at our offices in North Little Rock, Arkansas; Jacksonville, Florida; Breese,
Illinois; Columbia, Mississippi; Warren and Willard, Ohio; Oklahoma City,
Oklahoma; Riverdale and Paulsboro, New Jersey; and Irving and Laredo, Texas.
These regional dispatch offices facilitate communications with both our
customers and drivers.
INTERNET WEB SITE
The Company maintains a web site where additional information concerning its
business can be found. The address of that web site is www.pamt.com. The
Company makes available free of charge on its Internet web site its annual
report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form
8-K, and amendments to those reports filed or furnished pursuant to Section
13(a) or 15(d) of the Exchange Act as soon as reasonably practicable after it
electronically files or furnishes such materials to the SEC.
EMPLOYEES
At December 31, 2003, we employed 2,765 persons, of whom 2,235 were drivers, 151
were maintenance personnel, 210 were employed in operations, 24 were employed in
marketing, 72 were employed in safety and personnel, and 73 were employed in
general administration and accounting. None of our employees are represented by
a collective bargaining unit and we believe that our employee relations are
good.
REGULATION
We are a common and contract motor carrier regulated by various federal and
state agencies. We are subject to safety requirements prescribed by the U.S.
Department of Transportation ("DOT"). Such matters as weight and dimension of
equipment are also subject to federal and state regulations. All of our drivers
are required to obtain national driver's licenses pursuant to the regulations
promulgated by the DOT. Also, DOT regulations impose mandatory drug and alcohol
testing of drivers. We believe that we are in compliance in all material
respects with applicable regulatory requirements relating to our trucking
business and operate with a "satisfactory" rating (the highest of three grading
categories) from the DOT.
The trucking industry is subject to possible regulatory and legislative changes
(such as increasingly stringent environmental, safety and security regulations
and limits on vehicle weight and size) that may affect the economics of the
industry by requiring changes in operating practices or by changing the demand
for common or contract carrier services or the cost of providing truckload
services. These types of future regulations could unfavorably affect our
operations.
<PAGE>
EXECUTIVE OFFICERS OF THE REGISTRANT
Our executive officers are as follows:
YEARS OF SERVICE
NAME AGE POSITION WITH COMPANY WITH P.A.M.
---- --- --------------------- -----------
Robert W. Weaver 54 President and Chief
Executive Officer 21
W. Clif Lawson 50 Executive Vice President
and Chief Operating Officer 19
Larry J. Goddard 45 Vice President - Finance
Chief Financial Officer,
Secretary and Treasurer 16
Each of our executive officers has held his present position with the company
for at least the last five years. We have entered into employment agreements
with our executive officers with terms remaining of from three to sixteen
months.
RISK FACTORS
Set forth below and elsewhere in this Report and in other documents we file with
the SEC are risks and uncertainties that could cause our actual results to
differ materially from the results contemplated by the forward-looking
statements contained in this Report.
Our business is subject to general economic and business factors that are
largely out of our control, any of which could have a material adverse effect on
our operating results.
These factors include significant increases or rapid fluctuations in fuel
prices, excess capacity in the trucking industry, surpluses in the market for
used equipment, interest rates, fuel taxes, license and registration fees,
insurance premiums, self-insurance levels, and difficulty in attracting and
retaining qualified drivers and independent contractors.
We are also affected by recessionary economic cycles and downturns in customers'
business cycles, particularly in market segments and industries, such as the
automotive industry, where we have a significant concentration of customers.
Economic conditions may adversely affect our customers and their ability to pay
for our services. It is not possible to predict the medium- or long-term
effects of the September 11, 2001 terrorist attacks and subsequent events on the
economy or on customer confidence in the United States, or the impact, if any,
on our future results of operations.
We operate in a highly competitive and fragmented industry, and our business may
suffer if we are unable to adequately address downward pricing pressures and
other factors that may adversely affect our ability to compete with other
carriers.
<PAGE>
Numerous competitive factors could impair our ability to maintain our current
profitability. These factors include the following:
- we compete with many other truckload carriers of varying sizes and, to a
lesser extent, with less-than-truckload carriers and railroads, some of
which have more equipment and greater capital resources than we do;
- some of our competitors periodically reduce their freight rates to gain
business, especially during times of reduced growth rates in the economy,
which may limit our ability to maintain or increase freight rates, maintain
our margins or maintain significant growth in our business;
- many customers reduce the number of carriers they use by selecting
so-called "core carriers" as approved service providers, and in some
instances we may not be selected;
- many customers periodically accept bids from multiple carriers for their
shipping needs, and this process may depress freight rates or result in
the loss of some of our business to competitors;
- the trend toward consolidation in the trucking industry may create other
large carriers with greater financial resources and other competitive
advantages relating to their size and with whom we may have
difficulty competing;
- advances in technology require increased investments to remain competitive,
and our customers may not be willing to accept higher freight rates
to cover the cost of these investments;
- competition from Internet-based and other logistics and freight brokerage
companies may adversely affect our customer relationships and freight
rates; and
- economies of scale that may be passed on to smaller carriers by
procurement aggregation providers may improve their ability to compete
with us.
We are highly dependent on our major customers, the loss of one or more of which
could have a material adverse effect on our business.
A significant portion of our revenue is generated from our major customers. For
2003, our top five customers, based on revenue, accounted for approximately 64%
of our revenue, and our largest customer, General Motors Corporation, accounted
for approximately 46% of our revenue. We also provide transportation services
to other manufacturers who are suppliers for automobile manufacturers. As a
result, concentration of our business within the automobile industry is greater
than the concentration in a single customer. Approximately 58% of our revenues
for 2003 were derived from transportation services provided to the automobile
industry.
Generally, we do not have long-term contractual relationships with our major
customers, and we cannot assure that our customer relationships will continue as
presently in effect. A reduction in or termination of our services by our major
customers could have a material adverse effect on our business and operating
results.
<PAGE>
We may be unable to successfully integrate businesses we acquire into our
operations.
Integrating businesses we acquire may involve unanticipated delays, costs or
other operational or financial problems. Successful integration of the
businesses we acquire depends on a number of factors, including our ability to
transition acquired companies to our management information systems. In
integrating businesses we acquire, we may not achieve expected economies of
scale or profitability or realize sufficient revenues to justify our investment.
We also face the risk that an unexpected problem at one of the companies we
acquire will require substantial time and attention from senior management,
diverting management's attention from other aspects of our business. We cannot
be certain that our management and operational controls will be able to support
us as we grow.
Difficulty in attracting drivers could affect our profitability and ability to
grow.
Periodically, the transportation industry experiences difficulty in attracting
and retaining qualified drivers, including independent contractors, resulting in
intense competition for drivers. We have from time to time experienced
under-utilization and increased expenses due to a shortage of qualified drivers.
If we are unable to continue to attract drivers and contract with independent
contractors, we could be required to adjust our driver compensation package or
let trucks sit idle, which could adversely affect our growth and profitability.
If we are unable to retain our key employees, our business, financial condition
and results of operations could be harmed.
We are highly dependent upon the services of the following key employees: Robert
W. Weaver, our President and Chief Executive Officer; W. Clif Lawson, our
Executive Vice President and Chief Operating Officer; and Larry J. Goddard, our
Vice President and Chief Financial Officer. We do not maintain key-man life
insurance on any of these executives. The loss of any of their services could
have a material adverse effect on our operations and future profitability. We
must continue to develop and retain a core group of managers if we are to
realize our goal of expanding our operations and continuing our growth. We
cannot assure that we will be able to do so.
Increased prices for new revenue equipment and decreases in the value of used
revenue equipment may adversely affect our earnings and cash flows.
In the past, we have acquired new tractors and trailers at favorable prices and
traded or disposed of them at prices significantly higher than current market
values. There is currently a large supply of used tractors and trailers on the
market, which has depressed the market value of used equipment to levels
significantly below the values we historically received. In addition, some
manufacturers have communicated their intention to raise the prices of new
equipment. If either or both of these events occur, we may increase our
depreciation expense or recognize less gain (or a loss) on the disposition of
our tractors and trailers. This could adversely affect our earnings and cash
flows.
<PAGE>
We have significant ongoing capital requirements that could affect our
profitability if we are unable to generate sufficient cash from operations.
The trucking industry is very capital intensive. If we are unable to generate
sufficient cash from operations in the future, we may have to limit our growth,
enter into financing arrangements, or operate our revenue equipment for longer
periods, any of which could have a material adverse affect on our profitability.
Our operations are subject to various environmental laws and regulations, the
violation of which could result in substantial fines or penalties.
We are subject to various environmental laws and regulations dealing with the
handling of hazardous materials, underground fuel storage tanks, and discharge
and retention of stormwater. We operate in industrial areas, where truck
terminals and other industrial activities are located, and where groundwater or
other forms of environmental contamination could occur. We also maintain bulk
fuel storage and fuel islands at three of our facilities. Our operations
involve the risks of fuel spillage or seepage, environmental damage, and
hazardous waste disposal, among others. If we are involved in a spill or other
accident involving hazardous substances, or if we are found to be in violation
of applicable laws or regulations, it could have a materially adverse effect on
our business and operating results. If we should fail to comply with applicable
environmental regulations, we could be subject to substantial fines or penalties
and to civil and criminal liability.
We operate in a highly regulated industry and increased costs of compliance
with, or liability for violation of, existing or future regulations could have a
material adverse effect on our business.
The U.S. Department of Transportation and various state agencies exercise broad
powers over our business, generally governing such activities as authorization
to engage in motor carrier operations, safety, and financial reporting. We may
also become subject to new or more restrictive regulations relating to fuel
emissions, drivers' hours in service, and ergonomics. Compliance with such
regulations could substantially impair equipment productivity and increase our
operating expenses.
ITEM 2. PROPERTIES.
Our executive offices and primary terminal facilities, which we own, are located
in Tontitown, Arkansas. These facilities are located on approximately 49.3 acres
and consist of 114,403 square feet of office space and maintenance and storage
facilities.
Our subsidiaries lease terminal facilities in West Memphis, Arkansas;
Jacksonville, Florida; Springfield, Missouri; Riverdale and Paulsboro, New
Jersey; Warren, Ohio; Oklahoma City, Oklahoma; and Laredo, and El Paso, Texas.
Our terminal facilities in Columbia, Mississippi; Irving, Texas; North Little
Rock, Arkansas; and Willard, Ohio are owned. The leased facilities are leased
primarily on a month-to-month basis, and provide on-the-road maintenance and
trailer drop and relay stations.
We also have access to trailer drop and relay stations in various other
locations across the country. We lease certain of these facilities on a
month-to-month basis from an affiliate of our largest shareholder.
We believe that all of the properties that we own or lease are suitable for
their purposes and adequate to meet our needs.
<PAGE>
ITEM 3. LEGAL PROCEEDINGS.
The nature of the 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.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matters were submitted to a vote of our security holders during the fourth
quarter ended December 31, 2003.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
Our common stock is traded on the NASDAQ National Market under the symbol PTSI.
The following table sets forth, for the quarters indicated, the range of the
high and low bid prices per share for our common stock as reported on the NASDAQ
National Market. The bid prices in the tables below do not include retail
mark-up, mark-down or commission.
Calendar Year Ended December 31, 2003
HIGH LOW
---- ---
First Quarter $28.17 $20.25
Second Quarter 26.55 21.00
Third Quarter 22.99 19.80
Fourth Quarter 22.31 18.10
Calendar Year Ended December 31, 2002
HIGH LOW
---- ---
First Quarter $26.00 $12.68
Second Quarter 27.55 22.25
Third Quarter 26.23 18.89
Fourth Quarter 26.30 18.15
As of March 8, 2004, there were approximately 208 holders of record of our
common stock. We have not declared or paid any cash dividends on our common
stock. The policy of our board of directors is to retain earnings for the
expansion and development of our business and the repayment of our debt service
obligations. Future dividend policy and the payment of dividends, if any, will
be determined by the board of directors in light of circumstances then existing,
including our earnings, financial condition and other factors deemed relevant by
the board.
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA.
The following selected financial and operating data should be read in
conjunction with the Consolidated Financial Statements and notes thereto
included elsewhere in this Report.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
2003 2002 2001 2000 1999
--------- --------- --------- --------- ---------
(in thousands, except per share amounts)
<S> <C> <C> <C> <C> <C>
Statement of operations data:
Operating revenues $ 293,547 $ 264,012 $ 225,794 $ 205,245 $ 207,381
--------- --------- --------- --------- ---------
Operating expenses:
Salaries, wages and benefits 119,350 115,432 100,359 90,680 90,248
Operating supplies 55,750 51,161 43,289 37,728 35,246
Rent and purchased transportation 35,287 9,780 10,526 12,542 13,309
Depreciation and amortization 26,601 24,715 20,300 18,806 18,392
Operating taxes and licenses 14,710 13,467 11,936 11,140 11,334
Insurance and claims 13,500 12,786 10,202 8,674 7,945
Communications and utilities 2,540 2,284 2,320 2,234 2,365
Other 4,755 4,620 4,707 3,756 4,388
(Gain) loss on sale or
disposal of property 368 127 886 285 (301)
--------- --------- --------- --------- ---------
Total operating expenses 272,861 234,372 204,525 185,845 182,926
--------- --------- --------- --------- ---------
Operating income 20,686 29,640 21,269 19,400 24,455
Non-operating income 276 - - - -
Interest expense (1,677) (1,985) (4,477) (5,048) (5,650)
--------- --------- --------- --------- ---------
Income before income taxes 19,295 27,655 16,792 14,352 18,805
Income taxes 7,805 11,062 6,721 5,694 7,536
--------- --------- --------- --------- ---------
Net income $ 11,490 $ 16,593 $ 10,071 $ 8,658 $ 11,269
========= ========= ========= ========= =========
Earnings per common share:
Basic $ 1.02 $ 1.56 $ 1.18 $ 1.02 $ 1.34
======= ======= ======= ======= =======
Diluted $ 1.01 $ 1.55 $ 1.18 $ 1.02 $ 1.33
======= ======= ======= ======= =======
Average common shares outstanding-Basic 11,291 10,669 8,522 8,455 8,393
======= ======= ======= ======= =======
Average common shares outstanding-Diluted(1) 11,326 10,715 8,550 8,518 8,488
======= ======= ======= ======= =======
</TABLE>
- --------------------------------------------------------------------------------
(1) Diluted income per share for 2003, 2002, 2001, 2000 and 1999 assumes the
exercise of stock options to purchase an aggregate of 65,258, 87,984, 107,369,
208,602 and 262,097 shares of common stock, respectively.
<TABLE>
<CAPTION>
AT DECEMBER 31,
2003 2002 2001 2000 1999
-------- -------- -------- -------- --------
Balance Sheet Data: (in thousands)
<S> <C> <C> <C> <C> <C>
Total Assets $264,849 $228,320 $182,516 $164,518 $168,961
Long-term debt, excluding current portion 26,740 20,175 47,023 42,073 55,617
Stockholders' equity 156,875 144,452 72,597 62,210 53,365
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
2003 2002 2001 2000 1999
-------- -------- -------- -------- --------
Operating Data:
<S> <C> <C> <C> <C> <C>
Operating ratio (1) 92.9% 88.7% 90.6% 90.5% 88.2%
Average number of truckloads per week 7,105 6,463 5,399 5,169 4,885
Average miles per trip 701 755 769 713 734
Total miles traveled (in thousands) 242,890 238,256 204,303 183,476 186,355
Average miles per tractor 131,934 136,772 131,554 128,936 128,966
Average revenue per tractor per day $653 $621 $591 $579 $570
Average revenue per loaded mile $1.13 $1.15 $1.17 $1.18 $1.18
Empty mile factor 4.5% 4.0% 5.5% 5.6% 5.4%
At end of period:
Total company-owned/leased tractors 1,913(2) 1,781(3) 1,660(4) 1,413(5) 1,468(6)
Average age of all tractors (in years) 1.94 2.12 1.81 1.72 1.64
Total trailers 4,175 3,973 3,932 3,759 3,846(7)
Average age of trailers (in years) 5.15 5.74 5.31 4.66 3.97
Number of employees 2,765 2,538 2,424 2,154 1,899
- -----------------------------------------------
(1) Total operating expenses as a percentage
of total operating revenues.
(2) Includes 103 owner operator tractors.
(3) Includes 130 owner operator tractors.
(4) Includes 135 owner operator tractors.
(5) Includes 117 owner operator tractors.
(6) Includes 148 owner operator tractors.
(7) Includes 21 trailers leased from an
affiliate of our majority shareholder.
</TABLE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
CRITICAL ACCOUNTING POLICIES
The Company's significant accounting policies are described in Note 1 to the
consolidated financial statements. The policies described below represent those
that are broadly applicable to the Company's operations and involve additional
management judgment due to the sensitivity of the methods, assumptions and
estimates necessary in determining the related amounts.
Accounts Receivable. We continuously monitor collections and payments from our
customers, third party and vendor receivables and maintain a provision for
estimated credit losses based upon our historical experience and any specific
collection issues that we have identified. While such credit losses have
historically been within our expectations and the provisions established, we
cannot guarantee that we will continue to experience the same credit loss
rates that we have in the past.
Property, plant and equipment. Management must use its judgment in the
selection of estimated useful lives and salvage values for purposes of
depreciating tractors and trailers which do not have guaranteed residual values.
Estimates of salvage value at the expected date of trade-in or sale are based on
the expected market values of equipment at the time of disposal which, in many
cases include guaranteed residual values by the manufacturers.
Self Insurance. The Company is self-insured for health and workers'
compensation benefits up to certain stop-loss limits. Such costs are accrued
based on known claims and an estimate of incurred, but not reported (IBNR)
claims. IBNR claims are estimated using historical information and other data
either provided by outside claims administrators or developed internally. This
estimation process is subjective, and to the extent that future actual results
differ from original estimates, adjustments to recorded accruals may be
necessary.
<PAGE>
Revenue Recognition. Revenue is recognized in full upon completion of delivery
to the receivers location. For freight in transit at the end of a reporting
period, the Company recognizes revenue prorata based on relative transit miles
completed as a portion of the estimated total transit miles with estimated
expenses recognized upon recognition of the related revenue.
Prepaid Tires. Tires purchased with revenue equipment are capitalized as a cost
of the related equipment. Replacement tires are included in prepaid expenses and
deposits and are amortized over a 24-month period. Substantially all tires are
recapped with the cost of recapping expensed when incurred.
Business Combinations and Goodwill. Upon acquisition of an entity, the cost of
the acquired entity must be allocated to assets and liabilities acquired.
Identification of intangible assets, if any, that meet certain recognition
criteria is necessary. This identification and subsequent valuation requires
significant judgments. The carrying value of goodwill was tested for impairment
on December 31, 2003. The impairment testing requires an estimate of the value
of the Company as a whole, as the Company has determined it only has one
reporting unit as defined in SFAS No. 142.
RESULTS OF OPERATIONS
The following table sets forth the percentage relationship of revenue and
expense items to operating revenues for the periods indicated.
YEARS ENDED DECEMBER 31,
2003 2002 2001
---- ---- ----
Operating revenues 100.0% 100.0% 100.0%
------ ------ ------
Operating expenses:
Salaries, wages and benefits 40.7 43.7 44.4
Operating supplies 19.0 19.4 19.2
Rent and purchased transportation 12.0 3.7 4.7
Depreciation and amortization 9.0 9.4 9.0
Operating taxes and licenses 5.0 5.1 5.3
Insurance and claims 4.6 4.8 4.5
Communications and utilities 0.9 0.9 1.0
Other 1.6 1.7 2.1
Loss on sale or disposal of property 0.1 0.0 0.4
------ ------ ------
Total operating expenses 92.9 88.7 90.6
------ ------ ------
Operating income 7.1 11.3 9.4
Non-operating income 0.1 0.0 0.0
Interest expense (0.6) (0.8) (2.0)
------ ------ ------
Income before income taxes 6.6 10.5 7.4
Federal and state income taxes 2.7 4.2 3.0
------ ------ ------
Net income 3.9% 6.3% 4.4%
====== ====== ======
<PAGE>
2003 COMPARED TO 2002
For the year ended December 31, 2003, our revenues were $293.5 million as
compared to $264.0 million for the year ended December 31, 2002. The increase
in revenues was due to the revenues generated by East Coast Transport, Inc. and
McNeill Express, Inc., which were each acquired during 2003. During 2003, East
Coast Transport, Inc. and McNeill Express, Inc. revenues were approximately
$30.5 million and $10.2 million, respectively. The additional revenues
generated by the two acquisitions were partially offset by a decrease in
revenues attributable to a decrease in equipment utilization by the truckload
operations portion of our business. This decrease in equipment utilization
resulted in a 4.9% decrease in average truckload revenue generated per tractor
each work day from $596 in 2002 to $567 in 2003.
Salaries, wages and benefits decreased from 43.7% of revenues in 2002 to 40.7%
of revenues in 2003. The decrease relates to a decrease in company driver wages
as a percentage of revenues due to the reliance on third party drivers for our
logistics operations which is reflected as purchased transportation costs as
discussed below. The decrease, as a percentage of revenues, was partially
offset by increases in workers compensation and health insurance costs.
Rent and purchased transportation increased from 3.7% of revenues in 2002 to
12.0% of revenues in 2003. The increase relates primarily to the logistics
operations of East Coast Transport, Inc. which purchases transportation services
from other transportation companies.
Depreciation and amortization decreased from 9.4% of revenues in 2002 to 9.0% of
revenues in 2003. The decrease, as a percentage of revenues, was primarily due
to the additional revenues generated by our logistics operations which have no
corresponding revenue equipment depreciation expense. Excluding the dilutive
effect of the revenues generated by our logistics operations, depreciation and
amortization expense increased from 9.8% of truckload revenue in 2002 to 10.4%
of truckload revenue in 2003 due to the combined effect of higher purchase
prices for new equipment and lower guaranteed residual values offered by the
manufacturer.
Our effective tax rate increased from 40.0% during 2002 to 40.4% during 2003 due
to an increase in partially non-deductible per-diem payments to drivers. The
decrease in income from operations also resulted in a decrease in the provision
for income taxes from $11.1 million in 2002 to $7.9 million in 2003.
Net income decreased to $11.5 million, or 3.9% of revenues, in 2003 from $16.6
million, or 6.3% of revenues in 2002, representing a decrease in diluted net
income per share to $1.02 in 2003 from $1.55 in 2002.
<PAGE>
2002 COMPARED TO 2001
For the year ended December 31, 2002, our revenues were $264.0 million as
compared to $225.8 million for the year ended December 31, 2001. The increase
was due to improved utilization of existing revenue equipment and an increase in
the average number of tractors from 1,553 in 2001 to 1,742 in 2002. Improved
utilization of existing revenue equipment resulted in a 5.1% increase in average
revenue generated per tractor each work day from $591 in 2001 to $621 in 2002.
Salaries, wages and benefits decreased from 44.4% of revenues in 2001 to 43.7%
of revenues in 2002. While total salaries and wages costs did increase during
2002, the increase in revenues caused these costs to continue at approximately
the same percentage of revenue. The decrease, as a percent of revenues, relates
to a decrease in the amount reserved for employee health claims incurred but not
reported.
Rent and purchased transportation decreased from 4.7% of revenues in 2001 to
3.7% of revenues in 2002. The decrease relates primarily to a decrease in
amounts paid to other transportation companies in the form of brokerage fees
thereby resulting in a shift of costs for driver wages, fuel and equipment
costs, although to a lesser extent, to the Company's other operating expense
categories.
Depreciation and amortization increased from 9.0% of revenues in 2001 to 9.4% of
revenues in 2002. The increase was primarily due to the combined effect of
higher purchase prices for new equipment and lower guaranteed residual values
offered by the manufacturer.
Insurance and claims increased from 4.5% of revenues in 2001 to 4.8% of revenues
in 2002. The increase relates primarily to an increase in rates for auto
liability insurance coverage.
Other expenses decreased from 2.1% of revenues in 2001 to 1.7% of revenues in
2002. The decrease relates primarily to the expiration of non-compete
agreements with certain employees of a previously acquired company.
Interest expense decreased from 2.0% of revenues in 2001 to 0.8% of revenues in
2002 due to a decrease in interest rates and to the repayment of debt as
discussed in the "Liquidity and Capital Resources" section of this report.
Our effective tax rate remained constant at 40.0% during 2001 and 2002, however,
increased net income resulted in an increase in the provision for income taxes
from $6.7 million in 2001 to $11.1 million in 2002.
Net income increased to $16.6 million, or 6.3% of revenues, in 2002 from $10.1
million, or 4.4% of revenues in 2001, representing an increase in diluted net
income per share to $1.55 in 2002 from $1.18 in 2001.
<PAGE>
QUARTERLY RESULTS OF OPERATIONS
The following table presents selected consolidated financial information for
each of our last eight fiscal quarters through December 31, 2003. The
information has been derived from unaudited consolidated financial statements
that, in the opinion of management, reflect all adjustments, consisting of
normal recurring adjustments, necessary for a fair presentation of the quarterly
information.
<TABLE>
<CAPTION>
QUARTER ENDED
MAR. 31, JUNE 30, SEPT. 30, DEC. 31, MAR. 31, JUNE 30, SEPT. 30, DEC. 31,
2002 2002 2002 2002 2003 2003 2003 2003
---- ---- ---- ---- ---- ---- ---- ----
(unaudited)
(in thousands, except earnings per share data)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Operating revenues $63,313 $70,841 $65,034 $64,824 $70,139 $74,956 $74,216 $74,236
Total operating expenses 56,331 62,082 58,061 57,898 65,185 67,896 68,899 70,881
Operating income 6,982 8,759 6,973 6,926 4,954 7,060 5,317 3,355
Net income 3,606 5,034 3,958 3,995 2,818 4,047 2,965 1,660
Earnings per common share:
Basic $ 0.40 $ 0.45 $ 0.35 $ 0.36 $ 0.25 $ 0.36 $ 0.26 $ 0.15
======= ======= ======= ======= ======= ======= ======= =======
Diluted $ 0.40 $ 0.45 $ 0.35 $ 0.35 $ 0.25 $ 0.36 $ 0.26 $ 0.14
======= ======= ======= ======= ======= ======= ======= =======
</TABLE>
LIQUIDITY AND CAPITAL RESOURCES
During 2003, we generated $37.9 million in cash from operating activities
compared to $48.9 million and $31.4 million in 2002 and 2001, respectively.
Investing activities used $68.4 million in cash during 2003 compared to $30.4
million and $36.7 million in 2002 and 2001, respectively. The cash used in all
three years related primarily to the purchase of revenue equipment (tractors and
trailers) used in our operations. Financing activities generated $2.8 million
in cash during 2003 compared to cash generated by financing activities of $11.4
million in 2002 and $5.7 million in 2001. (See Cash Flow Statement on page 31.)
Our primary use of funds is for the purchase of revenue equipment. We typically
use our existing lines of credit on an interim basis, in addition to cash flows
from operations, to finance capital expenditures and repay long-term debt.
During 2002 and 2003, we utilized cash on hand and our lines of credit to
finance revenue equipment purchases for an aggregate of $35.9 million and $69.6
million, respectively.
Occasionally we finance the acquisition of revenue equipment through installment
notes with fixed interest rates and terms ranging from 36 to 48 months. At
December 31, 2003, we had outstanding indebtedness under such installment notes
of approximately $94,000. As of February 28, 2004, we no longer had any
outstanding indebtedness under such installment notes.
<PAGE>
We maintain a $20.0 million revolving line of credit and a $30.0 million
revolving line 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 1.40%, are secured by our
accounts receivable and mature on May 31, 2005. At December 31, 2003, $4.2
million, including $1.3 million in letters of credit were outstanding under Line
A, with availability to borrow $15.8 million. Amounts outstanding under Line B
bear interest at LIBOR (on the last day of the previous month) plus 1.15%, are
secured by revenue equipment and mature on June 30, 2005. At December 31, 2003,
$27.0 million, including $7.0 million in letters of credit were outstanding with
availability to borrow $3.0 million. In an effort to reduce interest rate risk
associated with these floating rate facilities, we have entered into interest
rate swap agreements in an aggregate notional amount of $20.0 million. For
additional information regarding the interest rate swap agreements, see Item 7A
of this Report.
During March and April 2002, the Company received net proceeds of approximately
$54.5 million from a public offering of 2,621,250 shares of its common stock.
The Company repaid approximately $43.0 million of long-term debt obligations
with the proceeds and used the remaining proceeds to fund its capital
expenditures and to finance general working capital needs.
During the year ended December 31, 2003, we purchased approximately $4.0 million
of equity securities with excess cash. These securities appreciated
approximately $1.6 million during 2003. 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. The holding term depends largely on the general economic environment,
the equity markets, borrowing rates and the Company's cash requirements.
Accounts receivable increased approximately $12.0 million as compared to
December 31, 2002. The increase relates to an increase of approximately $6.5
million generated by the two businesses acquired during 2003 and to an increase
in revenues earned but not yet billed as compared to 2002.
Prepaid expenses and deposits at December 31, 2003 increased approximately $3.0
million as compared to December 31, 2002. The increase relates primarily to the
prepayment of auto liability and physical damage insurance policies expiring in
August 2004 which in past years, expired on a calendar year basis.
Trade accounts payable at December 31, 2003 increased approximately $6.6
million as compared to December 31, 2002. This is a normal fluctuation that
occurs as a result of the timing of regularly scheduled check runs and how they
fall in relation to the end of a period.
For 2004, we expect to purchase approximately 415 new tractors and approximately
310 trailers while continuing to sell or trade older equipment, which we expect
to result in net capital expenditures of approximately $26.5 million.
Management expects that the Company's existing operating cash flows and its
available lines of credit will be sufficient to meet the Company's present
capital commitments, to repay indebtedness coming due, and to fund its operating
needs, during 2004.
On January 31, 2003, the Company closed the purchase of substantially all of the
assets of East Coast Transport and Logistics, Inc., a freight brokerage
operation based in New Jersey. In connection with this acquisition, the Company
issued to the seller an installment note in the amount of approximately $5.0
million at an interest rate of 6% and paid cash of approximately $1.9 million
utilizing existing cash.
On April 3, 2003, the Company closed the purchase of substantially all of the
assets of McNeill Trucking, Inc., a truckload carrier based in North Little
Rock, Arkansas. In connection with this acquisition, the Company paid cash of
approximately $8.8 million and assumed liabilities of approximately $70,000.
<PAGE>
CONTRACTUAL OBLIGATIONS AND COMMERCIAL COMMITMENTS
The following table sets forth the Company's contractual obligations and
commercial commitments as of December 31, 2003 (in thousands):
<TABLE>
<CAPTION>
Payments due by period
----------------------
Less than 1 to 3 3 to 5 More than
Total 1 year years years 5 Years
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Long-term debt $28,779 $2,039 $24,218 $1,474 $1,048
Operating leases (1) 1,573 582 487 336 168
Capital leases - - - - -
Purchase obligations (2) 41,165 41,165 - - -
Other long-term liabilities - - - - -
------- ------- ------- ------- -------
Total $71,517 $43,786 $24,705 $1,810 $1,216
======= ======= ======= ======= =======
(1) Represents building and facilities operating leases.
(2) Represents tractor and trailer purchase obligations which are
cancelable by us contingent upon advance notice.
</TABLE>
INSURANCE
With respect to physical damage for tractors, cargo loss and auto liability, the
Company maintains insurance coverage to protect it from certain business risks.
These policies are with various carriers and have per occurrence deductibles of
$2,500, $10,000 and $2,500 respectively. The Company elected in 2002 and 2003
to self insure itself for physical damage to trailers. During 2003, the Company
changed its workers' compensation coverage in Arkansas, Oklahoma, Mississippi,
Ohio and Florida from a fully insured policy with a $350,000 per occurrence
deductible to become self insured with a $500,000 per occurrence excess policy.
The Company has elected to opt out of workers' compensation coverage in Texas
and is providing coverage through the P.A.M. Texas Injury Plan. The Company has
reserved for estimated losses to pay such claims as well as claims incurred but
not yet reported. The Company has not experienced any adverse trends involving
differences in claims experienced versus claims estimates for workers'
compensation claims. Letters of credit aggregating $3,433,000 are held by a
bank as security for workers' compensation claims. The Company self insures for
employee health claims with a stop loss of $150,000 per covered employee per
year and estimates its liability for claims incurred but not reported.
SEASONALITY
Our revenues do not exhibit a significant seasonal pattern, due primarily to our
varied customer mix. Operating expenses can be somewhat higher in the winter
months, primarily due to decreased fuel efficiency and increased maintenance
costs associated with inclement weather. In addition, the automobile plants for
which we transport a large amount of freight typically utilize scheduled
shutdowns of two weeks in July and one week in December and the volume of
freight we ship is reduced during such scheduled plant shutdowns.
<PAGE>
INFLATION
Inflation has an impact on most of our operating costs. Recently, the effect of
inflation has been minimal.
Competition for drivers has increased in recent years, leading to increased
labor costs. While increases in fuel and driver costs affect our operating
costs, we do not believe that the effects of such increases are greater for us
than for other trucking concerns.
ADOPTION OF ACCOUNTING POLICIES
See "Item 8. Financial Statements and Supplementary Data, Note 1 to the
Consolidated Financial Statements - Recent Accounting Pronouncements."
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK.
Our primary market risk exposures include commodity price risk (the price paid
to obtain diesel fuel for our tractors) and interest rate risk. 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.
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. For
2003 and 2002, fuel expenses represented 15.7% and 15.0%, respectively, of our
total operating expenses. Based upon our 2003 fuel consumption, a 10% increase
in the average annual price per gallon of diesel fuel would increase our annual
fuel expenses by $4.3 million.
In August 2000 and July 2001, we entered into agreements to obtain price
protection and reduce a portion of our exposure to fuel price fluctuations.
Under these agreements, we were obligated to purchase minimum amounts of diesel
fuel per month, with a price protection component, for the six month periods
ended March 31, 2001 and February 28, 2002. The agreements also provide that if
during the 48 months commencing April 2001, the price of heating oil on the New
York Mercantile Exchange ("NY MX HO") falls below $.58 per gallon, we are
obligated to pay, for a maximum of twelve different months selected by the
contract holder during such 48-month period, the difference between $.58 per
gallon and NY MX HO average price, multiplied by 900,000 gallons. Accordingly,
in any month in which the holder exercises such right, we would be obligated to
pay the holder $9,000 for each cent by which $.58 exceeds the average NY MX HO
price for that month. For example, the NY MX HO average price during February
2002 was approximately $.54, and if the holder were to exercise its payment
right, we would be obligated to pay the holder approximately $36,000. In
addition, if during any month in the twelve-month period commencing January
2005, the average NY MX HO is below $.58 per gallon, we will be obligated to pay
the contract holder the difference between $.58 and the average NY MX HO price
for such month, multiplied by 1,000,000 gallons. The agreements are stated at
their fair value of $750,000 which is included in accrued liabilities in the
accompanying Consolidated Financial Statements.
<PAGE>
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 generally, will affect the interest rate on, and
therefore our costs under, the lines of credit. In an effort to manage the risks
associated with changing interest rates, we entered into interest rate swap
agreements effective February 28, 2001 and May 31, 2001, on notional amounts of
$15,000,000 and $5,000,000, respectively. The "pay fixed rates" under the
$15,000,000 and $5,000,000 swap agreements are 5.08% and 4.83%, respectively.
The "receive floating rate" for both swap agreements is "1-month" LIBOR. These
interest rate swap agreements terminate on March 2, 2006 and June 2, 2006,
respectively. Assuming $20.0 million of variable rate debt was outstanding
under each of Line A and Line B for a full fiscal year, a hypothetical 100 basis
point increase in LIBOR would result in approximately $200,000 of additional
interest expense, net of the effect of the swap agreements. For additional
information with respect to the interest rate swap agreements, see Note 15 to
our consolidated financial statements.
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The following statements are filed with this report:
Report of Independent Public Accountants
Consolidated Balance Sheets - December 31, 2003 and 2002
Consolidated Statements of Income - Years ended December 31, 2003,
2002 and 2001
Consolidated Statements of Shareholders' Equity - Years ended
December 31, 2003, 2002 and 2001
Consolidated Statements of Cash Flows - Years ended December 31, 2003,
2002 and 2001
Notes to Consolidated Financial Statements
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors
P.A.M. Transportation Services, Inc. and Subsidiaries
We have audited the accompanying consolidated balance sheets of P.A.M.
Transportation Services, Inc. (a Delaware corporation) and subsidiaries (the
"Company") as of December 31, 2003 and 2002, and the related consolidated
statements of income, shareholders' equity, and cash flows for the years then
ended. These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits. The financial statements
for the year ended December 31, 2001, were audited by other auditors who have
ceased operations. Those auditors expressed an unqualified opinion on those
financial statements in their report dated February 21, 2002.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of P.A.M. Transportation Services,
Inc. and subsidiaries as of December 31, 2003 and 2002, and the results of their
operations and their cash flows for the years then ended in conformity with
accounting principles generally accepted in the United States of America.
As discussed in Note 1 to the consolidated financial statements, the Company
changed its method of accounting for goodwill to conform to Statement of
Financial Accounting Standards No. 142, Goodwill and Other Intangible Assets, as
of January 1, 2002.
/s/ Deloitte & Touche LLP
Little Rock, Arkansas
March 10, 2004
<PAGE>
THE FOLLOWING IS A COPY OF A REPORT ISSUED BY ARTHUR ANDERSEN LLP AND INCLUDED
IN THE 2001 FORM 10-K REPORT FILED ON MARCH 1, 2002. THIS REPORT HAS NOT BEEN
REISSUED BY ARTHUR ANDERSEN LLP, AND ARTHUR ANDERSEN LLP HAS NOT CONSENTED TO
ITS USE IN THIS FORM 10-K. SEE ITEM 9 AND EXHIBIT 23.2 FOR MORE INFORMATION.
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Shareholders of
P.A.M. Transportation Services, Inc.:
We have audited the accompanying consolidated balance sheets of P.A.M.
Transportation Services, Inc. (a Delaware corporation) and subsidiaries as of
December 31, 2001 and 2000, and the related consolidated statements of income,
shareholders' equity, and cash flows for each of the three years in the period
ended December 31, 2001. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of P.A.M.
Transportation Services, Inc. and subsidiaries as of December 31, 2001 and 2000,
and the results of their operations and their cash flows for each of the three
years in the period ended December 31, 2001, in conformity with accounting
principles generally accepted in the United States.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedule listed in the index of
financial statements is presented for purposes of complying with the Securities
and Exchange Commission's rules and is not part of the basic financial
statements. This schedule has been subjected to the auditing procedures applied
in the audit of the basic financial statements and, in our opinion, fairly
states in all material respects the financial data required to be set forth
therein in relation to the basic financial statements taken as a whole.
/s/ Arthur Andersen LLP
Tulsa, Oklahoma
February 21, 2002
<PAGE>
<TABLE>
<CAPTION>
P.A.M. TRANSPORTATION SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 2003 AND 2002
(in thousands)
- --------------------------------------------------------------------------------
2003 2002
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 3,064 $ 30,766
Accounts receivable-net:
Trade 46,120 34,231
Other 1,150 1,221
Inventories 653 411
Prepaid expenses and deposits 6,771 3,647
Marketable equity securities available-for-sale 5,492
Deferred income taxes 127
Income taxes refundable 1,256 281
--------- ---------
Total current assets 64,506 70,684
PROPERTY AND EQUIPMENT:
Land 2,674 2,237
Structures and improvements 9,258 7,552
Revenue equipment 249,713 215,509
Service vehicles 911 805
Office furniture and equipment 6,863 7,056
--------- ---------
269,419 233,159
Accumulated depreciation (86,689) (85,787)
--------- ---------
182,730 147,372
OTHER ASSETS:
Goodwill 15,413 8,102
Other 2,200 2,162
--------- ---------
17,613 10,264
--------- ---------
TOTAL $ 264,849 $ 228,320
========= =========
(Continued)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
P.A.M. TRANSPORTATION SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 2003 AND 2002
(in thousands, except share data)
- --------------------------------------------------------------------------------
2003 2002
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Trade accounts payable $ 22,295 $ 15,725
Accrued expenses and other liabilities 11,167 9,601
Current portion of long-term debt 2,039 1,017
Deferred income taxes-current 1,330
--------- ---------
Total current liabilities 36,831 26,343
Long-term debt current portion 26,740 20,175
Deferred income taxes 43,708 37,350
Other 695
SHAREHOLDERS' EQUITY:
Preferred stock, $.01 par value:
Authorized shares - 10,000,000
Issued and outstanding shares:
0 at December 31, 2003 and 2002
Common stock, $.01 par value:
Authorized shares - 40,000,000
Issued and outstanding shares:
11,294,207 and 11,282,207
at December 31, 2003 and 2002, respectively 113 113
Additional paid-in capital 75,957 76,193
Accumulated other comprehensive gain/(loss) 164 (1,005)
Retained earnings 80,641 69,151
--------- ---------
Total shareholders' equity 156,875 144,452
--------- ---------
TOTAL $ 264,849 $ 228,320
========= =========
See notes to consolidated financial statements. (Concluded)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
P.A.M. TRANSPORTATION SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31, 2003, 2002 AND 2001
(in thousands, except share data)
- -------------------------------------------------------------------------------
2003 2002 2001
<S> <C> <C> <C>
OPERATING REVENUES $ 293,547 $ 264,012 $ 225,794
OPERATING EXPENSES AND COSTS:
Salaries, wages, and benefits 119,350 115,432 100,359
Operating supplies and expenses 55,750 51,161 43,289
Rents and purchased transportation 35,287 9,780 10,526
Depreciation and amortization 26,601 24,715 20,300
Operating taxes and licenses 14,710 13,467 11,936
Insurance and claims 13,500 12,786 10,202
Communications and utilities 2,540 2,284 2,320
Other 4,755 4,620 4,707
Loss on sale or disposal of equipment 368 127 886
--------- --------- ---------
272,861 234,372 204,525
--------- --------- ---------
OPERATING INCOME 20,686 29,640 21,269
NON-OPERATING INCOME 276
INTEREST EXPENSE (1,667) (1,985) (4,477)
--------- --------- ---------
INCOME BEFORE INCOME TAXES 19,295 27,655 16,792
FEDERAL AND STATE INCOME TAXES:
Current 630 1,718 1,301
Deferred 7,175 9,344 5,420
--------- --------- ---------
7,805 11,062 6,721
--------- --------- ---------
NET INCOME $ 11,490 $ 16,593 $ 10,071
========= ========= =========
EARNINGS PER COMMON SHARE:
Basic $ 1.02 $ 1.56 $ 1.18
========= ========= =========
Diluted $ 1.01 $ 1.55 $ 1.18
========= ========= =========
AVERAGE COMMON SHARES OUTSTANDING:
Basic 11,291 10,669 8,522
========= ========= =========
Diluted 11,326 10,715 8,550
========= ========= =========
See notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
P.A.M. TRANSPORTATION SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 2003, 2002, AND 2001
(in thousands)
- ---------------------------------------------------------------------------------------------------------------------------------
Additional Accumulated Other
Common Stock Paid-In Comprehensive Comprehensive Retained
Shares Amount Capital Income Loss Earnings Total
----------------- ------- ------------- ------------- -------- -----
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE AT DECEMBER 31, 2000 8,470 $ 85 $ 19,638 $ 42,487 $ 62,210
Components of comprehensive income:
Net earnings $ 10,071 10,071 10,071
Other comprehensive loss-
Unrealized loss on hedge,
net of tax of $339 (508) (508) (508)
--------
Total comprehensive income $ 9,563
========
Exercise of stock options-shares
issued 142 1 823 824
------ ------ -------- -------- ------- --------
BALANCE AT DECEMBER 31, 2001 8,612 86 20,461 (508) 52,558 72,597
Components of comprehensive income:
Net earnings $ 16,593 16,593 16,593
Other comprehensive loss -
Unrealized loss on hedge,
net of tax of $331 (497) (497) (497)
--------
Total comprehensive income $ 16,096
========
Stock options-deferred stock
compensation 39 478 478
Issuance of common stock 2,621 26 54,732 54,758
Exercise of stock options-
shares issued including tax
benefits 10 1 522 523
------ ------ -------- -------- -------- --------
BALANCE AT DECEMBER 31, 2002 11,282 113 76,193 (1,005) 69,151 144,452
Components of comprehensive income:
Net earnings $ 11,490 11,490 11,490
Other comprehensive loss -
Unrealized gain on hedge,
net of tax of $779 223 223 223
Unrealized gain on marketable
securities, net of tax of $631 946 946 946
--------
Total comprehensive income $ 12,659
========
Stock options-deferred stock
compensation (398) (398)
Exercise of stock options-
shares issued including tax
benefits 12 162 162
------ ------ -------- -------- -------- --------
BALANCE AT DECEMBER 31, 2003 11,294 $ 113 $ 75,957 $ 164 $ 80,641 $156,875
====== ====== ======== ======== ======== ========
See notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
P.A.M. TRANSPORTATION SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 2003, 2002
(in thousands)
---------------------------------------------------------------------------------------------
2003 2002 2001
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net income $ 11,490 $ 16,593 $ 10,071
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 26,601 24,715 20,300
Bad debt expense 110 1,028 897
Non-competition agreement amortization 42 131
Provision for deferred income taxes 7,175 9,344 5,420
Gain on sale of marketable equity securities (47)
Loss on sale or disposal of equipment 368 127 886
Changes in operating assets and liabilities-net
of acquisition:
Accounts receivable (11,983) (11,516) (2,453)
Prepaid expenses, inventories, and other assets (3,170) (349) (763)
Income taxes refundable (975) (357) 235
Trade accounts payable 7,156 7,925 (3,927)
Accrued expenses 1,168 1,357 648
--------- --------- ---------
Net cash provided by operating activities 37,935 48,867 31,445
--------- --------- ---------
INVESTING ACTIVITIES:
Purchases of property and equipment (74,238) (42,067) (47,515)
Proceeds from sale or disposal of equipment 20,393 11,565 10,536
Purchase of marketable equity securities (4,020)
Proceeds from sales of marketable equity securities 152
Lease payments received on direct financing leases 55 107 232
Acquisition of business net of cash acquired (10,752)
--------- --------- ---------
Net cash used in investing activities (68,410) (30,395) (36,747)
FINANCING ACTIVITIES:
Borrowings under line of credit 353,899 362,148 278,147
Repayments under line of credit (351,030) (371,224) (258,197)
Borrowings of long-term credit 1,666 1,459 7,943
Repayments of long-term debt (1,922) (35,907) (23,004)
Proceeds from issuance of common stock 54,538
Other 160 384 824
--------- --------- ---------
Net cash provided by financing activities 2,773 11,398 5,713
--------- --------- ---------
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (27,702) 29,870 411
CASH AND CASH EQUIVALENTS - beginning of year 30,766 896 485
--------- --------- ---------
CASH AND CASH EQUIVALENTS - end of year $ 3,064 $ 30,766 $ 896
========= ========= =========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION-
Cash paid during the year for:
Interest $ 1,591 $ 2,100 $ 4,500
========= ========= =========
Income taxes $ 1,119 $ 1,500 $ 1,100
========= ========= =========
See notes to consolidated financial statements.
</TABLE>
<PAGE>
P.A.M. TRANSPORTATION SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2003, 2002, AND 2001
- --------------------------------------------------------------------------------
1. ACCOUNTING POLICIES
DESCRIPTION OF BUSINESS AND PRINCIPLES OF CONSOLIDATION-P.A.M. Transportation
Services, Inc. (the "Company"), through its subsidiaries, operates as a
truckload motor carrier.
The consolidated financial statements include the accounts of the Company and
its wholly owned subsidiaries: P.A.M. Transport, Inc., P.A.M. Special Services,
Inc. (inactive as of December 31, 2003), P.A.M. Dedicated Services, Inc., P.A.M.
Logistics, Inc. (inactive as of December 31, 2003), Choctaw Express, Inc.,
Choctaw Brokerage, Inc. (inactive as of December 31, 2003), Allen Freight
Services, Inc., T.T.X., Inc., Transcend Logistics, Inc., Decker Transport Co.,
Inc., East Coast Transport and Logistics, LLC, and McNeill Express Inc. All
significant intercompany accounts and transactions have been eliminated.
CASH AND CASH EQUIVALENTS-The Company considers all highly liquid investments
with a maturity of three months or less when purchased to be cash equivalents.
ACCOUNTS RECEIVABLE ALLOWANCE-An allowance is provided for accounts receivable
based on historical collection rates applied to accounts receivable in the
aggregate considering the number of days the receivables have been outstanding.
Additionally, management considers any accounts individually known to exhibit
characteristics indicating a collection problem.
MARKETABLE EQUITY SECURITIES-Marketable equity securities are carried at market
value with unrelated gains and losses recognized in accumulated comprehensive
income in the statements of stockholders' equity. Realized gains and losses are
computed utilizing the specific identification method.
PROPERTY AND EQUIPMENT-Property and equipment is recorded at cost, less
accumulated depreciation. For financial reporting purposes, the cost of such
property is depreciated principally by the straight-line method. For tax
reporting purposes, accelerated depreciation or applicable cost recovery methods
are used. Depreciation is recognized over the estimated asset life, considering
the estimated salvage value of the asset. Such salvage values are based on
estimates using expected market values for used equipment and the estimated time
of disposal which, in many cases include guaranteed residual values by the
manufacturers. Gains and losses are reflected in the year of disposal. The
following is a table reflecting estimated ranges of asset useful lives by major
class of depreciable assets:
ASSET CLASS ESTIMATED ASSET LIFE
Service vehicles 3-5 years
Office furniture and equipment 3-7 years
Revenue equipment 3-10 years
Structures and improvements 5-30 years
PREPAID TIRES-Tires purchased with revenue equipment are capitalized as a cost
of the related equipment. Replacement tires are included in prepaid expenses and
deposits and are amortized over a 24-month period. Amounts paid for the
recapping of tires are expensed when incurred.
REPAIRS AND MAINTENANCE-Repairs and maintenance costs are expensed as incurred.
<PAGE>
GOODWILL-Goodwill was being amortized on a straight-line basis over 25 years for
years prior to 2002. Effective January 1, 2002, the Company adopted the
provisions of Statement of Financial Accounting Standards No. 142, Goodwill and
Other Intangible Assets, ("SFAS No. 142"), which requires the Company to assess
acquired goodwill for impairment at least annually in the absence of an
indicator of possible impairment, and immediately upon an indicator of possible
impairment. The Company completed an assessment in accordance with the
provisions of the standard in second quarter 2002 using data as of January 1,
2002, and determined there was no impairment as of the date of adoption of SFAS
No. 142. The annual assessment of impairment was completed on December 31, 2003.
SELF INSURANCE LIABILITY-A liability is recognized for known health, workers'
compensation, cargo damage and property damage. An estimate of the incurred but
not reported claims for each type of liability is made based on historical
claims made, estimated frequency of occurrence, and considering changing factors
that contribute to the overall cost of insurance.
INCOME TAXES-The Company applies the provisions of Statement of Financial
Accounting Standards No. 109, Accounting for Income Taxes ("SFAS No. 109").
Under this method, deferred tax liabilities and assets are determined based on
the difference between the financial reporting basis and the tax reporting basis
of assets and liabilities using enacted tax rates.
REVENUE RECOGNITION POLICY-Revenue is recognized in full upon completion of
delivery to the receiver's location. For freight in transit at the end of a
reporting period, the Company recognizes revenue pro rata based on relative
transit miles completed as a portion of the estimated total transit miles with
estimated expenses recognized upon recognition of the related revenue.
COMPENSATION TO EMPLOYEES-Stock based compensation to employees is accounted for
based on the intrinsic value method under Accounting Principles Board Opinion
No. 25, Accounting for Stock Issued to Employees, and related interpretations in
accounting for those plans. Stock-based compensation expense has been recognized
for variable stock options in accordance with Interpretation 28 to APB Opinion
No. 25. Stock-based compensation expense is not reflected in net income for
non-variable stock options as all options granted under those plans had an
exercise price equal to the market value of the underlying common stock on the
date of the grant. During 2002, the Company adopted the disclosure provisions of
SFAS No. 148 as described below and in Note 10.
<PAGE>
The Company adopted the disclosure-only provisions of Statement of Financial
Accounting Standards No. 123, Accounting for Stock-Based Compensation ("SFAS No.
123"). The following table illustrates the effect on net income and earnings per
share if the Company had applied the fair value recognition provisions of SFAS
No. 123 to stock-based employee compensation:
<TABLE>
<CAPTION>
2003 2002 2001
(in thousands, except per share data)
<S> <C> <C> <C>
Net income - as reported $ 11,490 $ 16,593 $ 10,071
Add: Stock-based employee
compensation included in reported
net income - net of related tax effects (28) 76
Deduct total stock-based employee
compensation expense determined under
fair value based method for all
awards - net of related tax effects (322) (445) (48)
--------- --------- ---------
Pro forma net income $ 11,140 $ 16,224 $ 10,023
========= ========= =========
Earnings per share:
Basic - as reported $ 1.02 $ 1.56 $ 1.18
Basic - pro forma $ 0.99 $ 1.52 $ 1.18
Diluted - as reported $ 1.01 $ 1.55 $ 1.18
Diluted - pro forma $ 0.98 $ 1.51 $ 1.18
</TABLE>
The fair value of each option grant is estimated on the date of grant using the
Black-Scholes option pricing model with the following weighted average
assumptions used during the periods above:
2003 2002 2001
Dividend yield 0% 0% 0%
Volatility range 37.34%-61.27% 35.00%-61.27% 31.63%-76.64%
Risk-free rate range 3.02%-4.38% 3.97%-6.01% 4.74%-7.02%
Expected life 5 years 5 years 5 years
BUSINESS SEGMENT AND CONCENTRATIONS OF CREDIT RISK-The Company operates in one
business segment, motor carrier operations. The Company provides transportation
services to customers throughout the United States and portions of Canada and
Mexico. The Company performs ongoing credit evaluations and generally does not
require collateral from its customers. The Company maintains reserves for
potential credit losses. In view of the concentration of the Company's revenues
and accounts receivable among a limited number of customers within the
automobile industry, the financial health of this industry is a factor in the
Company's overall evaluation of accounts receivable.
RECENT ACCOUNTING PRONOUNCEMENTS-In November 2002, the Financial Accounting
Standards Board ("FASB") issued Interpretation No. 45, Guarantor's Accounting
and Disclosure Requirements for Guarantees, Including Indirect Guarantees of
Indebtedness of Others (FIN 45"). For financial statements issued after December
15, 2002, FIN 45 requires a guarantor make certain disclosures regarding
guarantees or indemnification agreements. Starting January 1, 2003, FIN 45
requires that a liability be recognized at the fair value of the guarantee. The
Company has adopted the disclosure provisions and the liability recognition
provision of FIN 45 in the accompanying consolidated financial statements, which
did not have a material effect.
<PAGE>
In April 2003, the FASB issued SFAS No. 149, Amendment of Statement 133 on
Derivative Instruments and Hedging Activities ("SFAS No. 149"). SFAS No. 149
amends and clarifies accounting for derivative instruments, including certain
derivative instruments embedded in other contracts, and for hedging activities
under SFAS No. 133. SFAS No. 149 is effective for contracts entered into or
modified after June 30, 2003, and for hedging relationships designated after
June 30, 2003. The adoption of this statement did not have a material impact on
the Company's consolidated financial statements.
In May 2003, the FASB issued SFAS No. 150, Accounting or Certain Financial
Instruments with Characteristics of Both Liabilities and Equity ("SFAS No.
150"). This Statement is effective for financial instruments entered into or
modified after May 31, 2003 and otherwise is effective at the beginning of the
first interim period beginning after June 15, 2003. This Statement provides
guidance for determining the classification of and accounting for certain
financial instruments that embody obligations of the issuing entity. The
adoption of this Statement did not have a material impact on the Company's
consolidated financial statements.
In December 2003, the FASB issued SFAS No. 132 (revised December 2003),
Employers' Disclosures about Pensions and Other Postretirement Benefits-an
amendment of FASB Statements No. 87, 88 and 106 ("SFAS No. 132R"). This
Statement revises employers' disclosures about pension plans and other
postretirement benefit plans. It does not change the measurement or recognition
of those plans. This Statement retains the disclosure requirements contained in
FASB Statement No. 132, which it replaces. It requires additional disclosures to
those in the original Statement 132 about the assets, obligations, cash flows,
and net periodic benefit cost of defined benefit pension plans and other defined
benefit postretirement plans. Disclosure of information for public entities
required by this Statement is effective for fiscal years ending after December
15, 2003. Adoption on SFAS No. 132R did not have a material effect on the
Company's consolidated financial statements.
In December 2003, the FASB issued Interpretation No. 46 (revised December 2003),
Consolidation of Variable Interest Entities, an interpretation of Accounting
Research Bulletin No. 51, Consolidated Financial Statements ("FIN 46R"), which
replaced FIN 46. FIN 46 clarifies the application of Accounting Research
Bulletin No. 51 to certain entities in which equity investors do not have the
characteristics of a controlling financial interest or do not have sufficient
equity at risk for the entity to finance its activities without additional
subordinated financial support. The Company is required to adopt the provisions
of FIN 46R by the beginning of the first annual period beginning after December
15, 2004. The Company does not believe that it has an interest in an entity that
is subject to the Interpretation, therefore, the adoption of FIN 46R is not
expected to have a material effect on the Company's consolidated financial
statements.
USE OF ESTIMATES-The preparation of financial statements in conformity with
accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the amounts
reported in the financial statements and accompanying notes. Actual results
could differ from those estimates.
RECLASSIFICATIONS-Certain 2002 and 2001 amounts have been reclassified to
conform to the 2003 presentation.
<PAGE>
2. ACCOUNTS RECEIVABLE
Accounts receivable is presented net of an allowance for doubtful accounts as
shown below. An analysis of changes in the allowance for the years ended
December 31, 2003, 2002, and 2001 follows:
<TABLE>
<CAPTION>
2003 2002 2001
(in thousands)
<S> <C> <C> <C>
Balance-beginning of year $ 716 $ 1,515 $ 656
Provision for bad debts 110 1,028 898
Charge-offs (1,827) (39)
Recoveries 8
-------- -------- --------
Balance, end of year $ 834 $ 716 $ 1,515
======== ======== ========
</TABLE>
The 2002 provision for bad debt includes an amount of $660,055 for a liability
relating to a preferential payment claim lawsuit filed by the creditors of one
of the Company's subsidiaries (see Note 13). In addition, 2002 charge-offs
reflect the write-off of items included in the 2001 provision for bad debts.
3. MARKETABLE EQUITY SECURITIES
Marketable equity securities, which are classified as available for sale, had
gross unrealized gains of approximately $1,578,000 and gross unrealized losses
of approximately $1,000 at December 31, 2003. The investments consist of equity
securities with a combined original cost of approximately $4,020,000 and a
combined fair market value of approximately $5,492,000. Such gains and losses,
net of income tax are presented in stockholders' equity as elements of other
comprehensive income for the year ended December 31, 2003.
4. GOODWILL
A reconciliation of previously reported net income and earnings per share to the
amounts adjusted for the exclusion of goodwill amortization net of related
income tax effect for the years ended December 31, 2003, 2002, and 2001 follows:
<TABLE>
<CAPTION>
2003 2002 2001
(in thousands)
<S> <C> <C> <C>
Reported net income $ 11,490 $ 16,593 $ 10,071
Goodwill amortization, net of tax 243
--------- --------- ---------
Adjusted net income $ 11,490 $ 16,593 $ 10,314
========= ========= =========
Adjusted net income per common share:
Basic $ 1.02 $ 1.56 $ 1.21
========= ========= =========
Diluted $ 1.01 $ 1.55 $ 1.21
========= ========= =========
</TABLE>
<PAGE>
Effective January 1, 2002, the Company adopted the provisions of SFAS No. 142,
Goodwill and Other Intangible Assets. At this date, amortization of goodwill
ceased and an assessment of impairment was made. Such assessment resulted in a
conclusion that no impairment was indicated. Goodwill is net of amortization
through December 31, 2001, of $1,219,000.
5. ACCRUED EXPENSES
Accrued expenses at December 31 is summarized as follows:
<TABLE>
<CAPTION>
2003 2002
(in thousands)
<S> <C> <C>
Payroll $ 2,805 $ 1,638
Accrued vacation 1,629 1,414
Taxes-other than income 1,798 1,535
Interest 149 73
Driver escrows 835 893
Self-insurance claims reserves 3,951 4,048
-------- --------
$ 11,167 $ 9,601
======== ========
</TABLE>
<PAGE>
6. CLAIMS LIABILITIES
With respect to physical damage for tractors, cargo loss and auto liability, the
Company maintains insurance coverage to protect it from certain business risks.
These policies are with various carriers and have per occurrence deductibles of
$2,500, $10,000 and $2,500, respectively. The Company elected in 2002 to self
insure itself for physical damage to trailers. During 2001, the Company changed
its workers' compensation coverage in Arkansas, Oklahoma, Mississippi and
Florida from a fully insured first dollar policy to a fully insured policy with
a $500,000 per occurrence deductible. The company continues to be self insured
for workers' compensation claims in the State of Ohio with a $500,000 self
insured retention with excess insurance. The Company has reserved for estimated
losses to pay such claims as well as claims incurred but not yet reported. The
Company has not experienced any adverse trends involving differences in claims
experienced versus claims estimates for workers' compensation claims. Letters of
credit aggregating $1,550,000 are held by insurers as security for workers'
compensation claims and letters of credit aggregating $150,000 are held by
insurers for auto liability claims. The Company self insures for employee health
claims with a stop loss of $150,000 per covered employee per year and estimates
its liability for claims incurred but not reported.
<PAGE>
7. LONG-TERM DEBT
Long-term debt at December 31, consists of the following:
<TABLE>
<CAPTION>
2003 2002
(in thousands)
<S> <C> <C>
Equipment financings (1) $ 94 $ 1,066
Line of credit with a bank-due May 31, 2005
and collateralized by accounts receivable (2) 2,868
Line of credit with a bank-due November 30, 2005
and collateralized by revenue equipment (3) 20,000 20,000
Note payable (4) 4,486
Other (5) 1,331 126
--------- ---------
28,779 21,192
Less current maturities (2,039) ( 1,017)
--------- ---------
Long-term debt-net of current maturities $ 26,740 $ 20,175
========= =========
</TABLE>
(1) Equipment financings consist of installment obligations for revenue
equipment and service vehicles, payable in various monthly installments of
$47,748 through February 2004, at a weighted average interest rate of 7.16%
and collateralized by equipment with a net book value of approximately $1.2
million at December 31, 2003.
(2) Line of credit agreement with a bank provides for maximum borrowings of
$20.0 million and contains certain restrictive covenants that must be
maintained by the Company on a consolidated basis. Borrowings on the line
of credit are at an interest rate of LIBOR as of the first day of the month
plus 1.40% (2.57% at December 31, 2003). The Company was in compliance with
all provisions of the agreement at December 31, 2003.
(3) Line of credit agreement with a bank provides for maximum borrowings of
$30.0 million and contains certain restrictive covenants that must be
maintained by the Company on a consolidated basis. Borrowings on the line
of credit are at an interest rate of LIBOR as of the last day of the
previous month plus 1.15% (2.32% at December 31, 2003). The Company was in
compliance with all provisions of the agreement at December 31, 2003.
(4) 6.0% note to the former owner of an acquired entity, payable in monthly
installments of $72,672 through March 2010.
(5) Various notes at December 31, 2003, payable in monthly installments through
January 2005.
The Company has provided letters of credit to third parties totaling
approximately $8,300,000 at December 31, 2003. The letters are held by these
third parties to assist such parties in collection of any amounts due by the
Company should the Company default in its commitments to the parties.
<PAGE>
Scheduled annual maturities on long-term debt outstanding at December 31, 2003,
are:
(in thousands)
2004 $ 2,039
2005 23,523
2006 695
2007 738
2008 1,784
---------
$ 28,779
=========
8. SIGNIFICANT CUSTOMERS AND INDUSTRY CONCENTRATION
In 2003, 2002, and 2001, one customer, who is in the automobile manufacturing
industry, accounted for 46%, 56%, and 40% of revenues, respectively. The Company
also provides transportation services to other manufacturers who are suppliers
for automobile manufacturers including suppliers for the Company's largest
customer. As a result, concentration of the Company's business within the
automobile industry is significant. Of the Company's revenues for 2003, 2002,
and 2001, 67%, 68%, and 55%, respectively, were derived from transportation
services provided to the automobile manufacturing industry. Accounts receivable
from the largest customer totaled $28,100,000 and $25,000,000 at December 31,
2003 and 2002, respectively.
9. INCOME TAXES
Under SFAS No. 109, deferred income taxes reflect the net tax effects of
temporary differences between the carrying amounts of assets and liabilities for
financial reporting purposes and for income tax reporting purposes.
<PAGE>
Significant components of the Company's deferred tax liabilities and assets at
December 31 are as follows:
<TABLE>
<CAPTION>
2003 2002
------------------------ ------------------------
(in thousands)
CURRENT LONG-TERM CURRENT LONG-TERM
<S> <C> <C> <C> <C>
Deferred tax liabilities:
Property and equipment $ - $ 48,671 $ - $ 40,608
Unrealized gains on securities 631
Prepaid expenses 3,208 19 2,307
-------- ---------- -------- ----------
Total deferred tax liabilities 3,839 48,690 2,307 40,608
Deferred tax assets:
Alternative minimum tax credit 1,783 2,016
Allowance for doubtful accounts 298 267
Compensated absences 618 537
Self-insurance allowances 1,082 1,402
Hedging derivative 285 521 670
Accrued compensation 156 228
Non-competition agreement 474 450
Net operating loss carryovers 2,156
Other 70 48 122
-------- ---------- -------- ----------
Total deferred tax assets 2,509 4,982 2,434 3,258
-------- ---------- -------- ----------
Net deferred tax asset (liability) $ (1,330) $ (43,708) $ 127 $ (37,350)
======== ========== ======== ==========
</TABLE>
The reconciliation between the effective income tax rate and the statutory
Federal income tax rate is for year ended December 31, 2003, 2002 and 2001
presented in the following table:
<TABLE>
<CAPTION>
2003 2002 2001
------------------- ------------------- -------------------
(in thousands)
AMOUNT PERCENT AMOUNT PERCENT AMOUNT PERCENT
<S> <C> <C> <C> <C> <C> <C>
Income tax at the statutory
Federal rate of 34% $ 6,560 34.0% $ 9,403 34.0% $ 5,709 34.0%
Nondeductible expenses 548 2.8 401 1.5 338 2.0
State income taxes, net of
federal benefit 697 3.6 1,552 5.6 804 4.8
Other (294) (1.1) (130) (0.8)
-------- ---- -------- ---- -------- ----
Total income taxes $ 7,805 40.4% $ 11,062 40.0% $ 6,721 40.0%
======== ==== ======== ==== ======== ====
</TABLE>
<PAGE>
The current income tax provision consists of the following:
<TABLE>
<CAPTION>
2003 2002 2001
(in thousands)
<S> <C> <C> <C>
Federal $ 282 $ 975 $ 951
State 348 743 350
-------- -------- --------
$ 630 $ 1,718 $ 1,301
======== ======== ========
</TABLE>
The Company has alternative minimum tax credits of approximately $1.8 million at
December 31, 2003, which have no expiration date under the current federal
income tax laws. The Company also has a net operating loss carryover for federal
income purposes of approximately $6,000,000 which expires in 2024.
10. SHAREHOLDERS' EQUITY
The Company maintains an incentive stock option plan and a nonqualified stock
option plan for the issuance of options to directors, officers, key employees
and others. The option price under these plans is the fair market value of the
stock at the date the options were granted, ranging from $8.25 to $23.22 as of
December 31, 2003. At December 31, 2003, approximately 292,000 shares were
available for granting future options.
Outstanding incentive stock options at December 31, 2003, must be exercised
within six years from the date of grant and vest in increments of 20% each year.
Outstanding nonqualified stock options at December 31, 2003, must be exercised
within five to nine years. Certain nonqualified options may not be exercised
within one year of the date of grant.
In August 2002, PAM granted performance-based variable stock options to certain
key executives. For these awards, the exercise price was fixed at the grant date
and was equal to the fair market value of the stock on that date. The number of
shares earned will not be known until the date the performance criteria is
measured. Compensation cost is estimated at each reporting date with the final
measurement date on the date each performance criteria is measured. Vesting will
be measured on an accelerated vesting schedule.
<PAGE>
Transactions in stock options under these plans are summarized as follows:
<TABLE>
<CAPTION>
SHARES WEIGHTED
UNDER AVERAGE
OPTION EXERCISE PRICE
<S> <C> <C>
Outstanding-December 31, 2000 240,300 $ 7.34
Granted 8,000 8.25
Exercised (142,300) 5.79
Canceled (1,000) 7.38
---------
Outstanding-December 31, 2001 105,000 $ 9.50
Granted 320,500 23.03
Exercised (39,000) 9.84
---------
Outstanding-December 31, 2002 386,500 $ 20.69
Granted 14,000 22.68
Exercised (12,000) 9.88
Canceled (40,000) 23.22
---------
Outstanding-December 31, 2003 348,500 $ 20.85
=========
Options exercisable-December 31, 2003 141,000
=========
</TABLE>
The following is a summary of stock options outstanding as of December 31, 2003:
<TABLE>
<CAPTION>
WEIGHTED
OPTION AVERAGE
OPTIONS EXERCISE REMAINING OPTIONS
OUTSTANDING PRICE YEARS EXERCISABLE
<S> <C> <C> <C> <C>
30,000 $ 9.25 1.5 30,000
2,000 $ 8.63 1.2 2,000
6,000 $ 10.25 1.6 6,000
8,000 $ 9.13 2.2 8,000
8,000 $ 8.25 3.2 8,000
8,000 $ 20.79 4.3 8,000
260,000 $ 23.22 8.8 60,000
12,500 $ 19.88 4.8 5,000
14,000 $ 22.68 5.2 14,000
-------- --------
348,500 141,000
======== ========
</TABLE>
<PAGE>
11. EARNINGS PER SHARE
The Company applies Statement of Financial Accounting Standards No. 128,
Earnings Per Share, for computing and presenting earnings per share. Basic
earnings per common share were computed by dividing net income by the weighted
average number of shares outstanding during the period. Diluted earnings per
common share were calculated as follows:
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31, 2003
(in thousands, except per share date)
------------------------------------
NET PER SHARE
INCOME SHARES AMOUNT
<S> <C> <C> <C>
Basic earnings per share data - $ 11,490 11,291 $ 1.02
Effect of dilutive securities-stock options 35
-------- ------ -------
Diluted earnings per share data $ 11,490 11,326 $ 1.01
======== ====== =======
</TABLE>
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31, 2002
(in thousands, except per share date)
------------------------------------
NET PER SHARE
INCOME SHARES AMOUNT
<S> <C> <C> <C>
Basic earnings per share data - $ 16,593 10,669 $ 1.56
Effect of dilutive securities-stock options 46
-------- ------ -------
Diluted earnings per share data $ 16,593 10,715 $ 1.55
======== ====== =======
</TABLE>
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31, 2001
(in thousands, except per share date)
------------------------------------
NET PER SHARE
INCOME SHARES AMOUNT
<S> <C> <C> <C>
Basic earnings per share data - $ 10,071 8,522 $ 1.18
Effect of dilutive securities-stock options 28
-------- ------ -------
Diluted earnings per share data $ 10,071 8,550 $ 1.18
======== ====== =======
</TABLE>
12. PROFIT SHARING PLAN
The Company sponsors a profit sharing plan for the benefit of all eligible
employees. The plan qualifies under Section 401(k) of the Internal Revenue Code
thereby allowing eligible employees to make tax-deductible contributions to the
plan. The plan provides for employer matching contributions of 50% of each
participant's voluntary contribution up to 3% of the participant's compensation.
Total employer matching contributions to the plan totaled approximately
$270,000, $250,000 and $225,000 in 2003, 2002 and 2001, respectively.
<PAGE>
13. COMMITMENTS AND CONTINGENCIES
On October 10, 2002, a suit was filed against one of the Company's subsidiaries.
The suit, which has been filed in the United States Bankruptcy Court for the
District of Delaware, alleges preferential transfers of $660,055 were made to
the Company's subsidiary, Allen Freight Services Co., within the 90 day period
preceding the bankruptcy petition date of the plaintiff. The suit is currently
in pretrial proceedings. The settlement of this matter is not expected to have a
material effect on the financial position or results of operations of the
Company.
As to other matters, the Company is not a party to any pending legal proceedings
which management believes to be material to the financial position or results of
operations of the Company. The Company maintains liability insurance against
risks arising out of the normal course of its business.
Associated with the purchase of East Coast (see Note 17), the Company entered
into a five year consulting agreement with the previous owner of East Coast,
whereby such individual will serve as the president of East Coast and will be
compensated based on a percentage of East Coast revenue along with eligibility
for a yearly bonus subject to certain events.
The Company leases certain premises under noncancelable operating lease
agreements. Future minimum annual lease payments under these leases are as
follows:
2004 $ 581,999
2005 324,144
2006 163,000
2007 168,000
2008 and thereafter 336,000
-----------
Total $ 1,573,143
===========
Total rental expense, net of amounts reimbursed for the years ended December 31,
2003, 2002 and 2001 was approximately $964,000, $809,000, and $972,000,
respectively.
14. FAIR VALUE OF FINANCIAL INSTRUMENTS
SFAS No. 107, Disclosure About Fair Value of Financial Instruments, requires
disclosure of fair value information about financial instruments, whether or not
recognized in the balance sheet, for which it is practicable to estimate that
value. The estimated fair value amounts have been determined by the Company
using available market information and appropriate valuation methodologies.
However, considerable judgment is necessarily required to interpret market data
to develop the estimates of fair value. Accordingly, the estimates presented
herein are not necessarily indicative of the amounts the Company could realize
in a current market exchange. The use of different market assumptions and/or
estimation methodologies may have a material effect on the estimated fair value
amounts.
The following methods and assumptions were used by the Company in estimating
fair value disclosures for financial instruments:
For cash and cash equivalents, receivables, trade accounts payable, and accrued
expenses, the carrying amount is a reasonable estimate of fair value as the
assets are readily redeemable or short-term in nature and the liabilities are
short-term in nature. Marketable equity securities are carried at their fair
value.
<PAGE>
For long-term debt other than the line of credit, the fair values are estimated
using discounted cash flow analyses, based on the Company's current incremental
borrowing rates for similar types of borrowing arrangements. The carrying value
of this other long-term debt at December 31, 2003 and 2002, respectively, is
$5,911,000 and $1,192,000. The fair value of long-term debt is estimated to be
$6,436,000 and $1,217,000 at December 31, 2003 and 2002.
The carrying amount for the line of credit approximates fair value because the
line of credit interest rates are adjusted frequently.
The carrying value of all hedging financial instruments approximates their fair
value and is the amount at which the hedges could be settled, based on estimates
determined by dealers. Hedging liabilities total $2,054,000 and $2,425,000 at
December 31, 2003 and 2002, respectively.
15. DERIVATIVES AND HEDGING ACTIVITIES
Effective February 28, 2001, the Company entered into an interest rate swap
agreement on a notional amount of $15,000,000. The pay fixed rate under the swap
is 5.08%, while the receive floating rate is "1-month" LIBOR. This interest rate
swap agreement terminates on March 2, 2006. Effective May 31, 2001, the Company
entered into an interest rate swap agreement on a notional amount of $5,000,000.
The pay fixed rate under the swap is 4.83%, while the receive floating rate is
"1-month" LIBOR. This interest rate swap agreement terminates on June 2, 2006.
The Company designates both of these interest rate swaps as cash flow hedges of
its exposure to variability in future cash flows resulting from interest
payments indexed to "1-month" LIBOR. Changes in future cash flows from the
interest rate swaps will offset changes in interest rate payments on the first
$20,000,000 of the Company's current revolving credit facility or future
"1-month" LIBOR based borrowings that reset on the last London Business Day
prior to the start of the next interest period. The hedge locks the interest
rate at 5.08% or 4.83% plus the pricing spread (currently 1.15%) for the
notional amounts of $15,000,000 and $5,000,000, respectively.
These interest rate swap agreements meet the specific hedge accounting criteria.
The measurement of hedge effectiveness is based upon a comparison of the
floating-rate leg of the swap and the hedged floating-rate cash flows on the
underlying liability. The effective portion of the cumulative gain or loss has
been reported as a component of accumulated other comprehensive loss in
shareholders' equity and will be reclassified into current earnings by June 2,
2006, the latest termination date for all current swap agreements. At December
31, 2003, the net after tax deferred hedging loss in accumulated other
comprehensive loss was approximately $782,000. Ineffectiveness related to these
hedges was not significant.
<PAGE>
In August 2000 and July 2001, the Company entered into agreements to obtain
price protection and reduce a portion of our exposure to fuel price
fluctuations. Under these agreements, we were obligated to purchase minimum
amounts of diesel fuel per month, with a price protection component, for the six
month periods ended March 31, 2001 and February 28, 2002. The agreements also
provide that if during the 48 months commencing April 2001, the price of heating
oil on the New York Mercantile Exchange ("NY MX HO") falls below $.58 per
gallon, the Company is obligated to pay, for a maximum of twelve different
months selected by the contract holder during such 48-month period, the
difference between $.58 per gallon and NY MX HO average price, multiplied by
900,000 gallons. Accordingly, in any month in which the holder exercises such
right, the Company would be obligated to pay the holder $9,000 for each cent by
which $.58 exceeds the average NY MX HO price for that month. For example, the
NY MX HO average price during February 2002 was approximately $.54, and if the
holder were to exercise its payment right, we would be obligated to pay the
holder approximately $36,000. In addition, if during any month in the
twelve-month period commencing January 2005, the average NY MX HO is below $.58
per gallon, the Company will be obligated to pay the contract holder the
difference between $.58 and the average NY MX HO price for such month,
multiplied by 1,000,000 gallons. The agreements are stated at their fair value
of $750,000 which is included in accrued liabilities in the accompanying
consolidated balance sheets.
16. RELATED PARTY TRANSACTIONS
In the normal course of business, the Company provides and receives
transportation, repair and other services for and from companies affiliated with
a major stockholder, and recognized $195,595, $354,241 and $58,030 in operating
revenue and $1,194,283, $1,103,062 and $905,570 in operating expenses in 2003,
2002, and 2001, respectively. At December 31, 2003 $1,015,852 was owed to the
Company from these affiliates. Of these accounts receivable $195,595 represents
revenue resulting from maintenance performed in the Company's maintenance
facilities, $409,836 is due for an insurance claim, $244,897 remains receivable
from 2002 and the remaining balance represents charges paid by the Company on
behalf of their affiliate and charged back at the amount paid. Accounts
receivable from affiliates at December 31 2002 was $479,342. At December 31,
2003 and 2002 amounts payable to these affiliates totaled $1,401,759 and
$494,342 respectively.
<PAGE>
17. ACQUISTIONS
On January 31, 2003, P.A.M. Transportation Services, Inc. acquired substantially
all of the assets of East Coast Transport and Logistics, Inc. a freight
brokerage operation based in New Jersey. The results of East Coast Transport and
Logistics, Inc. have been included in the consolidated financial statements
since that date. In accordance with SFAS No. 141, Business Combinations, the
acquisition was accounted for under the purchase method of accounting.
The aggregate purchase price of approximately $6.9 million was paid in the form
of a 7 year installment note in the amount of approximately $5.0 million at an
interest rate of 6% and cash payments of approximately $1.9 million. A
non-compete agreement in the amount of $1.0 million and covering a 5 year period
was also entered into. Approximately $6.9 million of additional goodwill was
recognized as a result of the acquisition.
On April 3, 2003, P.A.M. Transportation Services, Inc. acquired substantially
all of the assets of McNeill Express, Inc. a truckload motor carrier. The
results of McNeill Express, Inc. have been included in the consolidated
financial statements since that date. In accordance with SFAS No. 141, Business
Combinations, the acquisition was accounted for under the purchase method of
accounting.
The aggregate purchase price of approximately $8.87 million was paid in the form
of cash in the amount of approximately $8.8 million and the assumption of
liabilities aggregating approximately $70,000. A non-compete agreement in the
amount of $300,000 and covering a 2 year period was also entered into.
Approximately $370,000 of additional goodwill was recognized as a result of the
acquisition.
The following unaudited pro forma information is being provided for the business
acquisitions made during the year ended December 31, 2003 as though the Company
made the acquisitions at the beginning of the year ended December 31:
<TABLE>
<CAPTION>
2003 2002 2001
(in thousands, except per share date)
<S> <C> <C> <C>
Operating income $ 20,869 $ 32,160 $ 22,705
Income before income taxes 19,444 29,790 17,843
Net income 11,578 18,521 11,056
Basic earnings per share $ 1.03 $ 1.74 $ 1.30
Diluted earnings per share 1.02 1.73 1.29
</TABLE>
<PAGE>
18. QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
The tables below present quarterly financial information for 2003 and 2002:
<TABLE>
<CAPTION>
2003
THREE MONTHS ENDED
MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31
-----------------------------------------------------
(in thousands, except per share data)
<S> <C> <C> <C> <C>
Operating revenues $ 70,139 $ 74,956 $ 74,216 $ 74,236
Operating expenses 65,185 67,896 68,899 70,881
-------- -------- -------- --------
Operating income 4,954 7,060 5,317 3,355
Non-operating income 10 59 70 137
Interest expense 268 485 445 469
Income taxes 1,878 2,587 1,977 1,363
-------- -------- -------- --------
Net income $ 2,818 $ 4,047 $ 2,965 $ 1,660
======== ======== ======== ========
Net income per common share:
Basic $ 0.25 $ 0.36 $ 0.26 $ 0.15
======== ======== ======== ========
Diluted $ 0.25 $ 0.36 $ 0.26 $ 0.14
======== ======== ======== ========
Average common shares outstanding:
Basic 11,287 11,290 11,293 11,291
======== ======== ======== ========
Diluted 11,338 11,332 11,327 11,326
======== ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
2002
THREE MONTHS ENDED
MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31
-----------------------------------------------------
(in thousands, except per share data)
<S> <C> <C> <C> <C>
Operating revenues $ 63,313 $ 70,841 $ 65,034 $ 64,824
Operating expenses 56,331 62,082 58,061 57,898
-------- -------- -------- --------
Operating income 6,982 8,759 6,973 6,926
Interest expense 972 369 377 267
Income taxes 2,404 3,356 2,638 2,664
-------- -------- -------- --------
Net income $ 3,606 $ 5,034 $ 3,958 $ 3,995
======== ======== ======== ========
Net income per common share:
Basic $ 0.40 $ 0.45 $ 0.35 $ 0.36
======== ======== ======== ========
Diluted $ 0.40 $ 0.45 $ 0.35 $ 0.35
======== ======== ======== ========
Average common shares outstanding:
Basic 8,928 11,183 11,263 11,268
======== ======== ======== ========
Diluted 8,974 11,238 11,307 11,308
======== ======== ======== ========
</TABLE>
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
On July 9, 2002, the Company dismissed its independent auditors, Arthur Andersen
LLP, and on the same date engaged Deloitte & Touche LLP as its independent
auditors for the fiscal year ending December 31, 2002. Each of these actions
was approved by the Audit Committee of the Company. Information with respect to
this matter is included in the Company's current report on Form 8-K filed July
12, 2002, which information is incorporated herein by reference.
ITEM 9A. CONTROLS AND PROCEDURES.
We maintain a set of disclosure controls and procedures designed to ensure that
information required to be disclosed by P.A.M. Transportation Services, Inc. in
reports that it files under the Securities Exchange Act of 1934 is recorded,
processed, summarized and reported within the time periods specified in
Securities and Exchange Commission ("SEC") rules and forms. An evaluation was
carried out as of December 31, 2003 under the supervision and with the
participation of our management, including the Chief Executive Officer ("CEO")
and Chief Financial Officer ("CFO"), of the effectiveness of our disclosure
controls and procedures. Based on that evaluation, the CEO and CFO have
concluded that our disclosure controls and procedures were effective as of
December 31, 2003.
CEO and CFO Certificates
Attached as Exhibits 31.1 and 31.2 to this report on Form 10-K are two
certifications, one each by the CEO and the CFO, respectively. They are
required in accordance with Rule 13a-14 of the Exchange Act. This Item 9A,
Controls and Procedures, includes the information concerning the controls
evaluation referred to in the certifications and should be read in conjunction
with the certifications.
Disclosure Controls
"Disclosure Controls" are procedures that are designed to ensure that
information required to be disclosed in our reports filed under the Securities
Exchange Act of 1934, such as this report on Form 10-K, is recorded, processed,
summarized and reported within the time periods specified in the SEC rules and
forms. Disclosure Controls are also designed to ensure that information
required to be disclosed is accumulated and communicated to our management,
including our CEO and CFO, as appropriate to allow timely decisions regarding
disclosure.
Internal Controls
"Internal Controls" are procedures that are designed to provide reasonable
assurance that (1) our transactions are properly authorized, recorded and
reported and (2) our assets are safeguarded against unauthorized or improper
use, so that our financial statements may be prepared in accordance with
generally accepted accounting principles.
<PAGE>
Limitations on the Effectiveness of Controls
Our management, including the CEO and CFO, do not expect that our Disclosure
Controls and/or our Internal Controls will prevent or detect all error or fraud.
A system of controls is able to provide only reasonable, not complete, assurance
that the control objectives are being met, no matter how extensive those control
systems may be. Also, control systems must be established within the opposing
forces of risk and resources, (i.e., the benefits of a control system must be
considered relative to its costs). Because of these inherent limitations that
exist in all control systems, no evaluation of Disclosure Controls and/or
Internal Controls can provide absolute assurance that all errors or fraud, if
any, have been detected. The inherent limitations in control systems include
various human and system factors that may include errors in judgment or
interpretation regarding events or circumstances or inadvertent error.
Additionally, controls can be circumvented by the acts of a single person, by
collusion on the part of two or more people or by management override of the
control. Over time, controls can also become ineffective as conditions,
circumstances, policies, technologies, level of compliance and people change.
Because of such inherent limitations, in any cost-effective control system over
financial information, misstatements may occur due to error or fraud and may not
be detected.
Scope of Evaluation of Disclosure Controls
The evaluation of our Disclosure Controls performed by our CEO and CFO included
obtaining an understanding of the design and objective of the controls, the
implementation of those controls and the results of the controls on this report
on Form 10-K. We have established a Disclosure Committee whose duty is to
perform procedures to evaluate the Disclosure Controls and provide the CEO and
CFO with the results of their evaluation as part of the information considered
by the CEO and CFO in their evaluation of Disclosure Controls. In the course of
the evaluation of Disclosure Controls, we reviewed the controls that are in
place to record, process, summarize and report, on a timely basis, matters that
require disclosure in our reports filed under the Securities Exchange Act of
1934. We also considered the adequacy of the items disclosed in this report on
Form 10-K.
Conclusions
Based upon the evaluation of Disclosure Controls described above, our CEO and
CFO have concluded that, subject to the limitations described above, our
Disclosure Controls are effective so that material information relating to
P.A.M. Transportation Services, Inc. and its consolidated subsidiaries is made
known to management, including the CEO and CFO, so that required disclosures
have been included in this report on Form 10-K.
<PAGE>
PART III
Portions of the information required by Part III of Form 10-K are, pursuant to
General Instruction G (3) of Form 10-K, incorporated by reference from our
definitive proxy statement to be filed pursuant to Regulation 14A for our Annual
Meeting of Stockholders to be held on May 20, 2004. We will, within 120 days of
the end of our fiscal year, file with the Securities and Exchange Commission a
definitive proxy statement pursuant to Regulation 14A.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The information responsive to this item, with the exception of the Audit
Committee and Code of Ethics information presented below, is incorporated by
reference from the section entitled "Election of Directors" contained in the
proxy statement.
Audit Committee
We have a separately-designated standing audit committee established in
accordance with Section 3(a)(58)(A) of the Securities Exchange Act of 1934. The
members of the Audit Committee consist of Frank L. Conner, Thomas H. Cooke,
Daniel C. Sullivan, and Charles F. Wilkins. The Board of Directors has
determined that Mr. Conner and Mr. Cooke, both members of the Audit Committee,
are each qualified as an audit committee financial expert, as that term is
defined in the rules of the Securities and Exchange Commission. Mr. Conner and
Mr. Cooke are independent, as independence for audit committee members is
defined in the listing standards of the Nasdaq Stock Market and the rules of the
Securities and Exchange Commission.
Code of Ethics
We have adopted a Code of Ethics that applies to all of our directors, officers
and employees, including our principal executive officer, principal financial
officer, principal accounting officer or controller, and persons performing
similar functions. The Code of Ethics is posted on our website (www.pamt.com).
We intend to post amendments to or waivers from our Code of Ethics, of the type
referred to in Item 10 of Form 8-K, to the extent applicable to our principal
executive officer, principal financial officer, principal accounting officer or
controller, and persons performing similar functions, on our website.
<PAGE>
ITEM 11. EXECUTIVE COMPENSATION.
The information responsive to this item is incorporated by reference from the
section entitled "Executive Compensation" contained in the proxy statement.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS.
The information responsive to this item, with the exception of the equity
compensation plan information presented below, is incorporated by reference
from the section entitled "Security Ownership of Certain Beneficial Owners and
Management" contained in the proxy statement.
EQUITY COMPENSATION PLAN INFORMATION
The following table summarizes, as of December 31, 2003, information about
compensation plans under which equity securities of the Company are authorized
for issuance:
<TABLE>
<CAPTION>
Number of securities
Number of securities to Weighted-average remaining available
be issued upon exercise exercise price of for future issuance
of outstanding options, outstanding options, under equity
Plan Category warrants and rights warrants and rights compensation plans
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Equity Compensation Plans
approved by Security Holders 348,500 $20.85 291,500
Equity Compensation Plans
not approved by Security
Holders -0- -0- -0-
</TABLE>
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The information responsive to this item is incorporated by reference from the
section entitled "Certain Relationships and Related Transactions" contained in
the proxy statement.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
The information responsive to this item is incorporated by reference from the
section entitled "Principal Accountant Fees and Services" contained in the proxy
statement.
<PAGE>
PART IV
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(a) Financial Statements and Schedules.
(1) Financial Statements: See Part II, Item 8 hereof.
Report of Independent Public Accountants
Consolidated Balance Sheets - December 31, 2003 and 2002
Consolidated Statements of Income - Years ended
December 31, 2003, 2002 and 2001
Consolidated Statements of Shareholders' Equity - Years ended
December 31, 2003, 2002 and 2001
Consolidated Statements of Cash Flows - Years ended
December 31, 2003, 2002 and 2001
Notes to Consolidated Financial Statements
(2) Financial Statement Schedules.
All schedules for which provision is made in the applicable accounting
regulations of the SEC are omitted as the required information is
inapplicable, or because the information is presented in the
consolidated financial statements or related notes.
(3) Exhibits.
The Exhibit Index filed herewith and appearing immediately following
the signatures in this Report is incorporated by reference in response
to this Item.
(b) Reports on Form 8-K.
A Current Report on Form 8-K was filed on October 28, 2003 regarding a
press release issued to announce our third quarter 2003 results. No other
reports on Form 8-K were filed during the fourth quarter ended December 31,
2003.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 of the Securities Exchange Act of
1934, the registrant has caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
P.A.M. TRANSPORTATION SERVICES, INC.
Dated: March 12, 2004 By: /s/ Robert W. Weaver
--------------------------
ROBERT W. WEAVER
President and Chief Executive Officer
(principal executive officer)
Dated: March 12, 2004 By: /s/ Larry J. Goddard
--------------------------
LARRY J. GODDARD, Vice President-
Finance, Chief Financial Officer,
Secretary and Treasurer
(principal financial and accounting officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed by the following persons on behalf of the registrant and in the
capacities and on the dates indicated:
Dated: March 12, 2004 By: /s/ Robert W. Weaver
--------------------------
ROBERT W. WEAVER, President and Chief
Executive Officer, Director
Dated: March 12, 2004 By: /s/ Matthew T. Moroun
--------------------------
MATTHEW T. MOROUN, Director
Dated: March 12, 2004 By: /s/ Daniel C. Sullivan
--------------------------
DANIEL C. SULLIVAN, Director
Dated: March 12, 2004 By: /s/ Charles F. Wilkins
--------------------------
CHARLES F. WILKINS, Director
Dated: March 12, 2004 By: /s/ Frederick P. Calderone
--------------------------
FREDERICK P. CALDERONE, Director
Dated: March 12, 2004 By: /s/ Manuel J. Moroun
--------------------------
MANUEL J. MOROUN, Director
Dated: March 12, 2004 By: /s/ Thomas H. Cooke
--------------------------
THOMAS H. COOKE, Director
Dated: March 12, 2004 By: /s/ Frank L. Conner
--------------------------
FRANK L. CONNER, Director
<PAGE>
EXHIBIT INDEX
The following exhibits are filed with or incorporated by reference into this
report. The exhibits which are denominated by an asterisk (*) were previously
filed as a part of, and are hereby incorporated by reference from either (i) the
Form S-1 Registration Statement under the Securities Act of 1933, as filed with
the Securities and Exchange Commission on July 30, 1986, Registration No.
33-7618, as amended on August 8, 1986, September 3, 1986 and September 10, 1986
("1986 S-1"); (ii) the Annual Report on Form 10-K for the year ended December
31, 1987 ("1987 10-K"); (iii) the Annual Report on Form 10-K for the year ended
December 31, 1992 ("1992 10-K"); (iv) the Quarterly Report on Form 10-Q for the
quarter ended June 30, 1994 ("6/30/94 10-Q"); (v) the Quarterly Report on Form
10-Q for the quarter ended June 30, 1995 ("6/30/95 10-Q"); (vi) the Quarterly
Report on Form 10-Q for the quarter ended September 30, 1996 (9/30/96 10-Q);
(vii) the Annual Report on Form 10-K for the year ended December 31, 1996 ("1996
10-K"); or (viii) the Quarterly Report on Form 10-Q for the quarter ended June
30, 1998 ("6/30/98 10-Q"); (ix) the Form S-8 Registration Statement filed on
June 11, 1999; (x) the Annual Report on Form 10-K for the year ended December
31, 2001 ("2001 10-K"); or (xi) the Quarterly Report on Form 10-Q for the
quarter ended March 31, 2002 ("3/31/02 10-Q").
<TABLE>
<CAPTION>
EXHIBIT# DESCRIPTION OF EXHIBIT
- -------- -----------------------------------------------------------------------------------------------
<S> <C>
*3.1 - Amended and Restated Certificate of Incorporation of the Registrant (Exh. 3.1, 1986 S-1)
*3.1.1 - Amendment to Certificate of Incorporation dated June 24, 1987 (Exh. 3.1.1, 1987 10-K)
*3.1.2 - Amended and Restated Certificate of Incorporation of the Registrant (Exh. 3.1, 3/31/02 10-Q)
*3.2.4 - Amended and Restated By-Laws of the Registrant (Exh. 3.2, 3/31/02 10-Q)
*4.1 - Specimen Stock Certificate (Exh. 4.1, 1986 S-1)
*4.2 - Loan Agreement dated July 26, 1994 among First Tennessee Bank National Association,
Registrant and P.A.M. Transport, Inc. together with Promissory Note (Exh. 4.1, 6/30/94 10-Q)
*4.2.1 - Security Agreement dated July 26, 1994 between First Tennessee Bank National Association and
P.A.M. Transport, Inc. (Exh. 4.2, 6/30/94 10-Q)
*4.3 - First Amendment to Loan Agreement dated June 27, 1995 by and among P.A.M. Transport, Inc.,
First Tennessee Bank National Association and P.A.M. Transportation Services, Inc., together
with Promissory Note in the principal amount of $2,500,000 (Exh. 4.1.1, 6/30/95 10-Q)
*4.3.1 - First Amendment to Security Agreement dated June 28, 1995 by and between P.A.M. Transport,
Inc. and First Tennessee Bank National Association (Exh. 4.2.2, 6/30/95 10-Q)
*4.3.2 - Security Agreement dated June 27, 1995 by and between Choctaw Express, Inc. and First
Tennessee Bank National Association (Exh. 4.1.3, 6/30/95 10-Q)
*4.3.3 - Guaranty Agreement of P.A.M. Transportation Services, Inc. dated June 27, 1995 in favor of
First Tennessee Bank National Association respecting $10,000,000 line of credit (Exh. 4.1.4,
6/30/95 10-Q)
<PAGE>
*4.4 - Second Amendment to Loan Agreement dated July 3, 1996 by and among P.A.M. Transport, Inc.,
First Tennessee Bank National Association and P.A.M. Transportation Services, Inc., together
with Promissory Note in the principal amount of $5,000,000 (Exh. 4.1.1, 9/30/96 10-Q)
*4.4.1 - Second Amendment to Security Agreement dated July 3, 1996 by and between P.A.M. Transport,
Inc. and First Tennessee National Bank Association (Exh. 4.1.2, 9/30/96 10-Q)
*4.4.2 - First Amendment to Security Agreement dated July 3, 1996 by and between Choctaw Express, Inc.
and First Tennessee Bank National Association (Exh. 4.1.3, 9/30/96 10-Q)
*4.4.3 - Security Agreement dated July 3, 1996 by and between Allen Freight Services, Inc. and First
Tennessee Bank National Association (Exh. 4.1.4, 9/30/96 10-Q)
*4.5.1 - Loan Agreement dated as of November 22, 2000 by and between P.A.M. Transport, Inc. and
SunTrust Bank (Exh 4.5.1, 2001 10-K)
*4.5.2 - Revolving Credit Note dated November 22, 2000 (Exh 4.5.2, 2001 10-K)
*4.5.3 - Security Agreement by and between P.A.M. Transport, Inc. and SunTrust Bank (Exh 4.5.3,
2001 10-K)
*4.5.4 - First Amendment to Loan Agreement, Revolving Credit Note and Security Deposit (Exh 4.5.4,
2001 10-K)
*10.1.1 - Employment Agreement between the Registrant and Robert W. Weaver, effective July 1, 2002
(Exh 10.1.1, 2001 10-K)
*10.2 - Employment Agreement between the Registrant and W. Clif Lawson, dated January 1, 2002
(Exh 10.2, 2001 10-K)
*10.3 - Employment Agreement between the Registrant and Larry J. Goddard, dated January 1, 2002
(Exh 10.3, 2001 10-K)
*10.4 - 1995 Stock Option Plan, as Amended and Restated (Exh. 4.1, 6/11/99 S-8)
*10.5 - Interest rate swap agreement, dated March 1, 2001 (Exh 10.5, 2001 10-K)
*10.6 - Interest rate swap agreement dated June 1, 2001 (Exh 10.6, 2001 10-K)
21.1 - Subsidiaries of the Registrant
23.1 - Consent of Deloitte & Touche LLP
23.2 - Notice regarding Consent of Arthur Andersen, LLP
31.1 - Rule 13a-14(a) Certification of Principal Executive Officer
31.2 - Rule 13a-14(a) Certification of Principal Financial Officer
32.1 - Section 1350 Certification of Chief Executive Officer
32.2 - Section 1350 Certification of Chief Financial Officer
</TABLE>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-21.1
<SEQUENCE>3
<FILENAME>doc2.txt
<TEXT>
EXHIBIT 21.1
SUBSIDIARIES OF REGISTRANT
P.A.M. Transport, Inc. (Arkansas Corporation)
P.A.M. Dedicated Services, Inc. (Ohio Corporation)
P.A.M. Logistics Services, Inc. (Arkansas Corporation)
T.T.X., Inc. (Texas Corporation)
Choctaw Express, Inc. (Oklahoma Corporation)
Choctaw Brokerage, Inc. (Oklahoma Corporation)
Allen Freight Services, Inc. (Missouri Corporation)
Decker Transport Co., Inc. (Ohio Corporation)
Transcend Logistics, Inc. (Indiana Corporation)
East Coast Transport and Logistics, Inc. (Arkansas LLC)
McNeill Express, Inc. (Arkansas Corporation)
S & L Logistics, Inc. (Texas Corporation)
P.A.M. International, Inc. (Ohio Corporation)
P.A.M. Canada, Inc. (Canadian Corporation)
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-23.1
<SEQUENCE>4
<FILENAME>doc3.txt
<TEXT>
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration Statement No.
333-80505 of P.A.M. Transportation Services, Inc. (the "Company") on Form S-8 of
our report dated March 10, 2004, relating to the consolidated financial
statements of the Company as of and for the years ended December 31, 2003 and
2002 (which report expresses an unqualified opinion and includes an explanatory
paragraph concerning the Company's change in its method of accounting for
goodwill to conform to Statement of Financial Accounting Standards No. 142,
Goodwill and Other Intangible Assets, as of January 1, 2002), appearing in this
Annual Report on Form 10-K of the Company for the year ended December 31, 2003.
/s/ Deloitte & Touche LLP
Little Rock, Arkansas
March 5, 2004
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-23.2
<SEQUENCE>5
<FILENAME>doc4.txt
<TEXT>
EXHIBIT 23.2
NOTICE REGARDING CONSENT OF ARTHUR ANDERSEN LLP
We have not been able to obtain, after reasonable efforts, the reissued report
or consent of Arthur Andersen LLP related to the 2001 financial statements
included in this report on Form 10-K. Therefore, we have included a copy of
their previously issued report.
Because we have been unable to obtain the above-referenced consent of Arthur
Andersen LLP, we are required to disclose any resulting limitations on recovery
by investors. Section 11(a) of the Securities Act of 1933 allows, under certain
circumstances, a person acquiring a security to assert a claim against, among
others, an accountant who has consented to be named as having prepared any
report for use in connection with the registration statement if part of a
registration statement at the time it becomes effective contains an untrue
statement of a material fact or omits to state a material fact required to be
stated therein or necessary to make the statements therein not misleading.
Because Arthur Andersen LLP has not consented to being named in this Form 10-K,
it will not be liable under Section 11(a) of the Securities Act for any untrue
statements or omissions of material fact contained in the financial statements
audited by Arthur Andersen LLP.
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-31.1
<SEQUENCE>6
<FILENAME>doc5.txt
<TEXT>
EXHIBIT 31.1
RULE 13a-14(a) CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER
I, ROBER W. WEAVER, President and Chief Executive Officer, certify that:
(1) I have reviewed this annual report on Form 10-K of P.A.M. TRANSPORTATION
SERVICES, INC., a Delaware corporation (the "registrant");
(2) Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this report;
(3) Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the registrant as of, and for, the periods presented in this report;
(4) The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to ensure
that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report is being
prepared;
(b) Evaluated the effectiveness of the registrant's disclosure controls and
procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of
the period covered by this report based on such evaluation; and
(c) Disclosed in this report any change in the registrant's internal control
over financial reporting that occurred during the registrant's most recent
fiscal quarter (the registrant's fourth fiscal quarter in the case of an
annual report) that has materially affected, or is reasonably likely to
materially affect, the registrant's internal control over financial
reporting; and
(5) The registrant's other certifying officer and I have disclosed, based on
our most recent evaluation of internal control over financial reporting, to
the registrant's auditors and the audit committee of the registrant's board
of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are reasonably
likely to adversely affect the registrant's ability to record, process,
summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal control
over financial reporting.
Date: March 12, 2004
By: /s/ Robert W. Weaver
--------------------------------------
Robert W. Weaver
President and Chief Executive Officer
(principal executive officer)
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-31.2
<SEQUENCE>7
<FILENAME>doc6.txt
<TEXT>
EXHIBIT 31.2
RULE 13a-14(a) CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER
I, LARRY J. GODDARD, Chief Financial Officer, certify that:
(1) I have reviewed this annual report on Form 10-K of P.A.M. TRANSPORTATION
SERVICES, INC., a Delaware corporation (the "registrant");
(2) Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this report;
(3) Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the registrant as of, and for, the periods presented in this report;
(4) The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to ensure
that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report is being
prepared;
(b) Evaluated the effectiveness of the registrant's disclosure controls and
procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of
the period covered by this report based on such evaluation; and
(c) Disclosed in this report any change in the registrant's internal control
over financial reporting that occurred during the registrant's most recent
fiscal quarter (the registrant's fourth fiscal quarter in the case of an
annual report) that has materially affected, or is reasonably likely to
materially affect, the registrant's internal control over financial
reporting; and
(5) The registrant's other certifying officer and I have disclosed, based on
our most recent evaluation of internal control over financial reporting, to
the registrant's auditors and the audit committee of the registrant's board
of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are reasonably
likely to adversely affect the registrant's ability to record, process,
summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal control
over financial reporting.
Date: March 12, 2004
By: /s/ Larry J. Goddard
--------------------------------------------
Larry J. Goddard
Vice President-Finance, Chief Financial
Officer, Secretary and Treasurer
(principal accounting and financial officer)
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-32.1
<SEQUENCE>8
<FILENAME>doc7.txt
<TEXT>
EXHIBIT 32.1
SECTION 1350 CERTIFICATION OF CHIEF EXECUTIVE OFFICER
In connection with the Annual Report of P.A.M. Transportation Services, Inc.
(the "Company") on Form 10-K for the period ending December 31, 2003, (the
"Report") filed with the Securities and Exchange Commission, I, Robert W.
Weaver, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002, that to the best of my knowledge:
(1) The Report fully complies with the requirements of section 13(a) or 15(d)
of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material
respects, the financial condition and results of operations of the Company.
Date: March 12, 2004
By: /s/ Robert W. Weaver
-------------------------------------
Robert W. Weaver
President and Chief Executive Officer
(chief executive officer)
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-32.2
<SEQUENCE>9
<FILENAME>doc8.txt
<TEXT>
EXHIBIT 32.2
SECTION 1350 CERTIFICATION OF CHIEF FINANCIAL OFFICER
In connection with the Annual Report of P.A.M. Transportation Services, Inc.
(the "Company") on Form 10-K for the period ending December 31, 2003, (the
"Report") filed with the Securities and Exchange Commission, I, Larry J.
Goddard, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002, that to the best of my knowledge:
(1) The Report fully complies with the requirements of section 13(a) or 15(d)
of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material
respects, the financial condition and results of operations of the Company.
Date: March 12, 2004
By: /s/ Larry J. Goddard
-----------------------------------------
Larry J. Goddard
Vice President-Finance, Chief Financial
Officer, Secretary and Treasurer
(chief accounting and financial officer)
</TEXT>
</DOCUMENT>
</SEC-DOCUMENT>
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