10-K
1
PAM TRANSPORTATION SERVICES
1
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, 1994
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.)
Highway 412 West
P.O. Box 188
Tontitown, Arkansas 72770
(501) 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. [ ]
The aggregate market value of the common stock of the registrant held by
non-affiliates of the registrant on March 21, 1995 was $11,880,720. Solely for
the purposes of this response, executive officers, directors and beneficial
owners of more than five percent of the Company's common stock are considered
the affiliates of the Company at that date.
The number of shares outstanding of the issuer's common stock, as of March 21,
1995: 4,962,357 shares of $.01 par value common stock.
DOCUMENTS INCORPORATED BY REFERENCE
The Registrant's definitive Proxy Statement for its Annual Meeting of
Shareholders to be held in 1995 is 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.
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PART I
ITEM 1. BUSINESS.
P.A.M. Transportation Services, Inc. (the "Company"), operating through
its wholly-owned subsidiaries, is an irregular route, common and contract motor
carrier authorized to transport general commodities throughout the continental
United States and the Canadian provinces of Ontario and Quebec, pursuant to
operating authorities granted by the Interstate Commerce Commission ("ICC"),
various state regulatory agencies and Canadian regulatory agencies. Under its
operating authorities, the Company may transport all types of freight (except
household goods, commodities in bulk and certain explosives) from any point in
the continental United States, Ontario or Quebec to any other point in another
state or in Ontario or Quebec over any route selected by the Company. The
Company transports dry freight commodities ("freight") in 48-foot and 53-foot
long, high cube conventional and specialized freight vans ("trailers"). The
freight consists primarily of consumer goods, such as general retail store
merchandise and products from the manufacturing sector, such as heating and air
conditioning units, industrial glass, and automotive parts. All freight is
transported as truckload quantities.
The Company is a holding company organized under the laws of the State of
Delaware in June 1986 and conducts its operations through its wholly-owned
subsidiaries, P.A.M. Transport, Inc. ("P.A.M. Transport"), P.A.M. Special
Services, Inc., T.T.X., Inc., Choctaw Express, Inc. and Choctaw Brokerage, Inc.
(see below). The Company's operating authorities are held by P.A.M. Transport
and Choctaw Express, Inc. Although not organized until June 1986, the Company
is, for financial accounting purposes, the successor to P.A.M. Transport, which
was organized under the laws of the State of Arkansas in 1980. Unless the
context otherwise requires, all references to the Company in this Annual Report
on Form 10-K include P.A.M. Transportation Services, Inc. and its subsidiaries.
At December 31, 1994, the Company operated a transport fleet consisting of 595
over-the-road tractors ("tractors") and 1,434 trailers.
The Company is headquartered and maintains its primary terminal,
maintenance facilities and corporate and administrative offices in Tontitown in
the northwest corner of Arkansas, a major center for the trucking industry and
where the support services (including warranty repair services) of most major
tractor and trailer equipment manufacturers are readily available.
RECENT ACQUISITIONS
On January 31, 1995, the Company closed the purchase of all of the
outstanding capital stock (the "Shares") of Choctaw Express, Inc. and Choctaw
Brokerage, Inc. (collectively "Choctaw"), Oklahoma corporations, from Joe M.
Bussell ("Bussell"), pursuant to a Stock Purchase Agreement by and among the
Company, Choctaw and Bussell (the "Agreement"). The total purchase price for
the Shares was $2,530,915, which was negotiated by the parties at arms-length.
Pursuant to the Agreement, the Company paid Bussell 95% of the purchase price
for the Shares in cash at closing, which amounted to $2,404,369. The balance
of the purchase price ($126,546) will be reserved by the Company for a period
of 120 days after the closing date for the purpose of determining the
collectibility of accounts receivable of Choctaw. The purchase price is
subject to a post-closing adjustment based upon the net book value of Choctaw
as of the closing date, with the purchase price to be adjusted up or down on a
dollar-for-dollar basis based upon the closing date net book value of Choctaw
as compared to the November 30, 1994 net book value of Choctaw. The Company
paid the purchase price by utilizing its existing line of credit.
In connection with the transaction, Mr. Bussell entered into a five year
Non-Competition Agreement with the Company in consideration of the payment of
$325,000 annually over the term of the Agreement. Mr. Bussell also entered
into a one year Employment Agreement with a subsidiary of the Company pursuant
to which he will continue to act as President of Choctaw.
3
Choctaw generated $7.9 million in revenues in 1993 and expects to report
approximately $12 million in revenues in 1994.
Choctaw is engaged in the truckload common and contract motor carrier and
motor carrier brokerage businesses, and is headquartered in Oklahoma City,
Oklahoma. Choctaw's operations consist primarily of dedicated "just in time"
("JIT") service, using a combination of 48-foot and 53-foot conventional and
specialized trailer equipment. Choctaw operated a fleet of 55 tractors and 110
trailers at December 31, 1994. All of Choctaw's tractors are operated by
two-man driver teams to accommodate the demands of JIT service customers.
MARKETING
The Company's marketing emphasis is directed to that segment of the
truckload market which is generally service-sensitive, as opposed to being
solely price competitive. Since 1990, the Company has diversified its
marketing efforts to gain access to non-traditional freight traffic, including
international (Mexico and Canada), domestic regional short-haul, dedicated
fleet services and intermodal transportation. The Company also participates in
various "core carrier" partnerships with its larger customers. The Company
estimates that approximately 60% of its deliveries to customers are made on a
JIT basis, whereby products and raw materials are scheduled for delivery as
they are needed on the retail customer's shelves or in the manufacturing
customer's production line. Such requirements place a premium on the freight
carrier's delivery performance and reliability. With respect to these JIT
deliveries, approximately 80% require the use of two-man driver teams to meet
the customer's schedule. The need for this service is a product of modern
manufacturing and assembly methods which are designed to drastically decrease
inventory levels and handling costs.
The Company's marketing efforts are conducted by seven outside sales
persons domiciled within the Company's major markets. Field personnel are
supervised from Company headquarters, emphasizing an even flow of freight
traffic (balance between originations and destinations in a given geographical
area) and minimization of movement of empty equipment.
During 1994, the Company's five largest customers, for which the Company
provides carrier services covering a number of geographic locations, accounted
for approximately 36% of total revenues. One customer, General Motors
Corporation, accounted for approximately 12.3% of revenues for that period. A
total loss of General Motors business, however unlikely, would have an adverse
impact on the Company's operations, at least over the short term.
The Company compiles and publishes its own freight rate tariffs so as to
maintain flexibility in responding to the varying service-oriented demands of
its customers.
OPERATIONS
The Company's operations department is generally divided into two groups
- fleet operations and customer service. Fleet operations personnel maintain
daily contact with drivers and dispatch the predesignated computerized load
assignments to the drivers. Dispatchers also control and oversee the movement
of equipment and drivers and update the computer system as to their location
and status after each contact. Customer service personnel handle day-to-day
solicitation of freight from the Company's customers.
The Company maintains a 24-hour dispatch office, with a toll free WATS
line to facilitate communications with both customers and drivers. The
location, status and contact assignment of all of the Company's equipment are
available on an up-to-date basis through the Company's computer system, which
permits the Company to better meet delivery schedules, respond to customer
inquiries and match equipment with the next available load.
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Each Customer Service Representative ("CSR") has an assigned geographic
region for which he or she has responsibility for efficiently matching the
customer's freight pickup origins with available equipment in the area. The
CSR obtains all relevant information from the customer regarding the service
needs of the freight shipment and enters the data into the Company's computer,
assigning the most practical tractor to the load and scheduling the delivery
appointment. A substantial majority of customers' orders require freight
pickup within 24 hours of such order, making responsiveness and availability of
equipment another major component of customer service.
The Company communicates through electronic data interchange with many of
its customers, providing live status reports of freight shipments and arrival
time information. This system provides the Company's customers flexibility and
convenience by allowing the customer to tender freight electronically.
DEDICATED SERVICE
The Company has contractual arrangements with customers to move freight
in dedicated lanes within the United States, primarily in the Midwest and
between the Midwest and Southwest. A majority of this freight is moved on a
round-trip basis, and due to the volume involved, the Company agreed to
dedicate equipment and personnel to handle this part of its business. At
December 31, 1994, 203 tractors, manned with two-man driver teams, and
approximately 464 trailers were dedicated to this service. The Company has
found that the dedicated service promotes increased utilization of equipment
and greater driver satisfaction due to the greater regularity of the routes and
schedules, which allows the drivers to be at home more often.
The dedicated service business amounted to approximately 44% of 1994
revenues, 32% of 1993 revenues, and 31% of 1992 revenues. There exists a large
volume of dedicated-type business throughout the continental United States.
The Company has enjoyed considerable success in entering this market, and is
aggressively seeking to expand its share of the dedicated service market.
INTERMODAL SERVICE
The Company entered the intermodal transportation business in early 1992,
and has contractual arrangements with Consolidated Rail Corporation (Conrail),
Norfolk Southern, the Atchison, Topeka and Santa Fe Railway Company (Santa Fe),
Burlington Northern and Union Pacific. Intermodal service provides customers
with an alternative to highway long-hauls. Management expects to take
advantage of opportunities to expand this business and views the intermodal
market as a mechanism to realize non-asset based revenue growth.
OVER-THE-ROAD EQUIPMENT
The Company operated a fleet of 595 tractors and 1,434 trailers at
December 31, 1994. All of the trailers and all except 40 of the tractors are
owned or leased by the Company. The trailer fleet is made up of 719 48' by
102" dry vans and 715 53' by 102" dry vans. In 1993, the Company began its
trailer fleet conversion to air ride equipment and the Company intends to
purchase only air ride trailers in the future. The Company also has certain
specialized drop-frame trailers. The 40 tractors that are not Company owned
are utilized in the dedicated service operations and are leased from
owner/operators on a per mile basis.
The average age of the Company's tractors decreased from 3.66 years in
1992 to 3.04 in 1993 to 1.70 by the end of 1994. The average age of the
Company's trailer fleet decreased from 5.28 years in 1992 to 3.84 in 1993 to
2.09 by the end of 1994.
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During 1994, the Company purchased 150 new tractors and 515 new trailers
and sold 259 tractors and 197 trailers. During 1995, the Company expects to
purchase 155 new tractors and 185 new trailers, and expects to continue to sell
older equipment.
MAINTENANCE
The Company has a strictly enforced comprehensive preventive maintenance
program for the tractors and trailers it operates. Inspections and various
levels of repair and preventive maintenance are performed at set mileage
intervals on both tractors and trailers. Although the majority of maintenance
is performed at the Company's maintenance facility in Tontitown, Arkansas, the
Company's subsidiaries have additional maintenance facilities in Warren, Ohio;
Springfield, Missouri; Dallas, Laredo and El Paso, Texas; and Oklahoma City,
Oklahoma. These facilities enhance the Company's preventive and routine
maintenance operations and are strategically located on major transportation
routes where a majority of the Company's freight originates and terminates. A
maintenance and safety inspection is performed on all vehicles each time they
return to a terminal. The Company's primary maintenance facilities consist of
thirteen mechanical repair bays, four bodyshop bays and three safety and
maintenance inspection bays. The Company believes that its current maintenance
facilities will be adequate to accommodate its fleet for the foreseeable
future.
The Company's tractors carry full warranty coverages of at least 100,000
miles. Extended warranties are negotiated with the manufacturer and major
component manufacturer (i.e., engine, transmission, differential) for up to
1,000,000 miles. Trailers are also warranted by the manufacturer and major
component manufacturer for up to five years.
Manufacturers of tractors are required to certify that new tractors meet
federal emission standards and the Company receives such certifications on each
new tractor it acquires. Certain governmental regulations require the Company
to adhere to a fuel and oil spillage prevention plan and to comply with
regulations concerning the discharge and disposal of waste oil. The Company
believes it is in compliance with applicable waste disposal and emission
regulations. The Company also maintains insurance to cover clean up expense in
the event of a spill.
DRIVERS
The Company currently utilizes 677 drivers in its operations. All
drivers are recruited, screened, drug tested and trained and are subject to the
control and supervision of the Company's operations and safety departments.
The Company's driver training program stresses the importance of reliable,
on-time delivery. Drivers are required to report to their dispatchers daily
and at the earliest possible moment when any condition en route occurs which
might delay their scheduled delivery time.
The Company has established a relationship with a recruiting and training
school in Indiana to enhance its ability to secure the services of qualified
drivers. The Company agrees to pay a student's costs for attending the
training school so long as the student fulfills a commitment to work for the
Company for at least nine months. Drivers who fail to complete their nine
month commitment are required to reimburse all or a portion of the Company's
costs in training the driver, depending upon the date of termination of
employment.
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The Company's drivers are selected only after strict application
screening and drug testing. Before being permitted to operate a vehicle for
the Company, drivers must undergo classroom instruction on Company policies and
procedures, safety techniques and proper operation of equipment and then must
pass both written and road tests. Instruction in defensive driving and safety
techniques continues after hiring, with the Company holding seminars at its
terminal in Tontitown. The Company currently employs approximately 23 persons
on a full-time basis in its driver recruiting, training and safety instruction
programs.
The Company's drivers are compensated on the basis of miles driven,
loading and unloading, extra stop pay and layovers in transit. Drivers can
earn bonuses by recruiting other qualified drivers who are employed by and
remain with the Company for at least 60 days 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.
The Company's operations have also been impacted and from time to time the
Company has experienced under-utilization and increased expenses due to a
shortage of qualified drivers. Management places the highest of priorities on
the recruitment and retention of an adequate supply of qualified drivers.
EMPLOYEES
The Company currently employs 859 persons, of which 677 are drivers, 53
are maintenance personnel, 49 are employed in the operations department, 53 are
employed in marketing, 23 are employed in the safety and personnel department,
and 30 are employed in general administration and accounting. Of the total
number of employees, 108 of the Company's employees are salaried, and the
remainder are employed on an hourly or mileage basis. The Company also has 40
owner/operators under contract who are compensated on a per mile basis. None
of these employees are represented by a collective bargaining unit and the
Company believes that its employee relations are good.
REGULATION
The Company is a common and contract motor carrier regulated by the ICC
and certain state and Canadian regulatory agencies. Prior to 1980, the ICC
strictly regulated the trucking industry as to territories served, rates
charged and commodities hauled. The Motor Carrier Act of 1980 resulted in
increased competition among motor carriers due to reduced levels of regulation
in the industry. Since that time, applications for ICC operating authority
have been more easily obtained and interstate motor carriers such as the
Company have been able to implement under their contract authorities certain
rate changes without ICC approval, and many route and commodity restrictions on
transportation of freight have been removed. Nevertheless, the ICC presently
has broad powers, generally governing activities such as authority to engage in
motor carrier operations, rates and charges, accounting systems, certain
mergers, consolidations, acquisitions and periodic financial reporting.
On January 1, 1995, federal legislation went into effect eliminating
intrastate regulation of motor carrier operations. This action will allow the
Company to better compete for intrastate business, possibly reducing empty
miles, and should result in more comprehensive service to the Company's
existing customers.
Motor carrier operations are also subject to safety requirements
prescribed by the United States Department of Transportation governing
interstate operation. Such matters as weight and dimensions of equipment are
also subject to federal and state regulations.
The Company believes that it is in compliance in all material respects
with applicable regulatory requirements relating to its trucking business and
operates with a satisfactory rating from the United States Department of
Transportation.
COMPETITION
The trucking industry is highly competitive. The Company competes
primarily with other irregular route long-haul truckload carriers, with private
carriage conducted by its existing and potential customers, and, to a lesser
extent, with the railroads. Increased competition has resulted
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from deregulation of the trucking industry and has generally exerted downward
pressure on prices. The Company competes on the basis of its 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 than
the Company.
EXECUTIVE OFFICERS
The executive officers of the Company are as follows:
Name Position with Company
---------------- -------------------------------------
Robert W. Weaver President and Chief Executive Officer
W. Clif Lawson Executive Vice President and
Chief Operating Officer
Larry J. Goddard Vice President - Finance,
Chief Financial Officer,
Secretary and Treasurer
ROBERT W. WEAVER, age 45, is a co-founder of the Company and served as
its Vice President from March 1980 to June 1986. He was President and Chief
Operating Officer from June 1986 until he resigned in February 1987. Between
February 1987 and September 1989, he was self-employed as a transportation
consultant. In September 1989, Mr. Weaver returned to the Company as President
and Chief Operating Officer and a director. On February 22, 1990, he was
appointed Chief Executive Officer.
W. CLIF LAWSON, age 41, has been Executive Vice President of the Company
since August 1989 and Chief Operating Officer since March 1992. He joined the
Company in June 1984 and served in various operations and sales capacities
until August 1989.
LARRY J. GODDARD, age 36, has been Vice President-Finance and Chief
Financial Officer since January 1991 and served as Controller of the Company
from May 1989 to January 1991. In addition, he has served as Secretary since
September 1989, and Treasurer since May 1991. From November 1987 to May 1989,
he served as General Accounting Manager of the Company.
ITEM 2. PROPERTIES.
The Company's executive offices and primary terminal facilities are
located in Tontitown, Arkansas. The Company's facilities are located on
approximately 45 acres and consist of 79,193 square feet of office space and
maintenance and storage facilities. The Company's facilities in Tontitown are
owned by the Company.
The Company's subsidiaries also lease terminal facilities in Warren,
Ohio; Springfield, Missouri; Laredo, El Paso, and Dallas, Texas; and Oklahoma
City, Oklahoma. These facilities are leased primarily on a month-to-month
basis.
The Company has access to trailer drop and relay stations in various
locations across the country. Each of these facilities is leased by the
Company on a month-to-month basis from an affiliate of its majority
shareholder.
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ITEM 3. LEGAL PROCEEDINGS.
The nature of the Company's business routinely results in litigation,
primarily involving claims for personal injuries and property damage incurred
in the transportation of freight, and the Company believes all such 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 the Company's financial
condition.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matters were submitted to a vote of security holders of the Company
during the fourth quarter ended December 31, 1994.
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
The Company's Common Stock is traded on the NASDAQ National Market
System under the NASDAQ symbol PTSI. The following tables set forth, by fiscal
quarter, the high and low bid prices reported by the over-the-counter NASDAQ
System from January 1, 1993 through November 8, 1993. On November 8, 1993, the
Company's Common Stock ceased quotation in the over-the-counter NASDAQ System,
and since such time has been quoted on the NASDAQ National Market System (which
reports actual sales transactions). The bid prices represent quotations
between dealers, not actual transactions, and do not reflect markups, markdowns
or commissions.
Fiscal Year Ended December 31, 1994
-----------------------------------
High Sales Low Sales
---------- ---------
First Quarter $ 6 7/8 $ 5 3/4
Second Quarter 6 1/4 4 7/8
Third Quarter 5 5/8 4 1/4
Fourth Quarter 6 1/2 4 5/8
Fiscal Year Ended December 31, 1993
-----------------------------------
High Bid Low Bid
-------- -------
First Quarter $ 2 7/8 $ 1 1/4
Second Quarter 4 7/8 1 7/8
Third Quarter 4 1/2 3 3/8
Fourth Quarter (through November 8, 1993) 6 1/2 4 3/8
High Sales Low Sales
---------- ---------
Fourth Quarter (after November 8, 1993) 7 3/4 5 1/2
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As of March 21, 1995, the number of common shareholders of record was
approximately 604. The Company has not declared or paid any cash dividend on
its common stock. The policy of the Board of Directors of the Company is to
retain earnings for the expansion and development of the Company's business.
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
the Company's earnings, financial condition and other factors deemed relevant
by the Board.
ITEM 6. SELECTED FINANCIAL DATA.
The following selected financial data should be read in conjunction with
the Consolidated Financial Statements and notes thereto included elsewhere
herein.
[THIS SPACE INTENTIONALLY LEFT BLANK]
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Years ended December 31,
1994 1993 1992 1991 1990
--------------------------------------------------------------------
(in thousands, except per share amounts)
Statements of Operations:
Operating revenues $76,147 $70,238 $66,687 $65,722 $57,545
------- ------- ------- ------- -------
Operating Expenses:
Salaries, wages and benefits 33,647 31,850 30,745 29,232 23,807
Operating supplies 14,688 16,393 16,248 16,795 17,665
Rent and purchased transportation 991 1,599 3,409 3,286 711
Depreciation and amortization 7,142 4,683 3,131 6,030 7,868
Operating taxes and licenses 5,078 4,680 4,410 4,891 4,477
Insurance and claims 3,816 3,686 3,822 4,115 3,944
Communications and utilities 868 864 914 987 891
Other 1,279 1,430 1,168 1,551 1,322
Gain on sale or disposal of
property and equipment (334) (246) (87) (7) (112)
------- ------- ------- ------- -------
Total operating expenses 67,175 64,939 63,760 66,880 60,573
------- ------- ------- ------- -------
Operating income (loss) 8,972 5,299 2,927 (1,158) (3,028)
Interest expense (2,926) (1,972) (985) (1,430) (2,242)
Other 217 122 (70) 0 1
------- ------- ------- ------- -------
Income (loss) before income taxes and
dividends on redeemable preferred stock 6,263 3,449 1,872 (2,588) (5,269)
Income taxes 2,493 321 70 0 0
------- ------- ------- ------- -------
Income (loss) before dividends on
redeemable preferred stock 3,770 3,128 1,802 (2,588) (5,269)
Accrued dividends on redeemable
preferred stock 30 360 360 360 317
------- ------- ------- ------- -------
Net income (loss) $ 3,740 $ 2,768 $ 1,442 $(2,948) $(5,586)
Earnings per common share
Primary:
Net income (loss) per share $ .50 $ .39 $ .23 $ (.61) $ (1.15)
======= ======= ======= ======= =======
Average common and common equivalent
shares outstanding 7,520 7,335 7,020 4,868 4,868
======= ======= ======= ======= =======
Fully diluted:
Net income (loss) per share $ .50 $ .37 $ .23 $ (.61) $ (1.15)
======= ======= ======= ======= =======
Average common and common equivalent
shares outstanding 7,522(1) 7,559(1) 7,020(1) 4,868 4,868
======= ======= ======= ======= =======
(1) Income per share for 1994, 1993 and 1992 assumes the exercise of stock
purchase warrants and stock options to purchase an aggregate of
3,454,549, 3,434,429 and 3,125,250 shares of Common Stock, respectively.
Such warrants and options were antidilutive in all other years.
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Balance Sheet Data
At December 31,
1994 1993 1992 1991 1990
-------------------------------------------------------------------
(in thousands)
Total assets $ 65,324 $ 56,140 $ 30,676 $ 29,193 $ 36,041
Long-term debt, excluding
current maturities 32,206 28,650 4,068 2,169 4,922
Redeemable preferred stock 0 4,397 4,037 3,677 3,317
Shareholders' equity 13,034 9,155 6,312 4,869 7,817
Operating Data
For the year ended December 31,
1994 1993 1992 1991 1990
-------------------------------------------------------------------
Operating ratio(1) 88.2% 92.5% 95.6% 101.8% 105.2%
Average number of truck-
loads per week 1,617 1,633 1,555 1,328 1,171
Average miles per trip 859 794 809 968 1,015
Total miles traveled
(in thousands) 69,128 64,879 63,423 64,766 59,460
Average miles per tractor 116,181 114,830 110,879 106,523 104,498
Average revenue per
tractor per week $ 2,668 $ 2,462 $ 2,313 $ 2,131 $ 2,023
Average revenue per
loaded mile $ 1.18 $ 1.16 $ 1.13 $ 1.09 $ 1.05
Empty mile factor 6.8% 6.9% 7.3% 6.9% 7.8%
AT END OF PERIOD:
Total Company-owned/
leased tractors 595(2) 565(3) 572(4) 608 594
Average age of all
tractors (in years) 1.70 3.04 3.66 3.47 2.90
Total trailers 1,434(5) 1,512(6) 1,519(7) 1,592 1,388
Average age of trailers
(in years) 2.09 3.84 5.28 4.24 3.42
Number of employees 859 945 927 902 890
(1) Total operating expenses as a percentage of total operating revenues.
(2) Includes 40 owner operator tractors.
(3) Includes 34 owner operator tractors.
(4) Includes 19 tractors leased from an affiliate of the Company's majority
shareholder, and 40 owner-operated tractors.
(5) Includes 74 trailers leased from an affiliate of the Company's majority
shareholder.
(6) Includes 266 trailers leased from an affiliate of the Company's majority
shareholder.
(7) Includes 493 trailers leased from an affiliate of the Company's majority
shareholder.
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
The following table sets forth the percentage relationship of revenue
and expense items to operating revenues for the periods indicated.
Percentage of Operating Revenues
--------------------------------
Years ended December 31,
-------------------------------------------------
1994 1993 1992
------ ------ ------
Operating revenues 100.0% 100.0% 100.0%
----- ----- -----
Operating expenses:
Salaries, wages and benefits 44.2 45.3 46.1
Operating supplies 19.3 23.4 24.4
Rent and purchased transportation 1.3 2.3 5.0
Depreciation and amortization 9.4 6.7 4.7
Operating taxes and licenses 6.7 6.7 6.6
Insurance and claims 5.0 5.2 5.7
Communications and utilities 1.1 1.2 1.4
Other 1.6 2.0 1.8
Gain on sale or disposal
of property and equipment (.4) (.3) (.1)
----- ----- -----
Total operating expenses 88.2 92.5 95.6
----- ----- -----
Operating income 11.8 7.5 4.4
Interest expense (3.8) (2.8) (1.5)
Other, net .2 .2 (.1)
----- ----- -----
Income before income taxes and dividends
on redeemable preferred stock 8.2 4.9 2.8
Federal and state income taxes (3.3) (.5) (.1)
----- ----- -----
Income before dividends on redeemable
preferred stock 4.9 4.4 2.7
Accrued dividends on redeemable preferred
stock -- (.5) (.5)
----- ----- -----
Net income 4.9 3.9 2.2
===== ===== =====
RESULTS OF OPERATIONS
1994 COMPARED TO 1993
For the year ended December 31, 1994, revenues increased 8.4% to $76.1
million as compared to $70.2 million for the year ended December 31, 1993. The
Company's utilization (revenue per tractor per work day) increased 8.5% from
$492 in 1993 to $534 in 1994. The two main factors contributing to the
increase in utilization were (1) the replacement of a majority of the older
equipment in 1994, reducing the down time related to maintenance problems with
older equipment, and (2) the continued growth in the dedicated services
division.
The Company's operating ratio improved from 92.5% in 1993 to 88.2% in 1994.
Salaries, wages and benefits increased in absolute dollars, but decreased
as a percentage of revenues from 45.3% in 1993 to 44.2% in 1994. The largest
savings were realized in the areas of state unemployment taxes and workers'
compensation where a 1.2% reduction was recorded due to
-12-
14
a rate reduction received on Arkansas unemployment taxes and the successful
implementation of the Company's self-insured program for workers' compensation
in the third quarter of 1994.
Operating supplies and expenses decreased from 23.4% of revenues in 1993 to
19.3% of revenues in 1994, as the Company continues to modernize its fleet.
The largest savings were realized in the area of equipment maintenance where a
$1.6 million reduction was recorded.
The Company incurred a significant increase in depreciation expense as a
result of new equipment being placed into service. For the period, as a
percentage of revenues, depreciation expense increased from 6.7% in 1993 to
9.4% in 1994. This increase in depreciation expense was offset by reductions
in operating costs combined with increased utilization of equipment.
As a percentage of revenues, interest expense increased from 2.8% in 1993
to 3.8% in 1994. This increased expense resulted from additional debt
associated with new equipment being placed into service in 1994.
The Company's effective tax rate increased from 10.4% in 1993 to 40% in
1994, due to the Company's continued profitability and the fact that tax
benefits associated with net operating loss carryforwards were substantially
fully recorded as of December 31, 1993.
The availability of restricted net operating losses to offset future
taxable income has been increased in recent years by realization of tax gains
on equipment sales. Based on net operating losses available at December 31,
1994, management has concluded that the benefits of all net operating losses
and credits may be recorded. Total deferred tax assets at December 31, 1994
were $6.1 million and total deferred tax liabilities were $8.4 million.
In assessing the need for a valuation allowance against deferred tax assets
management also considered the following factors: 1) the Company has recorded
approximately $2.5 million of deferred tax liabilities for future taxable
temporary differences (primarily depreciation related) which will result in
additional taxable income in future periods; 2) recent operating results have
resulted in a total of more than $10.8 million of pretax accounting income for
1994, 1993 and 1992 and net operating loss carryforwards have offset all
taxable income (total of $4.9 million) in these years; 3) various alternatives,
such as equipment leasing, are available to utilize net operating losses, which
might otherwise expire; and 4) carryover periods are extensive, with expiration
beginning in 2003 for net operating losses and 1999 for investment tax credits.
1993 COMPARED TO 1992
For the year ended December 31, 1993, revenues increased 5.3% to $70.2
million as compared to $66.7 million for the year ended December 31, 1992. The
Company's revenues per tractor per work day increased 6.4% from $463 in 1992 to
$492 in 1993.
The Company's operating ratio improved from 95.6% in 1992 to 92.5% in 1993.
Salaries, wages and benefits decreased .8% as a percentage of revenues for
the years compared. This was attributable to a decrease in the number of owner
operators used in the dedicated services portion of the business.
Operating supplies decreased 1.0% as a percentage of revenues for the years
compared, due to improved operating efficiencies from new equipment placed in
service during 1993. Equipment rentals decreased 2.8% and depreciation expense
increased 2.0% as a percentage of revenues as a result of
-13-
15
the Company's transition from leased equipment to Company owned equipment
through the purchase of new equipment.
Insurance and claims decreased from 5.7% of revenues in 1992 to 5.2% of
revenues in 1993. This decrease was attributable to both premium reductions
and the ongoing emphasis placed on loss prevention. Although insurance
premiums were reduced as a percentage of revenues, the Company did retain
comparable insurance coverages. In late 1992, the Company was fully insured
for workers' compensation, but opted out of the assigned risk pool at that time
due to the possible savings to be realized. The Company has reserved for
estimated claim losses as incurred, including reserves for unreported but
expected claims.
As a percentage of revenues, interest expense increased from 1.5% in 1992
to 2.8% in 1993. This increased interest expense resulted from additional debt
incurred in connection with the new equipment being placed into service during
1993.
The Company adopted Statement of Financial Accounting Standards ("FAS") No.
109 in the first quarter of 1993. The Company had previously adopted the
liability method of accounting for income taxes under FAS No. 96 in its
financial statements for the year ended December 31, 1987. As a result, the
adoption of FAS 109 had no material effect on the Company's accounting for
income taxes.
The availability of restricted net operating losses to offset future
taxable income has been increased in recent years by realization of tax gains
in equipment sales. Based on net operating losses available at December 31,
1993 and amounts expected to become available in 1994, management concluded
that all net operating losses and credits could be recorded as of December 31,
1993 subject to a valuation allowance primarily for those credits which may
expire unused.
The Company's effective tax rate was 10.4% in 1993 and 4.6% in 1992. These
effective tax rates for 1993 and 1992 have been substantially less than
statutory rates due to the realization of net operating losses. Such operating
loss benefits were not recorded in 1991 and prior years because realization was
uncertain. As described above, as of December 31, 1993, substantially all such
benefits had been recorded.
LIQUIDITY AND CAPITAL RESOURCES
The Company's principal subsidiary, P.A.M. Transport, Inc., has a $7.5
million secured line of credit from a bank subject to borrowing limitations.
Outstanding advances on this line of credit were approximately $5.5 million (at
an interest rate of 8.5%) at December 31, 1994. The Company's borrowing base
limitation at December 31, 1994 was $6.2 million. The line of credit is
guaranteed by the Company and matures May 31, 1996.
The Company entered into installment obligations in 1994 for the purchase
of replacement revenue equipment for approximately $18.6 million.
During 1994, the Company disposed of certain revenue equipment for
approximately $4.2 million. The Company plans to replace 185 trailers and 155
tractors during 1995, and expects to incur additional debt of approximately
$13.7 million.
At December 31, 1994, the Company had working capital of approximately
$300,000. Improved operating results provided net cash from operations of
approximately $12.9 million during 1994.
Management of the Company believes that its cash requirements for 1995 will
be adequately met from operating cash flows and the Company's available credit
line.
-14-
16
SEASONALITY
The Company's revenues do not exhibit a seasonal pattern, due primarily to
its varied customer mix. Operating expenses are generally somewhat higher in
the winter months, primarily due to decreased fuel efficiency and increased
maintenance costs in cold weather.
INFLATION
Inflation has an impact on most of the Company's 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 the Company's
operating costs, the effects of such increases are not greater for the Company
than for other trucking concerns.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The following statements are filed with this report:
Report of Independent Auditors
Consolidated Balance Sheets - December 31, 1994 and 1993
Consolidated Statements of Income - Years ended December 31,
1994, 1993 and 1992
Consolidated Statements of Shareholders' Equity - Years ended
December 31, 1994, 1993 and 1992
Consolidated Statements of Cash Flows - Years ended December 31,
1994, 1993 and 1992
Notes to Consolidated Financial Statements
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
-15-
17
Report of Ernst & Young LLP, Independent Auditors
The Board of Directors and Shareholders
P.A.M. Transportation Services, Inc.
We have audited the accompanying consolidated balance sheets of P.A.M.
Transportation Services, Inc. and subsidiaries as of December 31, 1994 and
1993, and the related consolidated statements of income, shareholders' equity,
and cash flows for each of the three years in the period ended December 31,
1994. Our audits also included the financial statement schedule listed in the
Index at Item 14(a). These financial statements and schedule are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements and schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. 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 consolidated financial position of P.A.M.
Transportation Services, Inc. and subsidiaries at December 31, 1994 and 1993,
and the consolidated results of their operations and their cash flows for each
of the three years in the period ended December 31, 1994, in conformity with
generally accepted accounting principles. Also, in our opinion, the related
financial statement schedule, when considered in relation to the basic
financial statements taken as a whole, presents fairly in all material respects
the information set forth therein.
ERNST & YOUNG LLP
Little Rock, Arkansas
February 22, 1995
-16-
18
P.A.M. Transportation Services, Inc.
Consolidated Balance Sheets
DECEMBER 31
1994 1993
------------------------------
ASSETS (NOTE 3)
Current assets:
Cash and cash equivalents $ 4,077,854 $ 3,621,642
Accounts receivable (Note 3):
Trade, net of allowance for doubtful accounts
(1994--$239,343; 1993--$135,275) 8,498,364 7,894,196
Other 481,986 263,224
Equipment held for sale (Note 1) 1,164,262 2,157,292
Prepaid expenses 2,870,033 2,416,890
Investment in direct financing lease (Note 7) 622,790 560,911
Income taxes refundable (Note 4) 154,313 -
Other 578,679 580,169
------------------------------
Total current assets 18,448,281 17,494,324
Property and equipment (Notes 3 , 7 and 8):
Land 955,830 955,830
Structures and improvements 2,240,244 2,240,244
Revenue equipment 57,062,761 50,218,009
Service vehicles 1,618,418 1,554,363
Office furniture and equipment 2,422,356 2,177,814
------------------------------
64,299,609 57,146,260
Allowances for depreciation and amortization (19,316,030) (21,055,482)
------------------------------
44,983,579 36,090,778
Other assets:
Investment in direct financing lease, less current
portion (Note 7) 1,239,824 1,862,616
Excess of cost over net assets acquired, net of accumulated
amortization (1994--$362,358;
1993--$322,362) 602,214 642,210
Other 50,000 50,000
------------------------------
1,892,038 2,554,826
------------------------------
Total assets $ 65,323,898 $ 56,139,928
==============================
-17-
19
DECEMBER 31
1994 1993
------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Trade accounts payable $ 4,983,179 $ 2,817,492
Accrued expenses (Note 2) 2,456,504 2,215,824
Deferred income taxes (Note 4) 368,866 -
Current portion of long-term debt (Notes 3 and 8) 10,358,442 7,952,227
-----------------------------
Total current liabilities 18,166,991 12,985,543
Long-term debt, less current portion (Notes 3 and 8) 32,206,125 28,649,692
Deferred income taxes (Note 4) 1,917,198 952,975
Redeemable preferred stock, redeemed in 1994 (Note 5) - 4,396,603
Commitments and contingencies (Notes 3, 8, 9, 10, and 12)
Shareholders' equity (Note 5):
Preferred stock, $.01 par value:
Authorized shares--10,000,000
Issued and outstanding shares--none - -
Common stock, $.01 par value:
Authorized shares--20,000,000
Issued and outstanding shares: 1994--4,937,857;
1993--4,895,157
49,379 48,952
Additional paid-in capital 13,123,241 12,985,509
Accumulated deficit (139,036) (3,879,346)
-----------------------------
Total shareholders' equity 13,033,584 9,155,115
-----------------------------
Total liabilities and shareholders' equity $65,323,898 $56,139,928
=============================
See accompanying notes.
-18-
20
P.A.M. Transportation Services, Inc.
Consolidated Statements of Income
YEAR ENDED DECEMBER 31
1994 1993 1992
------------------------------------------------
Operating revenues (Notes 1 and 7) $76,147,103 $70,238,388 $66,687,015
Operating expenses and costs:
Salaries, wages and benefits 33,647,127 31,849,896 30,744,676
Operating supplies and expenses 14,687,596 16,393,420 16,248,508
Rents and purchased transportation 990,894 1,599,151 3,408,795
Depreciation and amortization 7,141,533 4,682,533 3,131,153
Operating taxes and licenses 5,078,316 4,679,778 4,410,005
Insurance and claims 3,817,040 3,685,825 3,821,624
Communications and utilities 867,646 863,692 914,365
Other 1,279,256 1,431,514 1,168,038
Gain on sale or disposal of property
and equipment (334,116) (246,041) (86,748)
------------------------------------------------
67,175,292 64,939,768 63,760,416
------------------------------------------------
Operating income 8,971,811 5,298,620 2,926,599
Other income (expense):
Interest expense (2,926,316) (1,971,779) (984,482)
Other (Note 7) 217,946 122,147 (69,656)
------------------------------------------------
(2,708,370) (1,849,632) (1,054,138)
------------------------------------------------
Income before income taxes and
dividends on redeemable preferred stock 6,263,441 3,448,988 1,872,461
Federal and state income taxes:
Current 1,160,453 165,740 70,000
Deferred 1,333,089 155,000 -
------------------------------------------------
2,493,542 320,740 70,000
------------------------------------------------
Income before dividends on redeemable
preferred stock 3,769,899 3,128,248 1,802,461
Accrued dividends on redeemable
preferred stock 29,589 360,000 360,000
------------------------------------------------
Net income $ 3,740,310 $ 2,768,248 $ 1,442,461
================================================
Earnings per common share (Note 6)
Primary:
Net income per share $ .50 $ .39 $ .23
================================================
Average common and common
equivalent shares outstanding 7,520,027 7,335,240 7,019,536
================================================
Fully diluted:
Net income per share $ .50 $ .37 $ .23
================================================
Average common and common
equivalent shares outstanding 7,522,017 7,558,631 7,019,536
================================================
See accompanying notes.
-19-
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P.A.M. Transportation Services, Inc.
Consolidated Statements of Shareholders' Equity
ADDITIONAL ACCUMULATED
COMMON STOCK PAID-IN CAPITAL DEFICIT TOTAL
------------------------------------------------------------------
Balances at January 1, 1992 48,679 $12,910,632 $(8,090,055) $ 4,869,256
Net income - - 1,442,461 1,442,461
------------------------------------------------------------------
Balances at December 31, 1992 48,679 12,910,632 (6,647,594) 6,311,717
Net income - - 2,768,248 2,768,248
Exercise of stock options--
27,300 shares issued (Note 5) 273 74,877 - 75,150
------------------------------------------------------------------
Balances at December 31, 1993 48,952 12,985,509 (3,879,346) 9,155,115
Net income - - 3,740,310 3,740,310
Exercise of stock options--
42,700 shares issued (Note 5) 427 100,989 - 101,416
Tax benefits of stock options
(Note 5) - 36,743 - 36,743
------------------------------------------------------------------
Balances at December 31, 1994 49,379 $13,123,241 $ (139,036) $13,033,584
==================================================================
See accompanying notes.
-20-
22
P.A.M. Transportation Services, Inc.
Consolidated Statements of Cash Flows
YEAR ENDED DECEMBER 31
1994 1993 1992
------------------------------------------------
OPERATING ACTIVITIES
Net income $ 3,740,310 $ 2,768,248 $ 1,442,461
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 7,141,533 4,682,533 3,131,153
Provision for doubtful accounts 114,014 51,163 20,564
Provision for deferred income taxes 1,333,089 155,000 -
Gain on sale or disposal of property and equipment (334,116) (246,041) (86,748)
Accrued dividends on redeemable preferred stock 29,589 360,000 360,000
Changes in operating assets and liabilities:
Accounts receivable (936,944) (749,146) (563,692)
Prepaid expenses and other current assets (451,653) (231,667) (726,916)
Income taxes refundable (154,313) - -
Trade accounts payable 2,165,687 (981,261) (656,683)
Accrued expenses 240,680 429,760 (490,514)
------------------------------------------------
Net cash provided by operating activities 12,887,876 6,238,589 2,429,625
INVESTING ACTIVITIES
Purchases of property and equipment (15,111,623) (28,670,022) (4,659,999)
Proceeds from sale or disposal of property and
equipment 4,223,701 2,886,146 1,451,884
Lease payments received on direct financing lease
560,913 282,694 -
------------------------------------------------
Net cash used in investing activities (10,327,009) (25,501,182) (3,208,115)
FINANCING ACTIVITIES
Redemption of preferred stock (4,426,192) - -
Borrowings under line of credit 58,835,053 34,409,821 36,978,151
Repayments under line of credit (59,920,227) (35,459,583) (37,339,212)
Borrowings of long-term debt 14,834,926 28,181,721 4,226,551
Repayments of long-term debt (11,566,374) (4,474,727) (3,037,964)
Proceeds from exercise of stock options 101,416 75,150 -
Tax benefits of stock options 36,743 - -
------------------------------------------------
Net cash (used in) provided by financing activities (2,104,655) (22,732,382) 827,526
------------------------------------------------
Net increase in cash and cash equivalents 456,212 3,469,789 49,036
Cash and cash equivalents at beginning of year 3,621,642 151,853 102,817
------------------------------------------------
Cash and cash equivalents at end of year $ 4,077,854 $ 3,621,642 $ 151,853
================================================
See accompanying notes.
-21-
23
P.A.M. Transportation Services, Inc.
Notes to Consolidated Financial Statements
December 31, 1994
1. ACCOUNTING POLICIES
DESCRIPTION OF BUSINESS AND 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 subsidiaries. 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.
TIRE PURCHASES
Tires purchased with revenue equipment are capitalized as a cost of the related
equipment. Replacement tires are included in other current assets and are
amortized over a 24-month period.
EXCESS OF COST OVER NET ASSETS ACQUIRED
The excess of cost over net assets acquired, or goodwill, is being amortized on
a straight-line basis over 25 years. The carrying value of goodwill will be
reviewed if the facts and circumstances suggest that it may be impaired. If
this review indicates that goodwill will not be recoverable, as determined
based on undiscounted cash flows acquired over the remaining amortization
period, the Company's carrying value of the goodwill would be reduced by the
estimated shortfall of cash flows. No reduction of goodwill was required as of
December 31, 1994.
CLAIMS LIABILITIES
The Company maintains insurance policies with varying levels of deductibles to
cover cargo loss and damage and liability claims. The deductibles are $5,000
and $2,500 per occurrence, respectively, for those coverages. As of July 1,
1994, the Company became self-insured for worker's compensation, with excess
coverage maintained for claims exceeding $250,000 (Arkansas) and $350,000
(Ohio). Prior to July 1, 1994, the Company maintained an insurance policy for
worker's compensation with a deductible of $350,000 per occurrence. The Company
has reserved for estimated losses to pay such claims as incurred. Additionally,
a reserve has been estimated for those claims incurred but not reported. A
$400,000 letter of credit is held by a bank as security for worker's
compensation claims.
REVENUE RECOGNITION POLICY
The Company recognizes revenue based upon relative transit time in each
reporting period with expenses recognized as incurred.
-22-
24
P.A.M. Transportation Services, Inc.
Notes to Consolidated Financial Statements (continued)
1. ACCOUNTING POLICIES (CONTINUED)
PROPERTY AND EQUIPMENT
Property and equipment is recorded at cost. 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. Gains and losses are reflected in the year of
disposal.
EQUIPMENT HELD FOR SALE
Equipment held for sale consists of revenue equipment no longer in service,
that is expected to be sold within the next year. This equipment is recorded at
its estimated net realizable value.
INCOME TAXES
In February 1992, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes" ("FAS
109"). The Company adopted this statement in the first quarter of 1993. The
Company adopted the liability method of accounting for income taxes under
Financial Accounting Standards No. 96 in its financial statements for the year
ended December 31, 1987. Therefore, adoption of FAS 109 had no material effect
on the Company's financial position or results of operations.
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 portion of Canada. The Company performs ongoing credit evaluations
and generally does not require collateral. The Company maintains reserves for
potential credit losses and such losses have been within management's
expectations. In 1994, General Motors Corporation accounted for 12% of
revenues. In 1993, Packard Electric accounted for 12% of revenues. In 1992, no
customer accounted for more than 10% of revenues.
2. ACCRUED EXPENSES
DECEMBER 31
1994 1993
----------------------------
Payroll $ 769,122 $ 664,789
Taxes 663,386 662,169
Interest 198,477 145,955
Driver escrows 252,758 278,982
Self insurance claims reserves 572,761 463,929
----------------------------
$2,456,504 $2,215,824
============================
-23-
25
P.A.M. Transportation Services, Inc.
Notes to Consolidated Financial Statements (continued)
3. LONG-TERM DEBT
Long-term debt consists of the following:
DECEMBER 31
1994 1993
------------------------------
Equipment financings (1) $32,731,145 $29,421,068
Line of credit with a bank, with interest at the LIBOR rate
plus 2 1/2% (8.5% at December 31, 1994) due May 31, 1996 and
collateralized by accounts receivable (2) 5,542,977 -
Line of credit with a bank, paid in 1994 (3) - 3,500,000
Line of credit with affiliate of majority shareholder, with
interest at prime rate plus 1/2%, due January 3, 1995 (4) - 3,128,151
Note payable (5) 511,175 552,700
Capitalized lease obligations (6) 3,779,270 -
------------------------------
42,564,567 36,601,919
Less current maturities 10,358,442 7,952,227
------------------------------
$32,206,125 $28,649,692
==============================
(1) Equipment financings consist of installment obligations for revenue and
service equipment purchases, payable in various monthly installments
through 1999, at a weighted average interest rate of 7.9% and
collateralized by equipment with a net book value of $35,903,397 at
December 31, 1994.
Included in equipment financings is a note payable totaling $2,400,000
($1,503,298 outstanding as of December 31, 1994) with an affiliate of the
majority shareholder for the purchase of revenue equipment previously
leased under an operating lease arrangement. This note is payable in
monthly installments through April 1997, and has an interest rate of 9.0%.
(2) The line of credit agreement with a bank provides for maximum borrowings
of $7.5 million and contains various restrictive covenants which require,
among other things, maintenance of certain financial and operating ratios,
which have been met, and includes restrictions on dividend payments and
certain corporate acts such as mergers and consolidations.
(3) The line of credit agreement with a bank was paid during 1994 and was not
renewed.
(4) The line of credit agreement with an affiliate of its majority shareholder
expired on January 3, 1995 and was not renewed. Borrowings under this
agreement were paid during 1994.
-24-
26
P.A.M. Transportation Services, Inc.
Notes to Consolidated Financial Statements (continued)
3. LONG-TERM DEBT (CONTINUED)
(5) The Company, prior to April 1993, leased certain real estate from the
former majority shareholder under various noncancelable operating leases.
Related lease expense totaled $26,600 and $91,200 in 1993 and 1992,
respectively. The real estate was purchased by the Company in April 1993,
for $578,600, and financed through the former majority shareholder,
payable in monthly installments through March 2003, with an interest rate
of 8.0%.
(6) Capitalized lease obligations to a financial services organization for
revenue equipment are payable in various monthly installments through
October 1999 at rates of 8.15% and 8.33%, collateralized by equipment with
a net book value of $3,735,000 as of December 31, 1994 (Note 8).
Scheduled annual maturities on long-term debt outstanding, excluding capital
lease obligations (see Note 8), at December 31, 1994 are:
1995 $ 9,720,968
1996 15,912,149
1997 8,530,673
1998 3,987,461
1999 388,282
Thereafter 245,764
-----------
$38,785,297
===========
Interest payments of approximately $2,874,000, $1,943,000, and $1,193,000 were
made during 1994, 1993, and 1992, respectively.
4. INCOME TAXES
Under FAS 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 the amounts used for income tax purposes.
-25-
27
P.A.M. Transportation Services, Inc.
Notes to Consolidated Financial Statements (continued)
4. INCOME TAXES (CONTINUED)
Significant components of the Company's deferred tax liabilities and assets are
as follows:
DECEMBER 31
1994 1993
----------------------------
Deferred tax liabilities:
Property and equipment $7,531,404 $4,977,834
Prepaid expenses 893,073 846,422
----------------------------
Total deferred tax liabilities 8,424,477 5,824,256
Deferred tax assets:
Net operating loss carryover 3,260,533 3,440,372
Alternative minimum tax credit 1,276,113 137,996
Investment credit carryovers 1,096,540 1,030,374
Allowance for doubtful accounts 90,855 51,350
Vacation reserves 110,626 91,646
Self-insurance reserves 217,420 176,107
Revenue recognition 86,326 39,975
----------------------------
Total deferred tax assets 6,138,413 4,967,820
Valuation allowance - (96,539)
----------------------------
Net deferred tax assets 6,138,413 4,871,281
----------------------------
Net deferred tax liabilities $2,286,064 $ 952,975
============================
The reconciliation between the effective income tax rate and the statutory
Federal income tax rate is presented in the following table:
YEAR ENDED DECEMBER 31
1994 1993 1992
------------------------------------------
Income tax at the statutory Federal rate of 34% $2,129,570 $ 1,050,256 $ 514,237
Nondeductible expenses 230,650 434,517 443,087
Decrease in valuation allowance (96,539) (1,265,421) (957,324)
State income taxes (141,744) (17,000) -
Alternative minimum tax - - 70,000
Other (45,289) 68,388 -
------------------------------------------
Federal income taxes 2,076,648 270,740 70,000
State income taxes 416,894 50,000 -
------------------------------------------
Total income taxes $2,493,542 $ 320,740 $ 70,000
Effective tax rate 40.0% 10.3% 4.6%
==========================================
As of December 31, 1994, the Company has Federal net operating loss and
investment tax credit carryovers of approximately $8,600,000 and $1,000,000,
respectively. The net operating loss carryovers expire beginning in 2003 and
the investment credit carryovers begin to expire in 1999. Net operating loss
carryovers are available to offset 1993 and 1994 estimated taxable income for
regular income tax purposes. The current taxes provided in 1993 and 1994 result
from alternative minimum taxable income which is only partially offset by net
operating loss carryovers. The Company has alternative minimum tax credits of
approximately $1,300,000 at December 31, 1994 which carryover indefinitely.
-26-
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P.A.M. Transportation Services, Inc.
Notes to Consolidated Financial Statements (continued)
4. INCOME TAXES (CONTINUED)
In February 1990, a stock transaction occurred whereby the Company's then
majority shareholder sold his stock to the current majority shareholder. This
transaction constituted an ownership change under Internal Revenue Code Section
382. As a result of the ownership change, the amount of Federal taxable income
which may be offset by net operating loss carryovers ("NOLs") which existed as
of the ownership change date (estimated at $10,350,000) is limited to
approximately $500,000 per year. The annual limitation may be increased, under
certain circumstances, by realization of tax "built-in gains" which existed at
the time of the ownership change. Substantial tax built-in gains have been
realized since the ownership change date including gains recognized during 1993
and 1994.
As of January 1, 1993, deferred tax assets under FAS 109 were $5,565,693 with a
valuation allowance of $1,361,960 while deferred tax liabilities were
$5,001,708. The valuation allowance related to the uncertainty of realization
of net operating loss and investment credit carryovers. This valuation
allowance was reduced to $96,539 at December 31, 1993 and was eliminated at
December 31, 1994.
This elimination of the valuation allowance is due to a substantial amount of
net operating losses available to offset future taxable income which are more
assured of realization at December 31, 1994. This is due to recent profitable
operating results, and significant tax built-in gains realized in 1993 and
1994, which increased the available net operating loss carryovers.
Taxes paid totaled approximately $1,334,000 and $144,000 for the years ended
December 31, 1994 and 1993, respectively.
5. STOCKHOLDERS' EQUITY
On January 30, 1994, the Company redeemed 100% of the 12% Series A cumulative
redeemable preferred stock (Series A preferred stock) plus accrued dividends
for cash of $4,425,205. The redemption was funded through a combination of cash
on hand and borrowings under the Company's line of credit arrangements.
The Company maintains an incentive stock option plan, a nonqualified stock
option plan, and an employee 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 $2.375 to $5.50 as of December 31, 1994.
Outstanding incentive stock options and employee stock options at December 31,
1994 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, 1994 must be exercised within five to six years and certain nonqualified
options may not be exercised within one year of the date of grant.
-27-
29
P.A.M. Transportation Services, Inc.
Notes to Consolidated Financial Statements (continued)
5. STOCKHOLDERS' EQUITY (CONTINUED)
Transactions in stock options under these plans are summarized as follows:
SHARES
UNDER AGGREGATE
OPTION OPTION PRICE
------------------------------
January 1, 1992 38,000 $ 142,500
Canceled (12,500) (46,875)
------------------------------
December 31, 1992 25,500 95,625
Granted 416,500 1,036,063
Exercised (at exercise price of $2.75 per share) (27,300) (75,150)
Canceled (26,000) (86,500)
------------------------------
December 31, 1993 388,700 970,038
Granted 10,000 43,750
Exercised (at exercise price of $2.375 per share) (42,700) (101,416)
Canceled (8,800) (20,900)
------------------------------
December 31, 1994 347,200 $ 891,472
==============================
Options exercisable at December 31, 1994 121,700
=======
The majority shareholder holds immediately exercisable stock warrants to
purchase an aggregate of 3,092,000 shares of the Company's common stock. The
warrants are exercisable at prices increasing over time to $1.50 per share in
1997, when the warrants expire. As of December 31, 1994, the exercise price is
$1.25.
6. EARNINGS PER SHARE
Earnings per share assumes the exercise of stock warrants and options to
purchase a total of 3,454,549, 3,434,429, and 3,125,250 shares of common stock,
for 1994, 1993, and 1992, respectively. Under the treasury stock method of
computing earnings per share, the number of shares of treasury stock assumed
repurchased is limited to 20% of common stock outstanding, with the remaining
shares assumed to be newly issued, and the excess proceeds assumed to have
reduced long-term borrowings outstanding for the year.
-28-
30
P.A.M. Transportation Services, Inc.
Notes to Consolidated Financial Statements (continued)
6. EARNINGS PER SHARE (CONTINUED)
The computation of earnings per common share is summarized as follows:
1994 1993 1992 1994 1993 1992
---------------------------------------------------------------------------------------------
(Primary) (Fully Diluted)
Primary:
Application of assumed
proceeds:
Toward repurchase of
outstanding common
shares at applicable
market value (average
market value for primary
computation, year-end for
fully diluted) $4,780,271 $3,671,639 $ 954,100 $4,780,271 $4,698,823 $1,216,964
Reduction of borrowings
under line of credit - 1,027,184 2,262,588 - - 1,999,724
-------------------------------------------------------------------------------------------------
$4,780,271 $4,698,823 $3,216,688 $4,780,271 $4,698,823 $3,216,688
=================================================================================================
Adjustments of net income:
Actual net income $3,740,310 $2,768,248 $1,442,461 $3,740,310 $2,768,248 $1,442,461
Interest expense reduction - 70,975 163,196 - - 144,236
-------------------------------------------------------------------------------------------------
Adjusted net income (A) $3,740,310 $2,839,223 $1,605,657 $3,740,310 $2,768,248 $1,586,697
=================================================================================================
Adjustment of common shares
outstanding:
Actual average outstanding $4,920,749 $4,876,014 $4,867,857 $4,920,749 $4,876,014 $4,867,857
Net additional shares
issuable 2,599,278 2,459,226 2,151,679 2,601,268 2,682,617 2,151,679
-------------------------------------------------------------------------------------------------
Adjusted average common
shares outstanding (B) 7,520,027 7,335,240 7,019,536 7,522,017 7,558,631 7,019,536
=================================================================================================
Net income per common share
(A) / (B) $ .50 $ .39 $ .23 $ .50 $ .37 $ .23
=================================================================================================
7. RELATED PARTY TRANSACTIONS
The Company provides motor carrier services to an affiliate of its majority
shareholder. Revenues from these transactions totaled approximately $4,878,000,
$5,441,000, and $2,930,000 for 1994, 1993, and 1992, respectively.
During 1993, the Company began leasing certain revenue equipment with an
original cost of $2,706,000 to an affiliate of the majority shareholder under a
direct financing lease arrangement. The Company earned interest income of
$217,946 and $122,147 in 1994
-29-
31
P.A.M. Transportation Services, Inc.
Notes to Consolidated Financial Statements (continued)
7. RELATED PARTY TRANSACTIONS (CONTINUED)
and 1993, respectively, relating to this lease which is included in other
income in the accompanying financial statements. The aggregate future minimum
lease payments to be received under this lease are as follows:
1995 $ 789,132
1996 789,132
1997 570,566
----------
2,148,830
Less unearned income 286,216
----------
Present value of net minimum lease payment 1,862,614
Less current portion 622,790
----------
$1,239,824
==========
Payments made by the Company to an affiliate of the majority shareholder for
the reimbursement of operating and other expenses paid on behalf of the
Company, and debt repayments made on notes payable to the affiliate aggregated
approximately $14,145,000, $9,069,000, and $9,579,000 in 1994, 1993, and 1992,
respectively.
The Company, prior to 1993, purchased certain of its insurance policies through
an insurance agency which is operated by one of the Company's former directors
(who resigned from the Board in 1992). Premiums paid to the agency were
approximately $ 1,973,000 in 1992.
The Company has entered into noncancelable operating leases for revenue
equipment with an affiliate of the majority shareholder. The leases are payable
monthly and are currently under a month-to-month leasing arrangement. Rent
expense under these leases was $384,000 in 1994, $893,000 in 1993, and
$2,903,000 in 1992.
The Company leased revenue equipment under operating leases with unrelated
parties which expired in 1992. Total lease expense under these leases was
$333,584 in 1992.
The Company leases certain revenue equipment under capital leases. The
scheduled future minimum payments under these leases (see Note 3) at December
31, 1994 were as follows:
1995 $ 925,004
1996 925,004
1997 925,004
1998 925,004
1999 693,753
----------
Total minimum lease payments 4,393,769
Amounts representing interest 614,499
----------
Present value of net minimum lease payments $3,779,270
==========
-30-
32
P.A.M. Transportation Services, Inc.
Notes to Consolidated Financial Statements (continued)
8. LEASES AND COMMITMENTS
Assets held under capitalized leases are included in property, plant and
equipment as of December 31, 1994 as follows:
Revenue equipment $3,779,270
Accumulated amortization (44,092)
----------
$3,735,178
==========
Capital lease obligations incurred in 1994 totaled $3,779,270.
Lease amortization is included in depreciation expense.
9. 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 annual employer matching contributions of 25% of
each participant's voluntary contribution up to $400.
The Company's matching contributions to the plan totaled approximately $40,000,
$28,000, and $24,000 in 1994, 1993, and 1992, respectively.
10. LITIGATION
The Company is not a party to any pending legal proceedings which management
believes to be material to the financial condition of the Company. The Company
maintains liability insurance against risks arising out of the normal course of
its business.
11. QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
The tables below presents quarterly financial information for 1994 and 1993:
1994
THREE MONTHS ENDED
MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31
-------------------------------------------------------------
Operating revenues $18,846,554 $19,833,308 $18,508,413 $ 18,958,828
Operating expenses 16,982,158 17,147,870 16,251,398 16,793,866
-------------------------------------------------------------
Operating income 1,864,396 2,685,438 2,257,015 2,164,962
Other expenses - net 697,330 688,649 680,346 671,635
Income taxes 408,473 798,716 689,021 597,331
-------------------------------------------------------------
Net income $ 758,593 $ 1,198,073 $ 887,648 $ 895,996
=============================================================
Net income per common share (primary) $ .10 $ .16 $ .12 $ .12
=============================================================
Average common and common
equivalent shares outstanding 7,611,750 7,492,741 7,489,525 7,584,034
=============================================================
-31-
33
P.A.M. Transportation Services, Inc.
Notes to Consolidated Financial Statements (continued)
11. QUARTERLY RESULTS OF OPERATIONS (UNAUDITED) (CONTINUED)
1994
THREE MONTHS ENDED
MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31
-------------------------------------------------------------
Operating revenues $16,693,182 $17,857,314 $17,601,303 $18,086,589
Operating expenses 15,638,440 16,316,825 16,226,805 16,757,698
-------------------------------------------------------------
Operating income 1,054,742 1,540,489 1,374,498 1,328,891
Other expenses - net 387,898 535,807 676,554 609,373
Income taxes 43,345 92,025 91,901 93,469
-------------------------------------------------------------
Net income $ 623,499 $ 912,657 $ 606,043 $ 626,049
=============================================================
Net income per common share
(primary) $ .09 $ .13 $ .08 $ .08
=============================================================
Average common and common
equivalent shares outstanding 7,138,619 7,408,458 7,401,312 7,570,161
=============================================================
12. SUBSEQUENT EVENT--ACQUISITION
On January 31, 1995, the Company acquired substantially all the assets and
liabilities of Choctaw Express, Inc. and Choctaw Brokerage, Inc. based in
Oklahoma, (collectively "Choctaw Group"). The total purchase price for the
Choctaw Group was approximately $2.5 million, subject to closing audit
adjustments. The acquisition was financed through borrowings under the
Company's bank line of credit agreement and available cash, and the acquisition
will be accounted for under the purchase method. The Choctaw Group had sales
for the year ended December 31, 1994 of approximately $12 million.
The Company will also pay $325,000 per year for a five year noncompete and
employment agreement with the former sole shareholder of Choctaw.
-32-
34
PART III
Except as to information with respect to executive officers which is
contained in a separate heading under Item 1 to this Form 10-K, the information
required by Part III of Form 10-K is, pursuant to General Instruction G(3) of
Form 10-K, incorporated by reference from the Company's definitive proxy
statement to be filed pursuant to Regulation 14A for the Company's Annual
Meeting of Shareholders to be held on May 25, 1995. The Company will, within
120 days of the end of its 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 is incorporated by reference
from the section entitled "Election of Directors" contained in the proxy
statement.
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.
The information responsive to this item is incorporated by reference
from the section entitled "Security Ownership of Certain Beneficial Owners and
Management" contained in the proxy statement.
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.
-33-
35
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(a) 1. Financial Statements and Auditors' Report.
The following financial statements and auditors' report have been filed
as Item 8 in Part II of this report:
Report of Independent Auditors
Consolidated Balance Sheets - December 31, 1994 and 1993
Consolidated Statements of Income - Years ended December 31,
1994, 1993 and 1992
Consolidated Statements of Shareholders' Equity - Years ended
December 31, 1994, 1993 and 1992
Consolidated Statements of Cash Flows - Years ended December
31, 1994, 1993 and 1992
Notes to Consolidated Financial Statements
(a) 2. Financial Statement Schedules.
The following supporting financial statement schedule is filed with this
report:
II - Valuation and Qualifying Accounts - Years Ended
December 31, 1994, 1993 and 1992
All other schedules are omitted as the required information is
inapplicable, or the information is presented in the consolidated financial
statements or related notes.
-34-
36
(a) 3. Exhibits.
The following exhibits are filed with or incorporated by reference into
this report. The exhibits which are denominated by an asterisk (*) were
previously filed as a part of, and are hereby incorporated by reference from
either (i) the Form S-1 Registration Statement under the Securities Act of
1933, as filed with the Securities and Exchange Commission on July 30, 1986,
Registration No. 33-7618, as amended on August 8, 1986, September 3, 1986 and
September 10, 1986 ("1986 S-1"); (ii) the 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, 1991 ("1991 10-K"); (iv) the Annual Report
on Form 10-K for the year ended December 31, 1992 ("1992 10-K"); (v) the Annual
Report on Form 10-K for the year ended December 31, 1993 ("1993 Form 10-K");
(vi) the Quarterly Report on Form 10-Q for the quarter ended June 30, 1994
("6/30/94 10-Q"); or (vii) the Current Report on Form 8-K dated January 31,
1995 ("1/31/95 8-K").
Exhibit # Description of Exhibit
--------- --------------------------------------------------------------
*2.1 - Stock Purchase Agreement dated January 31, 1995 by and among
Registrant, Choctaw Express, Inc., Choctaw Brokerage, Inc. and
Joe M. Bussell (Exh. 2.1, 1/31/95 8-K).
*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)
*3.2 - Amended and Restated By-Laws of the Registrant (Exh. 3.2, 1986
S-1)
*3.2.1 - Amendment to Article I, Section 3 of By-Laws of Registrant
(Exh. 3.2.1, 1986 S-1)
*3.2.2 - Amendments to By-Laws of Registrant adopted May 7, 1987 (Exh.
3.2.2, 1987 10-K)
*3.2.3 - Amendments to By-Laws of Registrant adopted January 4, 1993
(Exh. 3.2.3, 1992 10-K)
*4.1 - Specimen Stock Certificate (Exh. 4.1, 1986 S-1)
*4.2. - Loan Agreement dated July 26, 1994 among First Tennessee Bank
National Association, Registrant and P.A.M. Transport, Inc.
together with Promissory Note (Exh. 4.1, 6/30/94 10-Q)
*4.2.1 - Security Agreement dated July 26, 1994 between First Tennessee
Bank National Association and P.A.M. Transport, Inc. (Exh.
4.2, 6/30/94 10-Q)
- No other long-term debt instrument of the Registrant or its
subsidiaries authorizes indebtedness exceeding 10% of the
total assets of the Registrant and its subsidiaries on a
consolidated basis and the Registrant hereby undertakes to
provide the Commission upon request with any long-term debt
instrument not filed herewith.
*10.1 - Incentive Stock Option Plan, dated July 25, 1986 (Exh. 10.2,
1986 S-1)
*10.1.1 - Amendment to 1986 Incentive Stock Option Plan, dated June 2,
1987 (Exh. 10.2.1, 1987 10-K)
*10.2 - Non-Qualified Stock Option Plan, dated July 25, 1986 (Exh.
10.3, 1986 S-1)
-35-
37
*10.2.1 - Amendment No. 1 to Non-Qualified Stock Option Plan (Exh.
10.2.1, 1993 10-K)
*10.3 - Employment Agreement between the Registrant and Robert W.
Weaver dated December 29, 1989 (Exh. 10.4, 1991 10-K)
*10.3.1 - Amendment dated March 2, 1993 to Employment Agreement between
the Registrant and Robert W. Weaver (Exh. 10.3.1, 1993 10-K)
10.4 - Incentive Compensation Plan of Registrant adopted January 10,
1995 for fiscal years 1994 and 1995.
*10.5 - Non-Competition Agreement dated January 31, 1995 between
Registrant and Joe M. Bussell (Exh. 10.1, 1/31/95 8-K)
21.1 - Subsidiaries of the Registrant
23.1 - Consent of Ernst & Young LLP
27 - Financial Data Schedule (for SEC purposes)
(b) Reports on Form 8-K.
No reports on Form 8-K were filed during the fourth quarter ended
December 31, 1994.
-36-
38
Schedule II
P.A.M. Transportation Services, Inc.
Valuation and Qualifying Accounts
Years ended December 31, 1994, 1993 and 1992
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN F
------------------------------------------------------------------------------------------------------------------------------------
ADDITIONS
---------
CHARGED TO
BALANCE AT CHARGED TO OTHER BALANCE
BEGINNING COSTS AND ACCOUNTS DEDUCTIONS AT END
DESCRIPTION OF PERIOD EXPENSES --DESCRIBE --DESCRIBE OF PERIOD
------------------------------------------------------------------------------------------------------------------------------------
1994 - Allowance for
doubtful accounts $135,275 $114,014 $ - $ 9,946(A) $239,343
1993 - Allowance for
doubtful accounts 133,374 51,163 - 49,262(A) 135,275
1992 - Allowance for
doubtful accounts 131,224 20,564 - 8,414(A) 133,374
Note A- Accounts written off.
39
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 28, 1995 By: /s/ Robert W. Weaver
-------------------------------------------
ROBERT W. WEAVER
President and Chief Executive Officer
(principal executive officer)
Dated: March 28, 1995 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:
P.A.M. TRANSPORTATION SERVICES, INC.
Dated: March 28, 1995 By: /s/ Robert W. Weaver
-------------------------------------------
ROBERT W. WEAVER,
President and Chief Executive Officer,
Director
Dated: March 28, 1995 By: /s/ Ronald W. Lech
-------------------------------------------
RONALD W. LECH, Director
Dated: March 28, 1995 By: /s/ Matthew T. Moroun
-------------------------------------------
MATTHEW T. MOROUN, Director
Dated: March 28, 1995 By: /s/ William E. Morrissey
-------------------------------------------
WILLIAM E. MORRISSEY, Director
Dated: March 28, 1995 By: /s/ Beryl L. Shroyer
-------------------------------------------
BERYL L. SHROYER, Director
Dated: March 28, 1995 By: /s/ Daniel C. Sullivan
-------------------------------------------
DANIEL C. SULLIVAN, Director
40
EXHIBIT INDEX
Sequential
Exhibit No. Description Page Number
----------- --------------------------------------------------------- -----------
10.4 Revised Incentive Compensation Plan of Registrant adopted
January 10, 1995 for fiscal 1994 and 1995
21.1 Subsidiaries of the Registrant
23.1 Consent of Ernst & Young LLP
27 Financial Data Schedule (for SEC purposes)
EX-10.4
2
INCENTIVE COMPENSATION PLAN
1
Exhibit 10.4
P.A.M. TRANSPORTATION SERVICES, INC.
INCENTIVE COMPENSATION PLAN
THIS IS THE INCENTIVE COMPENSATION PLAN of P.A.M. Transportation
Services, Inc., a Delaware corporation (the "Company"), under which bonuses may
be granted to certain employees of the Company and its subsidiaries subject to
the limitations, provisions and requirements hereinafter stated. The Plan is
as follows:
1. PURPOSES. The purposes of the P.A.M. Transportation Services,
Inc. Incentive Compensation Plan (the "Plan") are as follows:
(a) To encourage each participant in the Plan to make
exceptional contributions to further the growth, success and profits of the
Company.
(b) To foster teamwork and personal involvement in the
Company's success.
(c) To provide the Company with an objective method of
recognizing and rewarding certain employees who have been or will be given
substantial responsibility for the direction and management of the Company.
2. ADMINISTRATION OF PLAN. This Plan shall be administered by
the Compensation and Stock Option Committee of the Company's Board of Directors
(the "Committee"). This Committee shall interpret the Plan in a manner
consistent with its purposes; and, subject to the terms of the Plan, will have
discretion to determine who shall participate in the Plan and the amounts of
any incentive compensation to be awarded pursuant to the Plan. All actions and
determinations of the Committee taken in connection with the Plan, including
the awarding of any incentive compensation, shall be final and conclusive. The
Committee may adopt rules from time to time for carrying out the Plan.
3. ELIGIBLE EMPLOYEES. Upon the adoption of the Plan and at or
near the start of each succeeding calendar year, all full-time employees of the
Company and its subsidiaries, excluding those employees who are eligible to
participate in any other cash bonus plan of the Company or any subsidiary,
shall be eligible to participate in the Plan during such calendar year.
Additionally, the Committee may, in its discretion, allow a recently promoted
or hired officer or employee to participate in the Plan commencing with the
date of his promotion or his employment, as the case may be.
In order to be considered an "Eligible Employee" for purposes of the
Plan and except as provided in Section 4(d), each participant must be employed
without interruption during the applicable calendar year from January 1 through
December 31 and furthermore must be employed at the time that the bonus is
actually paid pursuant to Section 4(c). In the event that the participant's
employment is terminated, by reason of (i) discharge with or without cause or
(ii) voluntary termination by the participant, at any time during the calendar
year, such terminated participant shall not be entitled to any bonus for such
calendar year.
There shall be two classes of Eligible Employees as follows:
(a) Class I shall include the chief executive officer, the chief
operating officer and the chief financial officer, respectively, of the
Company, and such additional officers and other key employees of the Company or
its subsidiaries as may be selected by the Committee or by the Board of
Directors
2
to be eligible for participation in the Plan under the Class I category at the
beginning of any applicable calendar year.
(b) Class II shall include all Eligible Employees under the Plan
other than those employees included in Class I.
4. MECHANICS OF THE PLAN. The Plan will award participants for
above-average performance, measured by the Company's operating ratio, subject
to the following rules:
(a) Annual Plan. This Plan is an "annual plan" and
incentive awards shall be based on audited results of operations for each
respective fiscal year ending December 31.
(b) Incentive Awards. The Board of Directors or
Committee shall establish the targeted operating ratios and corresponding bonus
percentages for each calendar year at or near the completion of the audit of
the Company's financial statements for the previous calendar year; provided,
however, that the targeted operating ratios and bonus percentages for the 1994
calendar year shall be established by the Board of Directors upon the adoption
of this Plan. Upon adoption by the Board of Directors or Committee, the
targeted operating ratio and bonus percentages for the current calendar year
shall be set forth on a schedule and attached hereto as an exhibit. Under the
Plan, each participant may be awarded a bonus equal to the percentage of his
annual base compensation which corresponds to the Company's operating ratio for
that calendar year. For example, assume a participant has annual base
compensation of $50,000 and the Committee established the following targeted
operating ratios and corresponding bonus percentages for that calendar year:
Operating Ratios Bonus Percentage
---------------- ----------------
85.1% and over 0%
84.1% to 85.0% 5%
83.1% to 84.0% 10%
82.1% to 83.0% 20%
81.1% to 82.0% 25%
80.1% to 81.0% 30%
80.0% or less 40%
If the operating ratio of the Company for the calendar year was 85.5%, the
participant would not be entitled to a bonus. If the operating ratio of the
Company for the calendar year was 80.5%, the participant would be entitled to a
bonus equal to $50,000 x 30% or $15,000.
(c) Payment of Awards. Any bonus awarded hereunder shall
be paid by the Company upon the determination of the operating ratio for such
calendar year by the Company's independent accountants; provided, however, the
bonuses shall be paid no later than ninety (90) days after the end of each
calendar year.
(d) Death or Disability. Notwithstanding anything
contained herein to the contrary, if a participant's employment ceases on
account of death or total disability, as defined in Section 105(d)(4) of the
Internal Revenue Code, such participant shall be entitled to receive a pro-rata
portion of any bonus he otherwise would be awarded. In either event, the
participant shall be entitled to an amount equal to a normal bonus award under
Section 4(b) multiplied by a fraction the numerator of which shall be the
number of days in the year during which the participant was participating in
the Plan and
-2-
3
the denominator of which shall be 365 days. For example, a participant with
annual base compensation of $50,000 dies on July 1 of a calendar year. The
Company has an operating ratio of 80.5% for that calendar year which otherwise
would entitle the participant to a bonus of 30% of his annual base compensation
or $15,000. Such participant would be entitled to a bonus equal to $15,000 x
182/365 or $7,479. All bonus amounts payable to a deceased or disabled
participant shall be paid to such participant or his personal representative,
as the case may be.
(e) Recently Promoted or Hired Employees. In the event the
Committee allows a recently promoted or hired employee to participate in the
Plan, such participant shall be entitled to receive a pro-rata portion of any
bonus he otherwise would be awarded. Such pro-rata bonus shall be the amount
equal to a normal bonus award under Section 4(b) multiplied by a fraction the
numerator of which shall be the number of days in the year during which the
participant was participating in the Plan and the denominator of which shall be
365 days. For example, a participant commences participation in the Plan on
July 1 of a calendar year at annual base compensation of $60,000. The Company
has an operating ratio of 80.0% for that calendar year which otherwise would
entitle the participant to a bonus of 40% of his annual base compensation or
$24,000. Such participant would be entitled to a bonus equal to $24,000 x
183/365 or $12,033.
(f) Applicable Base Annual Compensation. For purposes of
calculating all bonus awards hereunder, whenever the term "annual base
compensation" of a participant is referred to in this Plan it shall mean the
following:
i) With respect to any eligible employee who is
compensated on the basis of a fixed salary, annual base compensation shall be
the amount of such base salary determined at December 31 of each calendar year.
ii) With respect to any eligible employee who is
compensated on the basis of hourly wages, the annual base compensation shall be
equal to the base wage of such eligible employee at December 31 of each
calendar year and then annualized.
(g) Operating Ratio. The "operating ratio" for any
calendar year means operating expenses as a percentage of operating revenues.
For purposes of this Plan, operating revenues shall not include interest
income, other non-operating income or extraordinary items, and operating
expenses shall not include any incentive compensation awarded hereunder,
interest expense or income taxes but shall include loss (gain) on sale of
equipment. For purposes of this Plan, the operating ratio shall be determined
to the nearest one-hundredth of one percent (.01%).
5. NOTICES. The Board of Directors or the Committee shall notify
all employees selected to participate in the Plan as soon as practicable after
such determination has been made. The participants shall be notified of the
targeted operating ratios and corresponding bonus percentages for each calendar
year, and any subsequent modifications thereto, as soon as practicable after
such determinations have been made by the Committee.
6. OTHER BENEFITS. This Plan is intended to provide a method of
rewarding employees for exceptional contributions made by such employees and
any awards hereunder are intended to be in addition to any other benefits which
the Company provides to the participants. The Board of Directors or the
Committee may, but is not obligated to, award one or more of the participants
additional bonuses in such amounts and at such times as the Board of Directors
or the Committee, in its sole discretion, shall determine.
-3-
4
7. AMENDMENTS TO PLAN. The Board of Directors or the Committee may
from time to time make such amendments to the Plan as the Board or the
Committee, in its sole discretion, shall deem desirable, including modifying
the targeted operating ratios and the corresponding bonus percentages
established pursuant to Section 4(b) at any time during a calendar year.
8. TERMINATION OF THE PLAN. The Board of Directors may at any time
terminate the Plan. In the event the Plan is terminated, the Company shall not
have any obligation to the participants under the Plan unless the Board of
Directors states that the Company has assumed an obligation. For example,
assume the Plan is terminated on December 15 of a calendar year. No
participant shall have a right to receive, and the Company shall not have any
obligation to pay, any bonus amount under the Plan for that calendar year
unless the Board of Directors expressly states the Company shall pay such bonus
amount.
9. NONASSIGNABILITY. No participant shall have the right to assign
or transfer any of his benefits or expected benefits under the Plan except by
will or by the laws of descent and distribution.
This Plan has been adopted and approved at a special meeting of the
Board of Directors of the Company on the 10th day of January, 1995, and shall
be effective for calendar years 1994 and 1995, unless otherwise amended by the
Board of Directors.
-4-
5
EXHIBIT A
P.A.M. TRANSPORTATION SERVICES, INC.
INCENTIVE COMPENSATION PLAN
TARGETED OPERATING RATIOS AND
CORRESPONDING BONUS PERCENTAGES
FOR 1994 AND 1995 CALENDAR YEARS
CLASS I ELIGIBLE EMPLOYEES
Operating Ratio Bonus Percentage
--------------- ----------------
90.0% and Above 0%
89.0% to 89.9% 10%
88.0% to 88.9% 15%
87.0% to 87.9% 20%
86.0% to 86.9% 25%
85.0% to 85.9% 30%
84.0% to 84.9% 35%
83.0% to 83.9% 40%
82.0% to 82.9% 45%
81.0% and Below 50%
CLASS II ELIGIBLE EMPLOYEES
Operating Ratio Bonus Percentage
--------------- ----------------
90.0% and Above 0.0%
89.0% to 89.9% 5.0%
88.0% to 88.9% 7.5%
87.0% to 87.9% 10.0%
86.0% to 86.9% 12.5%
85.0% to 85.9% 15.0%
84.0% to 84.9% 17.5%
83.0% to 83.9% 20.0%
82.0% to 82.9% 22.5%
81.0% to 81.9% 25.0%
80.0% to 80.9% 27.5%
Under 80% 40.0%
-5-
EX-21.1
3
PAM SUBSIDIARIES
1
Exhibit 21.1
P.A.M. TRANSPORTATION SERVICES, INC.
SUBSIDIARIES
1. P.A.M. TRANSPORT, INC.
2. P.A.M. SPECIAL SERVICES, INC.
3. T.T.X., INC.
4. CHOCTAW EXPRESS, INC.
5. CHOCTAW BROKERAGE, INC.
EX-23.1
4
CONSENT OF ERNST & YOUNG LLP
1
Exhibit 23.1
Consent of Ernst & Young LLP, Independent Auditors
We consent to the incorporation by reference in the Registration Statements
(Form S-8 No. 33-16220, Form S-8 No. 33-16084, and Form S-8 No. 33-60926)
pertaining to the Incentive Stock Option Plan, the Nonqualified Stock Option
Plan, and the Employee Stock Option Plan of P.A.M. Transportation Services,
Inc. of our report dated February 22, 1995, with respect to the consolidated
financial statements and schedule of P.A.M. Transportation Services, Inc.
included in its Annual Report (Form 10-K) for the year ended December 31, 1994.
Little Rock, Arkansas
March 28, 1995
EX-27
5
FINANCIAL DATA SCHEDULE
5
1,000
U.S. DOLLARS
YEAR
DEC-31-1994
JAN-01-1994
DEC-01-1994
1000
4078
0
8498
239
0
18,448
64,300
19,316
65,324
18,167
32,206
49
0
0
12,984
65,324
76,147
76,147
67,175
67,175
218
114
2,926
6,263
2,494
3,740
0
0
0
3,740
.50
.50