-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, HyhjntKoYOx/OUJHFyAg2ceH4aHWU5rCIeyaWFaD9Or5FGf5TdzhckNn0R+DHHQn suulGoFALVXFEjfqhOWceA== 0000950144-96-001391.txt : 19960402 0000950144-96-001391.hdr.sgml : 19960402 ACCESSION NUMBER: 0000950144-96-001391 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19951231 FILED AS OF DATE: 19960401 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: PAM TRANSPORTATION SERVICES INC CENTRAL INDEX KEY: 0000798287 STANDARD INDUSTRIAL CLASSIFICATION: TRUCKING (NO LOCAL) [4213] IRS NUMBER: 710633135 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-15057 FILM NUMBER: 96542235 BUSINESS ADDRESS: STREET 1: HIGHWAY 412 WEST CITY: TONTITOWN STATE: AR ZIP: 72770 BUSINESS PHONE: 5013619111 MAIL ADDRESS: STREET 1: HIGHWAY 412 WEST CITY: TONTITOWN STATE: AR ZIP: 72770 10-K 1 P.A.M. TRANSPORTATION FORM 10-K 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, 1995 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, 1996 was $14,545,223. 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, 1996: 5,008,357 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 1996 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. 2 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 former 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) intrastate within any state, and from any point in the continental United States, Ontario or Quebec to any other point in the continental United States 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 automotive parts, consumer goods, such as general retail store merchandise and products from the manufacturing sector, such as heating and air conditioning units, and industrial glass. 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., P.A.M. Dedicated Services, Inc., Choctaw Express, Inc., Choctaw Brokerage, Inc. and Allen Freight Services, Inc. (see below). The Company's operating authorities are held by P.A.M. Transport, Choctaw Express, Inc., Choctaw Brokerage, Inc. and Allen Freight Services, 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, 1995, the Company operated a transport fleet consisting of 716 over-the-road tractors ("tractors") and 1,638 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 March 11, 1996, the Company closed the purchase of all of the outstanding capital stock (the "Shares") of Allen Freight Services, Inc., a Missouri corporation ("AFS"). The total purchase price for the Shares was $200,000, which was negotiated by the parties at arms-length. The Company paid the purchase price by utilizing its existing line of credit. In connection with the transaction, Haddon N. Allen, William Kirk Allen, Keith R. Kraegel and G.J. "Jack" Geis (formerly stockholders and officers/employees of AFS) entered into three-year Non-Competition Agreements with the Company and Employment Agreements with AFS. Haddon N. Allen will serve as President and Chief Operating Officer of AFS. AFS expects to report approximately $16 million in revenues in 1995. 3 AFS is engaged in the truckload common and contract motor carrier business, and is and is headquartered in Jacksonville, Florida. AFS's operations consist primarily of providing over-the-road trucking services, contract loading services and dedicated regional distribution services, using 53-foot conventional trailer equipment. AFS operated a fleet of 160 tractors and 373 trailers at December 31, 1995. MARKETING/MAJOR CUSTOMERS 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 ("just in time") 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 six 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 1995, the Company's five largest customers, for which the Company provides carrier services covering a number of geographic locations, accounted for approximately 43% of total revenues. General Motors Corporation accounted for approximately 19% of 1995 revenues and Packard Electric accounted for approximately 12% of 1995 revenues. A total loss of General Motors or Packard Electric business, however unlikely, would have an adverse impact on the Company's operations, at least over the short term. The Company also provides transportation services to other manufacturers who are suppliers for automobile manufacturers including General Motors. As a result, concentration of the Company's business within the automobile industry is greater than the concentration in a single customer. Of the Company's total revenues for 1995, 39.8% were derived from transportation services provided to the automobile manufacturing industry. The Company is no longer required to file tariffs with the Interstate Commerce Commission ("ICC") or any successor agency. See "Regulation" section. 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 -2- 4 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 at its headquarters, 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. The Company recently began installing Qualcomm Omnitracs(TM) display units in its tractors. The Omnitracs system is a satellite-based positioning and communications system that allows fleet managers to communicate directly with drivers. This direct communication creates operating efficiencies in the dispatch of customer loads. The addition of these units will improve customer service by simplifying the location of equipment. The Omnitracs system updates the tractor's position every 30 minutes to permit customers to locate freight and more precisely estimate pick-up and delivery times. During 1996, the Company plans to install display units in all tractors involved in JIT service. 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, 1995, 342 tractors, 238 of which are manned with two-man driver teams, and approximately 786 trailers were dedicated to this service. The Company has found that 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 services business amounted to approximately 58% of 1995 revenues, 44% of 1994 revenues, and 32% of 1993 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 services market. -3- 5 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, Union Pacific and CSX Intermodal ("CSX"). 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 716 tractors and 1,638 trailers at December 31, 1995. All of the trailers and all except 45 tractors are owned or leased by the Company. The trailer fleet is made up of 838 48' by 102" dry vans and 800 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 45 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 3.04 years in 1993, to 1.70 in 1994 and to 1.26 by the end of 1995. The average age of the Company's trailer fleet was 3.84, 2.09 and 2.34 by the end of the years 1993, 1994 and 1995, respectively. During 1995, the Company purchased 306 new tractors and 200 new trailers and sold 240 tractors and 55 trailers. During 1996, the Company expects to purchase 200 new tractors and 200 new trailers while continuing 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; Oklahoma City, Oklahoma; and Columbia, Mississippi. 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. -4- 6 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 At December 31, 1995, the Company utilized 972 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. 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 28 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 the Company 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 At December 31, 1995, the Company employed 1,192 persons, of which 972 are drivers, 55 are maintenance personnel, 72 are employed in operations, 30 are employed in marketing, 28 are employed in safety and personnel, and 35 are employed in general administration and accounting. Of the total number of employees, 144 of the Company's employees are salaried, and the remainder are -5- 7 employed on an hourly or mileage basis. The Company also has 45 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 that is regulated by certain state and Canadian regulatory agencies. Prior to January 1, 1996, the Company was also regulated by the ICC. The ICC governed such activities as the authority to engage in motor carrier operations, rates and charges, accounting systems, certain mergers, consolidations, acquisitions and periodic financial reporting. On January 1, 1996, however, the ICC Termination Act of 1995 (the "Termination Act") was enacted, terminating the ICC and substantially deregulating the rail and motor carrier industries. The Termination Act substantially revises the Motor Carrier Act of 1980, eliminating numerous unnecessary provisions and streamlining many of the ICC's functions regarding the regulation of the motor carrier industry. The majority of the remaining ICC functions are transferred to the Department of Transportation ("DOT"), with limited responsibilities transferred to a newly formed Surface Transportation Board. Some of the ICC functions that have been eliminated include: tariff filings, except for non-contiguous domestic trade; rate regulation, except for non-contiguous domestic trade and individual household goods movements; federal grants of operating authority; price regulation and tariff filing requirements for office and exhibit moves; the possibility of future undercharge claims; restrictions on intermodal ownership; review of motor carrier mergers; and state regulation of transportation intermediaries. In addition, registration and insurance filings under the Motor Carrier Act are streamlined into a single federal registration and insurance system to eliminate duplicative and burdensome filing requirements. Exemption authority to permit administrative deregulation has also been substantially broadened, with restrictions remaining on only cargo loss and damage, insurance, safety fitness and antitrust immunity. Prior to the enactment of the Termination Act, most of the ICC's authority to oversee the commercial operation of the motor carrier industry had already been transferred to the DOT. The primary remaining functions which are transferred to the DOT by the Termination Act are motor carrier registration and the setting and maintenance of minimum levels of liability insurance. In addition, the maintenance of nationwide motor carrier industry commercial rules (such as leasing rules, uniform cargo loss and damage rules, rules for shipper payment, and perfecting security interests) are transferred to the DOT. Currently, the ICC and the DOT operate separate registration systems. The ICC requires that interstate, for hire carriers receive a license (operating authority) with the standards for granting of authority limited to a showing of safety and fitness and insurance coverage at a specified level. The DOT registration system extends to all carriers, including private and exempt carriers not regulated by the ICC. DOT assigns each carrier an identification number. Carriers are not required to show proof of insurance at the time of DOT registration, nor is any fee currently charged. The Termination Act continues the two registration systems for a period of twenty-four months, during which time the Secretary of Transportation shall conduct a rule-making and implement changes to consolidate these two registration systems into one system. The new system will serve as a clearing house and depository of information on and identification of all domestic and foreign motor carriers, brokers, freight forwarders and others required to register. The DOT will utilize the information in overseeing -6- 8 safety fitness and compliance with required levels of insurance. Registrations will be renewed periodically and the on-line system will be available to state authorities and the public. The Termination Act also continues antitrust immunity granted by the ICC but contains reforms intended to prevent any potential market abuses. 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 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 46, 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. -7- 9 W. CLIF LAWSON, age 42, 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 37, 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; Oklahoma City, Oklahoma; Kansas City, Missouri; Topeka, Kansas; and Columbia, Mississippi. 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. 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 management of 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, 1995. -8- 10 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 table sets forth, for the fiscal quarters indicated, the range of the high and low sales price per share for the Common Stock as quoted on the Nasdaq National Market System. Fiscal Year Ended December 31, 1995 High Low -------------------------------------- ---- ---- First Quarter $ 7 1/2 $ 5 1/2 Second Quarter 6 5/8 5 1/2 Third Quarter 8 1/4 5 3/4 Fourth Quarter 8 3/4 6 3/4 Fiscal Year Ended December 31, 1994 High Low -------------------------------------- ---- --- 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
As of March 21, 1996, the number of common shareholders of record was approximately 517. 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. -9- 11 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.
Years ended December 31, 1995 1994 1993 1992 1991 ------------------------------------------- (in thousands, except per share amounts) Statements of Operations: Operating revenues $91,595 $76,147 $70,238 $66,687 $65,722 ------- ------- ------- ------- ------- Operating Expenses: Salaries, wages and benefits 40,020 33,647 31,850 30,745 29,232 Operating supplies 16,719 14,688 16,393 16,248 16,795 Rent and purchased transportation 1,538 991 1,599 3,409 3,286 Depreciation and amortization 9,428 7,142 4,683 3,131 6,030 Operating taxes and licenses 5,608 5,078 4,680 4,410 4,891 Insurance and claims 4,163 3,816 3,686 3,822 4,115 Communications and utilities 852 868 864 914 987 Other 1,666 1,279 1,430 1,168 1,551 (Gain) loss on sale or disposal of property and equipment 159 (334) (246) (87) (7) ------- ------- ------- ------- ------- Total operating expenses 80,153 67,175 64,939 63,760 66,880 ------- ------- ------- ------- ------- Operating income (loss) 11,442 8,972 5,299 2,927 (1,158) Interest expense (3,521) (2,926) (1,972) (985) (1,430) Other 166 217 122 (70) 0 ------- ------- ------- ------- ------- Income (loss) before income taxes and dividends on redeemable preferred stock 8,087 6,263 3,449 1,872 (2,588) Income taxes 3,073 2,493 321 70 0 ------- ------- ------- ------- ------- Income (loss) before dividends on redeemable preferred stock 5,014 3,770 3,128 1,802 (2,588) Accrued dividends on redeemable preferred stock 0 30 360 360 360 ------- ------- ------- ------- ------- Net income (loss) $ 5,014 $ 3,740 $ 2,768 $ 1,442 $(2,948) ======= ======= ======= ======= ======= Earnings per common share Primary: Net income (loss) per share $ .65 $ .50 $ .39 $ .23 $ (.61) ======= ======= ======= ======= ======= Average common and common equivalent shares outstanding 7,661 7,520 7,335 7,020 4,868 ======= ======= ======= ======= ======= Fully diluted: Net income (loss) per share $ .65 $ .50 $ .37 $ .23 $ (.61) ======= ======= ======= ======= ======= Average common and common equivalent shares outstanding 7,684(1) 7,522(1) 7,559(1) 7,020(1) 4,868 ======= ======= ======= ======= =======
(1) Income per share for 1995, 1994, 1993 and 1992 assumes the exercise of stock purchase warrants and stock options to purchase an aggregate of 3,529,278, 3,454,549, 3,434,429 and 3,125,250 shares of Common Stock, respectively. Such warrants and options were antidilutive in 1991. -10- 12
Balance Sheet Data At December 31, 1995 1994 1993 1992 1991 ------------------------------------------- (in thousands) Total assets $86,808 $65,324 $56,140 $30,676 $29,193 Long-term debt, excluding current maturities 37,966 32,206 28,650 4,068 2,169 Redeemable preferred stock 0 0 4,397 4,037 3,677 Shareholders' equity 18,232 13,034 9,155 6,312 4,869
Operating Data For the year ended December 31, 1995 1994 1993 1992 1991 ---------------------------------------------- Operating ratio(1) 87.5% 88.2% 92.5% 95.6% 101.8% Average number of truckloads per week 1,913 1,617 1,633 1,555 1,328 Average miles per trip 899 859 794 809 968 Total miles traveled (in thousands) 85,588 69,128 64,879 63,423 64,766 Average miles per tractor 118,424 116,181 114,830 110,879 106,523 Average revenue per tractor per week $ 2,711 $ 2,668 $ 2,462 $ 2,313 $ 2,131 Average revenue per loaded mile $ 1.14 $ 1.18 $ 1.16 $ 1.13 $ 1.09 Empty mile factor 6.2% 6.8% 6.9% 7.3% 6.9% AT END OF PERIOD: Total Company-owned/leased tractors 716(2) 595(3) 565(4) 572(5) 608 Average age of all tractors (in years) 1.26 1.70 3.04 3.66 3.47 Total trailers 1,638(6) 1,434(7) 1,512(8) 1,519(9) 1,592 Average age of trailers (in years) 2.34 2.09 3.84 5.28 4.24 Number of employees 1,192 859 945 927 902
(1) Total operating expenses as a percentage of total operating revenues. (2) Includes 45 owner operator tractors. (3) Includes 40 owner operator tractors. (4) Includes 34 owner operator tractors. (5) Includes 19 tractors leased to an affiliate of the Company's majority shareholder and 40 owner operated tractors. (6) Includes 82 trailers leased from an affiliate of the Company's majority shareholder. (7) Includes 74 trailers leased from an affiliate of the Company's majority shareholder. (8) Includes 266 trailers leased from an affiliate of the Company's majority shareholder. (9) Includes 493 trailers leased from an affiliate of the Company's majority shareholder. -11- 13 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, ---------------------------- 1995 1994 1993 -------- -------- -------- Operating revenues 100.0% 100.0% 100.0% -------- -------- -------- Operating expenses: Salaries, wages and benefits 43.7 44.2 45.3 Operating supplies 18.3 19.3 23.4 Rent and purchased transportation 1.7 1.3 2.3 Depreciation and amortization 10.3 9.4 6.7 Operating taxes and licenses 6.1 6.7 6.7 Insurance and claims 4.5 5.0 5.2 Communications and utilities 0.9 1.1 1.2 Other 1.8 1.6 2.0 (Gain) loss on sale or disposal of property and equipment 0.2 (.4) (.3) -------- -------- -------- Total operating expenses 87.5 88.2 92.5 -------- -------- -------- Operating income 12.5 11.8 7.5 Interest expense (3.8) (3.8) (2.8) Other, net .2 .2 .2 -------- -------- -------- Income before income taxes and dividends on redeemable preferred stock 8.9 8.2 4.9 Federal and state income taxes (3.4) (3.3) (.5) -------- -------- -------- Income before dividends on redeemable preferred stock 5.5 4.9 4.4 Accrued dividends on redeemable preferred stock -- -- (.5) -------- -------- -------- Net income 5.5 4.9 3.9 ======== ======== ========
RESULTS OF OPERATIONS 1995 COMPARED TO 1994 For the year ended December 31, 1995, revenues increased 20.3% to $91.6 million as compared to $76.1 million for the year ended December 31, 1994. The Company's utilization (revenue per tractor per work day) increased 1.6% from $534 in 1994 to $542 in 1995. The two main factors contributing to the increase in utilization were (1) the continued replacement of a majority of older equipment in 1995, reducing the down time related to maintenance problems with older equipment, and (2) the increase in revenues in the dedicated services division, due in part as a result of the acquisition of Choctaw Express, Inc. on January 31, 1995. Choctaw Express, Inc. produced revenues of $8.1 million in 1995. -12- 14 The Company's operating ratio improved from 88.2% in 1994 to 87.5% in 1995. Salaries, wages and benefits increased in absolute dollars, but decreased as a percentage of revenues from 44.2% in 1994 to 43.7% in 1995. The largest savings were realized in the areas of maintenance wages where a decrease of .6% was recorded. Operating supplies and expenses decreased from 19.3% of revenues in 1994 to 18.3% of revenues in 1995, as the Company continues to modernize its fleet. The largest savings were realized in the area of equipment maintenance where a 1.0% reduction was realized. Operating taxes and licenses expenses decreased from 6.7% of revenues in 1994 to 6.1% of revenues in 1995. The .4% decrease was attributable to lower accruals of state fuel tax expenses. The Company incurred an increase in depreciation expense of .9% as a result of new equipment being placed into service in 1995. For the period, as a percentage of revenues, depreciation expense increased from 9.4% in 1994 to 10.3% in 1995. This increase in depreciation expense was offset by reductions in operating costs combined with increased utilization of equipment. Interest expense as a percentage of revenues in 1995 remained consistent with 1994. Interest expense increased in absolute dollars by $.6 million, which is attributable to additional long-term debt incurred on equipment purchased during 1995. The Company's effective tax rate decreased slightly from 40% in 1994 to 38% in 1995. The Company's effective tax rate reflects the statutory federal tax rate and the weighted average tax rate of the states in which the Company conducts business. The 1995 tax rate is slightly lower than the effective tax rate in 1994 due to a change in the Company's policy relating to driver per diems in 1995. In 1994, management concluded that the benefits of all net operating losses and credits would be recorded and that no valuation allowance against the deferred tax assets was necessary at December 31, 1994. At December 31, 1995, the Company's deferred tax assets were $5.9 million and deferred tax liabilities were $10.8 million. In assessing the need for a valuation allowance against deferred tax assets at December 31, 1995, management considered the following factors: 1) the Company has recorded $4.9 million of deferred tax liabilities for future taxable temporary differences (primarily depreciation related) which will result in additional taxable income in future periods; 2) the Company's recent operating results have produced a total of more than $17.4 million of pretax accounting income for 1995, 1994 and 1993 and net operating loss carryovers have offset all taxable income (total of $4.6 million) in these years; 3) the Company has various alternatives, such as equipment leasing to utilize net operating losses, which might otherwise expire; and 4) the Company's carryover periods for its deferred tax assets are extensive, with expiration beginning in 2003 for net operating losses and 1999 for investment credits. -13- 15 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 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 in the areas of state unemployment taxes and workers' compensation where 1.2% was realized due to 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 in the area of equipment maintenance where a $1.6 million reduction was realized. 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 concluded that the benefits of all net operating losses and credits could 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 at December 31, 1994 management also considered the following factors: 1) the Company has recorded approximately $2.3 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. -14- 16 LIQUIDITY AND CAPITAL RESOURCES The Company's principal subsidiary, P.A.M. Transport, Inc., has a $10.0 million secured line of credit from a bank subject to borrowing limitations. Outstanding advances on this line of credit were approximately $8.6 million (at an interest rate of 8.5%) at December 31, 1995, including $.7 million in letters of credit. The Company's borrowing base limitation at December 31, 1995 was $9.3 million. The line of credit is guaranteed by the Company and matures May 31, 1997. P.A.M. Transport entered into installment obligations in 1995 for the purchase of replacement revenue equipment for approximately $21.2 million. During 1995, the Company disposed of certain revenue equipment for approximately $3.8 million. The Company plans to replace 200 trailers and 90 tractors, and to add 110 additional new tractors, during 1996, incurring additional debt of approximately $14 million. At December 31, 1995, the Company had working capital of approximately $1.0 million. Improved operating results provided net cash from operations of approximately $15.2 million during 1995. Management expects that the Company's existing working capital and its available line of credit will be sufficient to meet the Company's commitments as of December 31, 1995, and to fund its operating needs during fiscal 1996. However, if additional financing were required, management believes that such financing would be available from its existing lender. RECENT DEVELOPMENTS On March 21, 1996, the Company issued a press release to announce that it expects the strike (which commenced on or about March 5, 1996) by the United Auto Workers against General Motors Corporation to have a negative impact on the Company's earnings for the first quarter ending March 31, 1996. The Company expects earnings in the first quarter to remain unchanged as compared to earnings reported in the first fiscal quarter of 1995. For the first quarter ended March 31, 1995, the Company reported net income of $1 million, or $.13 per share. Although the Company has actively sought and obtained replacement freight to keep utilization at normal levels, the continuance of the strike into the week of March 18, 1996 began to impact utilization in the dedicated services division. 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. OTHER MATTERS In October 1995, the Financial Accounting Standards Board issued Statement No. 123, Accounting for Stock Based Compensation, which becomes effective in 1996. The Company has disclosed in its 1995 financial statements that it elects to continue following the existing accounting rules (the intrinsic value method). -15- 17 ENVIRONMENTAL The Company has no outstanding inquiries with any federal or state environmental agency at December 31, 1995. 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, 1995 and 1994 Consolidated Statements of Income - Years ended December 31, 1995, 1994 and 1993 Consolidated Statements of Shareholders' Equity - Years ended December 31, 1995, 1994 and 1993 Consolidated Statements of Cash Flows - Years ended December 31, 1995, 1994 and 1993 Notes to Consolidated Financial Statements ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. None. -16- 18 CONSOLIDATED FINANCIAL STATEMENTS P.A.M. TRANSPORTATION SERVICES, INC. AND SUBSIDIARIES Years ended December 31, 1995, 1994, and 1993 with Report of Independent Auditors 17 19 P.A.M. Transportation Services, Inc. and Subsidiaries Consolidated Financial Statements Years ended December 31, 1995, 1994, and 1993 CONTENTS Report of Ernst & Young LLP, Independent Auditors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Audited Consolidated Financial Statements Consolidated Balance Sheets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Consolidated Statements of Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Consolidated Statements of Shareholders' Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Consolidated Statements of Cash Flows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
18 20 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, 1995 and 1994, and the related consolidated statements of income, shareholders' equity, and cash flows for each of the three years in the period ended December 31, 1995. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements 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, 1995 and 1994, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 1995, in conformity with generally accepted accounting principles. ERNST & YOUNG LLP Little Rock, Arkansas February 14, 1996 19 21 P.A.M. Transportation Services, Inc. and Subsidiaries Consolidated Balance Sheets
DECEMBER 31 1995 1994 ------------------------------- (Thousands, except par values) ASSETS Current assets: Cash and cash equivalents $ 7,629 $ 4,078 Accounts receivable (Note 4): Trade, net of allowance for doubtful accounts (1995--$324; 1994--$239) 12,517 8,498 Other 307 482 Operating supplies and inventories 468 579 Equipment held for sale (Note 1) 1,223 1,164 Prepaid expenses and deposits 3,341 2,870 Investment in direct financing lease (Note 8) 691 623 Income taxes refundable 95 154 ---------------------------- Total current assets 26,271 18,448 Property and equipment (Notes 4, 8 and 9): Land 956 956 Structures and improvements 2,395 2,240 Revenue equipment 71,885 57,063 Service vehicles 1,037 1,619 Office furniture and equipment 2,556 2,422 ---------------------------- 78,829 64,300 Allowances for depreciation and amortization (21,540) (19,316) ---------------------------- 57,289 44,984 Other assets: Investment in direct financing lease, less current portion (Note 8) 548 1,240 Excess of cost over net assets acquired, net of accumulated amortization (1995--$502; 1994--$440) (Notes 1 and 2) 1,140 602 Noncompetition agreement, net of accumulated amortization (1995--$261) (Note 2) 1,059 - Other 501 50 ---------------------------- 3,248 1,892 ---------------------------- $ 86,808 $ 65,324 ============================
20 22
DECEMBER 31 1995 1994 ------------------------------ (Thousands, except par values) LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Trade accounts payable (Note 8) $ 6,729 $ 4,382 Accrued expenses (Note 3) 3,048 3,059 Deferred income taxes (Note 5) 409 369 Current portion of long-term debt (Notes 4 and 9) 15,120 10,358 ---------------------------- Total current liabilities 25,306 18,168 Long-term debt, less current portion (Notes 4 and 9) 37,966 32,206 Deferred income taxes (Note 5) 4,489 1,917 Noncompetition agreement (Note 2) 815 - Shareholders' equity (Note 6): Preferred stock, $.01 par value: Authorized shares--10,000,000 Issued and outstanding--none - - Common stock, $.01 par value: Authorized shares--20,000,000 Issued and outstanding shares: 1995--4,990,968; 1994--4,937,857 50 49 Additional paid-in capital 13,307 13,123 Retained earnings (deficit) 4,875 (139) ---------------------------- Total shareholders' equity 18,232 13,033 Commitments ---------------------------- $ 86,808 $ 65,324 ============================
See accompanying notes. 21 23 P.A.M. Transportation Services, Inc. and Subsidiaries Consolidated Statements of Income
YEAR ENDED DECEMBER 31 1995 1994 1993 -------------------------------------- (Thousands, except per share data) Operating revenues (Notes 1, 2, and 8) $ 91,595 $ 76,147 $ 70,238 Operating expenses and costs: Salaries, wages and benefits 40,020 33,647 31,850 Operating supplies and expenses 16,719 14,688 16,393 Rents and purchased transportation 1,538 991 1,599 Depreciation and amortization 9,428 7,142 4,683 Operating taxes and licenses 5,608 5,078 4,680 Insurance and claims 4,163 3,816 3,686 Communications and utilities 852 868 864 Other 1,666 1,279 1,430 (Gain) loss on sale or disposal of property and equipment 159 (334) (246) -------------------------------------- 80,153 67,175 64,939 -------------------------------------- Operating income 11,442 8,972 5,299 Other income (expense): Interest expense (3,521) (2,926) (1,972) Other (Note 8) 166 217 122 -------------------------------------- (3,355) (2,709) (1,850) -------------------------------------- Income before income taxes and dividends on redeemable preferred stock 8,087 6,263 3,449 Federal and state income taxes: Current 528 1,160 166 Deferred 2,545 1,333 155 -------------------------------------- 3,073 2,493 321 -------------------------------------- Income before dividends on redeemable preferred stock 5,014 3,770 3,128 Accrued dividends on redeemable preferred stock - 30 360 -------------------------------------- Net income $ 5,014 $ 3,740 $ 2,768 ====================================== Earnings per common share (Note 7) Primary: Net income per share $ .65 $ .50 $ .39 ====================================== Average common and common equivalent shares outstanding 7,661 7,520 7,335 ====================================== Fully diluted: Net income per share $ .65 $ .50 $ .37 ====================================== Average common and common equivalent shares outstanding 7,684 7,522 7,559 ======================================
See accompanying notes. 22 24 P.A.M. Transportation Services, Inc. and Subsidiaries Consolidated Statements of Shareholders' Equity
ADDITIONAL RETAINED COMMON PAID-IN EARNINGS STOCK CAPITAL (DEFICIT) TOTAL ------------------------------------------------ (Thousands) Balances at January 1, 1993 $ 49 $ 12,911 $ (6,647) $ 6,313 Net income - - 2,768 2,768 Exercise of stock options--27,300 shares issued (Note 6) - 75 - 75 ------------------------------------------------ Balances at December 31, 1993 49 12,986 (3,879) 9,156 Net income - - 3,740 3,740 Exercise of stock options--42,700 shares issued (Note 6) - 101 - 101 Tax benefits of stock options (Note 6) - 36 - 36 ------------------------------------------------ Balances at December 31, 1994 49 13,123 (139) 13,033 Net income - - 5,014 5,014 Exercise of stock options--56,700 shares issued (Note 6) 1 142 - 143 Tax benefits of stock options (Note 6) - 42 - 42 ------------------------------------------------ Balances at December 31,1995 $ 50 $ 13,307 $ 4,875 $ 18,232 ================================================
See accompanying notes. 23 25 P.A.M. Transportation Services, Inc. and Subsidiaries Consolidated Statements of Cash Flows
YEAR ENDED DECEMBER 31 1995 1994 1993 ----------------------------------------- (Thousands) OPERATING ACTIVITIES Net income $ 5,014 $ 3,740 $ 2,768 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 9,428 7,142 4,683 Noncompetition agreement amortization (Note 2) 261 - - Provision for doubtful accounts 89 113 51 Provision for deferred income taxes 2,545 1,333 155 (Gain) loss on sale or disposal of property and equipment 159 (334) (246) Accrued dividends on redeemable preferred stock - 30 360 Changes in operating assets and liabilities: Accounts receivable (3,013) (937) (749) Prepaid expenses and other current assets (798) (452) (232) Income taxes refundable 187 (154) - Trade accounts payable 1,652 2,166 (981) Accrued expenses (246) 241 430 ----------------------------------------- Net cash provided by operating activities 15,278 12,888 6,239 INVESTING ACTIVITIES Purchases of property and equipment (25,307) (15,111) (28,670) Proceeds from sale or disposal of property and equipment 3,841 4,224 2,886 Lease payments received on direct financing lease 624 561 283 Choctaw acquisition less cash acquired (Note 2) (1,323) - - ----------------------------------------- Net cash used in investing activities (22,165) (10,326) (25,501) FINANCING ACTIVITIES Redemption of preferred stock - (4,426) - Borrowings under line of credit 99,884 58,835 34,410 Repayments under line of credit (97,518) (59,920) (35,460) Borrowings of long-term debt 21,239 14,835 28,181 Repayments of long-term debt (13,083) (11,566) (4,475) Payments under noncompetition agreement (Note 2) (269) - - Proceeds from exercise of stock options 143 101 75 Tax benefits of stock options 42 36 - ----------------------------------------- Net cash (used in) provided by financing activities 10,438 (2,105) 22,731 ----------------------------------------- Net increase in cash and cash equivalents 3,551 457 3,469 Cash and cash equivalents at beginning of year 4,078 3,621 152 ----------------------------------------- Cash and cash equivalents at end of year $ 7,629 $ 4,078 $ 3,621 =========================================
See accompanying notes. 24 26 P.A.M. Transportation Services, Inc. and Subsidiaries Notes to Consolidated Financial Statements December 31, 1995 1. SUMMARY OF SIGNIFICANT 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. Majority ownership in the Company is held by an affiliate of another transportation company, with whom the Company has certain business relationships. See Note 8. 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, 1995. INSURANCE The Company maintains insurance policies covering cargo loss and damage and liability claims. The Company maintains a deductible of $5,000 on cargo loss claims. As of July 1, 1994, the Company became self-insured for worker's compensation, with excess 25 27 P.A.M. Transportation Services, Inc. and Subsidiaries Notes to Consolidated Financial Statements (continued) 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) coverage maintained for claims exceeding $250,000 (Arkansas and Oklahoma) and $200,000 (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 for claims incurred. Additionally, a reserve has been estimated for claims incurred but not reported. Letters of credit in the amounts of $400,000 and $200,000 are held by a bank as collateral for worker's compensation claims in Arkansas and Oklahoma, respectively and a letter of credit in the amount of $100,000 is held by a bank for auto liability claims. REVENUE RECOGNITION POLICY The Company recognizes revenue based upon relative transit time in each reporting period with expenses recognized as incurred. 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. RECLASSIFICATIONS Certain reclassifications have been made in prior years' financial statements to conform to the current year's presentation. 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 reflected at the lower of net book value or 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 1994. The Company adopted 26 28 P.A.M. Transportation Services, Inc. and Subsidiaries Notes to Consolidated Financial Statements (continued) 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 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 The Company operates in one business segment, motor carrier operations. The Company provides transportation services to customers throughout the United States and portions of Canada. The Company performs ongoing credit evaluations and generally does not require collateral on its trade receivables. The Company maintains reserves for potential credit losses and such losses have been within management's expectations. At December 31, 1995, two separate customers accounted for 14% and 12%, respectively of the consolidated trade accounts receivable balances. In 1995 and 1994, one customer accounted for 19% and 12% of revenues, respectively. A second customer accounted for 12% of revenues in 1995 and 1993. The Company's largest customer is an automobile manufacturer. The Company also provides transportation services to other manufacturers who are suppliers for automobile manufacturers including the Company's largest customer. As a result, concentration of the Company's business within the automobile industry is greater than the concentration in a single customer. Of the Company's revenues for 1995, 39.8% were derived from transportation services provided to the automobile manufacturing industry. COMPENSATION TO EMPLOYEES Stock based compensation to employees is accounted for based on the intrinsic value method under Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees. Management expects to continue this method. RECENT ACCOUNTING PRONOUNCEMENTS In 1995, the Financial Accounting Standards Board issued Statement No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of. This statement will be adopted in the first quarter of 1996. The Company does not expect Statement No. 121 to have a significant impact on the Company's financial position or results of operations. 27 29 P.A.M. Transportation Services, Inc. and Subsidiaries Notes to Consolidated Financial Statements (continued) 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) USE OF ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statement and accompanying notes. Actual results could differ from those estimates. 2. ACQUISITION On January 31, 1995, the Company acquired all the outstanding stock of Choctaw Express, Inc., a truckload motor carrier, and Choctaw Brokerage, Inc., a related company, based in Oklahoma, (collectively "Choctaw"). Assets of approximately $2.7 million were acquired and liabilities of approximately $800,000 were assumed. The total purchase price for Choctaw was approximately $2.5 million. The acquisition has been accounted for using the purchase method, with operations included in the Company's financial statements beginning on the acquisition date. The purchase price has been allocated to assets and liabilities based on their estimated fair values as of the date of acquisition. Goodwill in the amount of $600,000 was recorded as a result of the purchase allocation and it is being amortized over a 25-year period. The Company also entered into a five-year noncompete agreement with the former sole shareholder of Choctaw which provides for payments of approximately $300,000 per year. Pro forma unaudited financial information (as if the Choctaw acquisition was completed at the beginning of the respective periods) for 1995 and 1994 is provided below:
YEAR ENDED DECEMBER 31 1995 1994 ------------------------ (Thousands, except per share data) (Unaudited) Operating revenues $ 92,462 $ 88,287 Operating expenses 80,917 78,797 ------------------------ Operating income 11,545 9,490 Other expenses, net 3,373 2,890 Income taxes 3,105 2,624 ------------------------ Income before dividends on preferred stock 5,067 3,976 Accrued dividends on preferred stock - 30 ------------------------ Net income $ 5,067 $ 3,946 ======================== Net income per common share (primary) $ .66 $ .53 ======================== Average common and common equivalent shares outstanding 7,661 7,520 ========================
28 30 P.A.M. Transportation Services, Inc. and Subsidiaries Notes to Consolidated Financial Statements (continued) 2. ACQUISITION (CONTINUED) The above pro forma unaudited financial information does not purport to be indicative of the results which actually would have occurred had the acquisition been made at the beginning of the respective periods. 3. ACCRUED EXPENSES DECEMBER 31 1995 1994 --------------- (Thousands) Payroll $1,051 $ 769 Taxes 613 663 Interest 207 199 Driver escrows 237 253 Current portion of noncompete agreement 236 - Self insurance claims reserves 704 1,175 -------------- $3,048 $3,059 ==============
4. LONG-TERM DEBT Long-term debt consists of the following: DECEMBER 31 1995 1994 ---------------- (Thousands) Equipment financings (1) $40,365 $32,730 Line of credit with a bank, with interest at the LIBOR rate plus 2 1/2% (8.47% at December 31, 1995) due May 31, 1997 and collateralized by accounts receivable (2) 7,909 5,543 Note payable (3) 466 511 Capitalized lease obligations (4) 4,346 3,780 ---------------- 53,086 42,564 Less current maturities 15,120 10,358 ---------------- $37,966 $32,206 ================
(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 $50.9 million at December 31, 1995. 29 31 P.A.M. Transportation Services, Inc. and Subsidiaries Notes to Consolidated Financial Statements (continued) 4. LONG-TERM DEBT (CONTINUED) Included in equipment financings is a note payable with an outstanding balance of $1.5 million 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 had an interest rate of 9.0% and was paid during 1995. (2) The line of credit agreement with a bank provides for maximum borrowings of $10.0 million and contains various restrictive covenants which require, among other things, maintenance of certain financial and operating ratios, and includes restrictions on dividend payments and certain corporate acts such as mergers and consolidations. At December 31, 1995 drawings under the line of credit amounted to $7.9 million. In addition letters of credit of $700,000 were outstanding against the line of credit. The amount available on the line of credit at December 31, 1995 was $1.4 million. (3) The Company, prior to April 1993, leased certain real estate from the former majority shareholder. Related lease expense totaled $26,600 in 1993. The real estate was purchased by the Company in April 1993, for approximately $600,000, and financed through the former majority shareholder, payable in monthly installments through March 2003, with an interest rate of 8.0%. (4) 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 8.49%, collateralized by equipment with a net book value of $4.5 million and $3.7 million as of December 31, 1995 and December 31, 1994, respectively (See Note 9). Scheduled annual maturities on long-term debt outstanding, excluding capital lease obligations (see Note 9), at December 31, 1995 (in thousands) are: 1996 $14,152 1997 21,080 1998 9,369 1999 3,893 2000 67 Thereafter 179 ------- $48,740 =======
Interest payments of approximately $3.5 million, $2.9 million, and $1.9 million were made during 1995, 1994, and 1993, respectively. 30 32 P.A.M. Transportation Services, Inc. and Subsidiaries Notes to Consolidated Financial Statements (continued) 5. FEDERAL AND STATE 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. Significant components of the Company's deferred tax liabilities and assets are as follows: DECEMBER 31 1995 1994 --------------- (Thousands) Deferred tax liabilities: Property and equipment $ 9,766 $ 7,531 Prepaid expenses 1,072 893 --------------- Total deferred tax liabilities 10,838 8,424 Deferred tax assets: Net operating loss carryover 2,440 3,261 Alternative minimum tax credit 1,672 1,276 Investment credit carryovers 1,095 1,096 Allowance for doubtful accounts 123 91 Vacation reserves 163 111 Self-insurance reserves 285 217 Noncompetition agreement 70 - Revenue recognition 92 86 --------------- Total deferred tax assets 5,940 6,138 --------------- Net deferred tax liabilities $ 4,898 $ 2,286 ===============
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 1995 1994 1993 ---------------------------------- (Thousands) Income tax at the 34% statutory Federal rate $2,750 $2,130 $ 1,050 Nondeductible expenses 39 230 435 Decrease in valuation allowance - (96) (1,265) State income taxes (167) (142) (17) Other (41) (45) 68 ---------------------------------- Federal income taxes 2,581 2,077 271 State income taxes 492 417 50 ---------------------------------- Total income taxes $3,073 $2,494 $ 321 ================================== Effective tax rate 38.0% 40.0% 10.3% ==================================
31 33 P.A.M. Transportation Services, Inc. and Subsidiaries Notes to Consolidated Financial Statements (continued) 5. FEDERAL AND STATE INCOME TAXES (CONTINUED) As of December 31, 1995, the Company has Federal net operating loss and investment tax credit carryovers of approximately $6.4 million and $1.1 million, 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 1994 and 1995 estimated taxable income for regular income tax purposes. The current taxes provided in 1993, 1994 and 1995 result from alternative minimum taxable income which is only partially offset by net operating loss carryovers in 1993 and 1994. All net operating losses for alternative minimum taxes were fully utilized as of December 31, 1994. The Company has alternative minimum tax credits of approximately $1.7 million at December 31, 1995 which carry over indefinitely. 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 $10.4 million) was limited to approximately $500,000 per year. The annual limitation could 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 a result, at December 31, 1995, all net operating loss carryovers are available without annual limitation. This reduction of the valuation allowance in 1993 and 1994 was due to changes in expectations as to realization of net operating losses available to offset future taxable income at December 31, 1993 and 1994. This was due to 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 $400,000, $1.3 million and $100,000 for the years ended December 31, 1995, 1994 and 1993, respectively. 6. 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. 32 34 P.A.M. Transportation Services, Inc. and Subsidiaries Notes to Consolidated Financial Statements (continued) 6. STOCKHOLDERS' EQUITY (CONTINUED) 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 $6.75 as of December 31, 1995. Outstanding incentive stock options and employee stock options at December 31, 1995 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, 1995 must be exercised within five to six years from the date of grant and certain nonqualified options may not be exercised within one year of the date of grant. Transactions in stock options under these plans are summarized as follows:
SHARES UNDER PRICE OPTION RANGE ---------------------- Outstanding at January 1, 1993 25,500 $3.75 Granted 416,500 $2.38-$5.50 Exercised (27,300) $2.38-$5.50 Canceled (26,000) $2.38-$5.50 ---------------------- Outstanding at December 31, 1993 388,700 $2.38-$5.50 Granted 15,000 $4.38-$6.00 Exercised (42,700) $2.38-$6.00 Canceled (8,800) $2.38-$6.00 ---------------------- Outstanding at December 31, 1994 352,200 $2.38-$6.00 Granted 260,000 $5.75-$6.75 Exercised (56,700) $2.38-$6.00 Canceled (23,400) $2.38-$6.75 ---------------------- Outstanding at December 31, 1995 532,100 $2.38-$6.75 ====================== Options exercisable at December 31, 1995 161,400 =========
The majority shareholder holds immediately exercisable stock warrants to purchase an aggregate of 3.1 million shares of the Company's common stock. The warrants are exercisable at $1.50 per share through 1997, when the warrants expire. 33 35 P.A.M. Transportation Services, Inc. and Subsidiaries Notes to Consolidated Financial Statements (continued) 7. EARNINGS PER SHARE Earnings per share assumes the exercise of stock warrants and options to purchase a total of 3.5 million, 3.4 million, and 3.4 million shares of common stock, for 1995, 1994, and 1993, respectively. Under the treasury stock method of computing earnings per share, the number of shares of treasury stock assumed to be 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. The computation of earnings per common share is summarized as follows: 1995 1994 1993 1995 1994 1993 -------------------------- -------------------------- (Primary) (Fully Diluted) (Thousands, except per share data) (Thousands, except per share data) 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) $6,221 $4,780 $3,672 $6,221 $4,780 $4,699 Reduction of borrowings under line of credit - - 1,027 - - - ---------------------------- ---------------------------- $6,221 $4,780 $4,699 $6,221 $4,780 $4,699 ============================ ============================ Adjustments of net income: Actual net income $5,014 $3,740 $2,768 $5,014 $3,740 $2,768 Interest expense reduction - - 71 - - - ---------------------------- ---------------------------- Adjusted net income (A) $5,014 $3,740 $2,839 $5,014 $3,740 $2,768 ============================ ============================ Adjustment of common shares outstanding: Actual average outstanding 4,971 4,921 4,876 4,971 4,921 4,876 Net additional shares issuable 2,690 2,599 2,459 2,713 2,601 2,683 ---------------------------- ---------------------------- Adjusted average common shares outstanding (B) 7,661 7,520 7,335 7,684 7,522 7,559 ============================ ============================ Net income per common share (A) / (B) $ .65 $ .50 $ .39 $ .65 $ .50 $ .37 ============================ ============================
8. RELATED PARTY TRANSACTIONS The Company provides motor carrier services to an affiliate of its majority shareholder. Revenues from these transactions totaled approximately $5.3 million, $4.9 million, and $5.4 million for 1995, 1994, and 1993, respectively. 34 36 P.A.M. Transportation Services, Inc. and Subsidiaries Notes to Consolidated Financial Statements (continued) 8. RELATED PARTY TRANSACTIONS (CONTINUED) During 1993, the Company began leasing certain revenue equipment with an original cost of $2.7 million to an affiliate of the majority shareholder under a direct financing lease arrangement. The Company earned interest income of $200,000, $200,000, and $100,000 in 1995, 1994 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 (in thousands): 1996 $ 789 1997 571 ------ 1,360 Less unearned income 121 ------ Present value of net minimum lease payment 1,239 Less current portion 691 ------ $ 548 ======
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 $6.8 million, $14.1 million, and $9.1 million in 1995, 1994, and 1993, respectively. 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 $200,000, $400,000 and $900,000 in 1995, 1994 and 1993, respectively. Trade accounts payable at December 31, 1995 includes a payable to an affiliate of the majority shareholder of $1.1 million. 35 37 P.A.M. Transportation Services, Inc. and Subsidiaries Notes to Consolidated Financial Statements (continued) 9. LEASES AND COMMITMENTS The Company leases certain revenue equipment under capital leases. The future minimum payments under capital (see Note 4) and operating leases at December 31, 1995 with initial terms of one year or more consisted of the following: CAPITAL OPERATING ------- --------- 1996 $1,293 $195 1997 1,293 178 1998 1,293 - 1999 969 - ----------------- Total minimum lease payments 4,848 373 Amounts representing interest 502 - ----------------- Present value of net minimum lease payments $4,346 $373 =================
Assets held under capitalized leases are included in property, plant and equipment (in thousands) as follows: 1995 1994 -------------- Revenue equipment $5,273 $3,779 Accumulated amortization (782) (44) -------------- $4,491 $3,735 ==============
Capital lease obligations incurred in 1995 and 1994 totaled $1.5 million and $3.8 million, respectively. Lease amortization is included in depreciation expense. Rent expense on nonrelated party operating leases totaled approximately $500,000 for 1995. 10. PROFIT SHARING PLAN P.A.M. Transport, Inc. a subsidiary of the Company, sponsors a profit sharing plan for the benefit of its 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. 36 38 P.A.M. Transportation Services, Inc. and Subsidiaries Notes to Consolidated Financial Statements (continued) 10. PROFIT SHARING PLAN (CONTINUED) P.A.M. Transport, Inc.'s matching contributions to the plan totaled approximately $46,000, $40,000, and $28,000 in 1995, 1994, and 1993, respectively. Choctaw Express, Inc., sponsors a profit sharing plan for the benefit of its eligible employees. The plan qualifies under Section 401(k) of the Internal Revenue Code thereby allowing all eligible employees to make tax deductible contributions to the plan. The plan provides for employer matching contributions of 50% of each participant's voluntary contribution up to 3% of the participant's compensation. Choctaw Express, Inc.'s matching contribution to its plan totaled approximately $14,000 in 1995. The Choctaw Express, Inc. profit sharing plan was merged into the P.A.M. Transport, Inc. profit sharing plan effective December 31, 1995. 11. 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, subject to retention amounts as provided by the specific policy. 12. QUARTERLY RESULTS OF OPERATIONS (UNAUDITED) The tables below presents quarterly financial information for 1995 and 1994: THREE MONTHS ENDED MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31 ----------------------------------------------- (Thousands, except per share data) 1995 Operating revenues $22,084 $23,833 $22,241 $23,437 Operating expenses 19,713 20,421 19,365 20,654 --------------------------------------------- Operating income 2,371 3,412 2,876 2,783 Other expenses - net 740 828 882 905 Income taxes 620 982 758 713 --------------------------------------------- Net income $ 1,011 $ 1,602 $ 1,236 $ 1,165 ============================================= Net income per common share (primary) $ .13 $ .21 $ .16 $ .15 ============================================= Average common and common equivalent shares outstanding 7,648 7,605 7,674 7,708 =============================================
37 39 P.A.M. Transportation Services, Inc. and Subsidiaries Notes to Consolidated Financial Statements (continued) 12. QUARTERLY RESULTS OF OPERATIONS (UNAUDITED) (CONTINUED) THREE MONTHS ENDED MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31 ----------------------------------------------- (Thousands, except per share data) 1994 Operating revenues $18,846 $19,833 $18,508 $18,960 Operating expenses 16,982 17,148 16,251 16,794 --------------------------------------------- Operating income 1,864 2,685 2,257 2,166 Other expenses - net 697 688 680 673 Income taxes 408 799 689 598 --------------------------------------------- Net income $ 759 $ 1,198 $ 888 $ 895 ============================================= Net income per common share (primary) $ .10 $ .16 $ .12 $ .12 ============================================= Average common and common equivalent shares outstanding 7,612 7,493 7,490 7,584 =============================================
13. FAIR VALUES OF FINANCIAL INSTRUMENTS The following methods and assumptions were used by the Company is estimating fair value disclosures for financial instruments: Cash and cash equivalents--The carrying amount reported in the balance sheet for cash and cash equivalents approximates fair value. Direct financing lease--The fair value of the Company's direct financing lease is estimated using discounted cash flow analyses, based on the Company's current incremental rate for similar types of investment arrangements. Long-term debt--The fair values of the Company's long-term debt are estimated using discounted cash flow analyses, based on the Company's current incremental borrowing rates for similar types of borrowing arrangements. Line of credit--The carrying amount for the line of credit approximates fair value. 38 40 P.A.M. Transportation Services, Inc. and Subsidiaries Notes to Consolidated Financial Statements (continued) 13. FAIR VALUES OF FINANCIAL INSTRUMENTS (CONTINUED) The carrying amounts and fair values of the Company's financial instruments at December 31 are as follows (in thousands): CARRYING AMOUNT FAIR VALUE -------------------- 1995 Cash and cash equivalents $ 7,629 $ 7,629 Direct financing lease 1,239 1,283 Long-term debt 45,177 46,257 Line of credit 7,909 7,909
14. SUBSEQUENT EVENT On January 18, 1996, the Company reached an agreement in principle to acquire, for approximately $200,000 cash, Allen Freight Services, Inc., a truckload carrier based in Jacksonville, Florida. The Company anticipates closing the purchase by the end of the first quarter of 1996. The transaction is subject to completion of a due diligence investigation, execution of a definitive agreement, and regulatory approvals. Allen Freight Services, Inc. generated revenues of approximately $16 million in 1995. 39 41 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 23, 1996. 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. -40- 42 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, 1995 and 1994 Consolidated Statements of Income - Years ended December 31, 1995, 1994 and 1993 Consolidated Statements of Shareholders' Equity - Years ended December 31, 1995, 1994 and 1993 Consolidated Statements of Cash Flows - Years ended December 31, 1995, 1994 and 1993 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, 1995, 1994 and 1993 All other schedules are omitted as the required information is inapplicable, or the information is presented in the consolidated financial statements or related notes. -41- 43 (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 Annual Report on Form 10-K for the year ended December 31, 1994 ("1994 Form 10-K"); (vii) the Quarterly Report on Form 10-Q for the quarter ended June 30, 1994 ("6/30/94 10-Q"); (viii) the Quarterly Report on Form 10-Q for the quarter ended June 30, 1995 ("6/30/95 10-Q"); or (ix) 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) *4.3 - First Amendment to Loan Agreement date June 27, 1995 by and among P.A.M. Transport, Inc., First Tennessee Bank National Association and P.A.M. Transportation Services, Inc., together with Promissory Note in the principal amount of $2,500,000 (Exh. 4.1.1, 6/30/95 10-Q)
-42- 44 *4.3.1 - First Amendment to Security Agreement dated June 28, 1995 by and between P.A.M. Transport, Inc. and First Tennessee Bank National Association (Exh. 4.2.2, 6/30/95 10-Q) *4.3.2 - Security Agreement dated June 27, 1995 by and between Choctaw Express, Inc. and First Tennessee Bank National Association (Exh. 4.1.3, 6/30/95 10-Q) *4.3.3 - Guaranty Agreement of P.A.M. Transportation Services, Inc. dated June 27, 1995 in favor of First Tennessee Bank National Association respecting $10,000,000 line of credit (Exh. 4.1.4, 6/30/95 10-Q) - 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) *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 January 1, 1995 *10.4 - Incentive Compensation Plan of Registrant adopted January 10, 1995 for fiscal years 1994 and 1995 (Exh. 10.4, 1994 10-K). *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
(b) Reports on Form 8-K. No reports on Form 8-K were filed during the fourth quarter ended December 31, 1995. -43- 45 SCHEDULE II P.A.M. TRANSPORTATION SERVICES, INC. VALUATION AND QUALIFYING ACCOUNTS Years Ended December 31, 1995, 1994 and 1993
ADDITIONS --------- Charged to Balance at Charged to Other Balance Beginning Costs and Accounts Deductions at End Description of Period Expenses (Describe) (Describe) of Period ----------- ---------- ---------- ---------- --------- --------- 1995 - Allowance for doubtful accounts $239,343 $88,692 $-- $4,148(A) $323,887 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
Note A - Accounts written off. 46 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 25, 1996 By: /s/ Robert W. Weaver ------------------------------------------------ ROBERT W. WEAVER President and Chief Executive Officer (principal executive officer) Dated: March 25, 1996 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 25, 1996 By: /s/ Robert W. Weaver --------------------------------- ROBERT W. WEAVER, President and Chief Executive Officer, Director Dated: March 25, 1996 By: /s/ Matthew T. Moroun --------------------------------- MATTHEW T. MOROUN, Director Dated: March 25, 1996 By: /s/ William E. Morrissey --------------------------------- WILLIAM E. MORRISSEY, Director Dated: March 25, 1996 By: --------------------------------- BERYL L. SHROYER, Director Dated: March 25, 1996 By: /s/ Daniel C. Sullivan --------------------------------- DANIEL C. SULLIVAN, Director Dated: March 25, 1996 By: /s/ Charles F. Wilkins --------------------------------- CHARLES F. WILKINS, Director EX-10.3 2 EMPLOYMENT AGREEMENT 1 EXHIBIT 10.3 EMPLOYMENT AGREEMENT THIS AGREEMENT made effective as of the 1st day of January, 1995 by and between P.A.M. TRANSPORTATION SERVICES, INC., a Delaware corporation (hereinafter referred to as "P.A.M." or "COMPANY") and ROBERT W. WEAVER (hereinafter referred to as "EMPLOYEE"). RECITALS: The following is a recital of facts underlying this Agreement and it replaces, survives, and eliminates all prior agreements and is a continuation of employment. P.A.M. is a holding company which owns various subsidiary corporations which operate as motor common carriers and desires to encourage EMPLOYEE to use his best efforts to further develop such business. Hereinafter, P.A.M. and its subsidiaries (whether or not now existing) shall be referred to collectively as "COMPANY". EMPLOYEE is the President and Chief Executive Officer of P.A.M. and desires to continue to perform employment services as an employee and fiduciary of P.A.M. NOW, THEREFORE, in consideration of the mutual covenants and agreement of the parties set forth herein, the parties hereto hereby agree as follows: 1. EMPLOYMENT OF EMPLOYEE. P.A.M. hereby continues to employ EMPLOYEE and EMPLOYEE hereby continues in the same employment of P.A.M. for the business conducted by COMPANY for a term commencing on January 1, 1995, and ending at the close of business on June 30, 1998. If EMPLOYEE is terminated due to medical disability, EMPLOYEE'S compensation shall be continued for twelve (12) months thereafter from the determination of disability. 2. DUTIES OF EMPLOYEE. EMPLOYEE shall make himself available to serve as President and Chief Executive Officer of P.A.M. and, at the request of the Board of Directors, as an officer of its various subsidiaries, with such specific duties, responsibilities and authority as may from time to time be assigned to him by the Board of Directors of P.A.M. which may include, but shall not necessarily be limited to, overall responsibility for operation of the business of COMPANY in a manner which will maximize COMPANY'S profits. EMPLOYEE shall devote all of his time, attention, knowledge and skills solely to the business of COMPANY and EMPLOYEE shall obey and comply with all rules, regulations and orders issued from time to time by the P.A.M. Board of Directors. COMPANY shall be entitled to all of the benefits, profits, or other issues arising from or incident to all work, services, and advice of EMPLOYEE. EMPLOYEE shall thus devote his full attention to the operation of the COMPANY and shall not be engaged in any other business or operation that in any way would inhibit EMPLOYEE from devoting his full attention to the operations of the COMPANY. Notwithstanding the agreement that the EMPLOYEE shall devote his full attention to the operations of the COMPANY, EMPLOYEE shall be allowed to pursue other business interests unrelated to the transportation industry as long as the EMPLOYEE'S participation in the unrelated business does not inhibit the EMPLOYEE'S ability to devote his full attention to the operation of the COMPANY. 3. BASE COMPENSATION AND BONUS. P.A.M. shall pay EMPLOYEE as base compensation for all services to be rendered by EMPLOYEE compensation of $245,000 for the 1995 calendar year, $265,000 for the 1996 calendar year, $280,000 for the 1997 calendar year, and $145,000 for the months of January through June of 1998. Each base compensation amount is respective and specific to the time period of which the EMPLOYEE'S service 2 is rendered. Each amount of base compensation for the expressly mentioned time periods is payable in equal bi-weekly payments. Any increase of EMPLOYEE'S base compensation shall be at the sole discretion of the Board of Directors of P.A.M. P.A.M. shall also provide EMPLOYEE with the use of a COMPANY car, as approved by the P.A.M. Board of Directors, with full reimbursements to EMPLOYEE for business use upon the submission to COMPANY of proper documentation and shall be entitled to the fringe benefit package available to executive employees of P.A.M. EMPLOYEE shall be entitled to all bonuses or bonus programs of which he participated in prior to entering into this Agreement. All future and additional forms and amounts of bonus compensation shall be determined at the full discretion of P.A.M. Board of Directors. 4. CONFIDENTIALITY. EMPLOYEE shall not at any time or in any manner, directly or indirectly, divulge, disclose or communicate to any firm, person, corporation or entity, in any manner whatsoever, any information concerning or relating to the business of COMPANY, including without limitation, COMPANY'S customer list, or the methods used by COMPANY in conducting business or any matter relating to the business of COMPANY, including without limitation, the prices it obtains or has obtained from the sale of its service, its manner of operation, its plans, processes or other data, without regard to whether all of the foregoing matters will be deemed confidential, material or important. Anything to the contrary notwithstanding, the parties hereto stipulate that any and all knowledge, data and information gathered by EMPLOYEE through this Agreement, his employment with P.A.M. and the operation of the business of COMPANY is deemed important, material and confidential, and gravely affects the effective and successful conduct of the business of COMPANY and COMPANY'S good will and that any breach of the terms of this Paragraph 4 shall be deemed a material breach of this Agreement. This Paragraph 4 shall continue in full force and effect for the lesser of the three (3) years after the termination or earlier cancellation of this Agreement or the longest period of time found to be enforceable by a court of competent jurisdiction and venue as defined herein. In recognition of the difficulty of determining damages for violation of this covenant, COMPANY shall be entitled to injunctive relief for the violation hereof, in addition to such other relief as may be available to it at law, in such other relief as may be available to it at law, in equity, or under this Agreement (without the necessity of posting a bond). All reasonable costs of any nature whatsoever incurred by COMPANY in attempting to enforce this Paragraph 4, including without limitation, attorneys fees, shall be paid by EMPLOYEE, provided that COMPANY shall prevail in such proceedings or litigation. If EMPLOYEE shall prevail in such proceeding or litigations, then COMPANY shall pay all reasonable costs of any nature whatsoever incurred by EMPLOYEE in defending the proceeding or litigation, including without limitation, attorneys fees. Any such attorneys fees shall be calculated on a time and charges basis. If any provisions hereunder shall be determined to be contrary to law, the remainder of this provision shall constitute the agreement between the parties. This Paragraph shall not be deemed to prevent EMPLOYEE from making such public disclosures as a person in his position is reputed to do from time to time. 5. RESTRICTION ON COMPETITION. As a material part of the consideration of this Agreement, EMPLOYEE agrees not to compete with COMPANY during his employment and for a one (1) year period following the period of EMPLOYEE'S employment with COMPANY in the geographic and marketing areas serviced and to be serviced by COMPANY. EMPLOYEE shall not directly or indirectly own, manage, operate, or be connected as an officer, employee, partner, director, shareholder, adviser or financially or otherwise, anyone else in the conduct of any business or businesses which compete with any business conducted by the COMPANY. This covenant is restricted geographically to (i) the United States, or if found to be unenforceable by a final, unappealable order of a court of competent jurisdiction and venue as defined herein (hereinafter referred to an "Unenforceable"), (ii) the states in which COMPANY owns or leases and/or uses and/or has plans for using a business facility at any time during the term of EMPLOYEE'S employment of if Unenforceable, (iii) within a one hundred (100) mile radius of such facilities or if Unenforceable, (iv) the largest geographic area such court will allow. This covenant also includes all customers of COMPANY regardless of their geographic location. In recognition of the 2 3 difficulty of determining damages for violation of this covenant, COMPANY shall be entitled to injunctive relief for the violation hereof, in addition to such other relief as may be available to it at law, in equity, or under this Agreement (without the necessity of posting a bond). All reasonable costs of any nature whatsoever incurred by COMPANY in attempting to enforce this Paragraph 5, including without limitation, attorneys fees, shall be paid by EMPLOYEE, provided that COMPANY shall prevail in such proceedings or litigation. If EMPLOYEE shall prevail in such proceeding or litigation, then COMPANY shall pay all reasonable costs of any nature whatsoever incurred by EMPLOYEE in defending the proceeding or litigation, including without limitation, attorneys fees. Any such attorneys fees shall be calculated on a time and charges basis. If any provision hereunder shall be deemed to be contrary to law, the remainder of this provision shall constitute the agreement between the parties. Anything to the contrary notwithstanding, this Paragraph 5 shall survive the termination or earlier cancellation of this Agreement. EMPLOYEE can own up to five percent (5%) of the stock of publicly traded transportation companies as a passive investor but shall take no part in the management or direction of such companies. 6. REMEDIES UPON DEFAULT. 6.1 DEFAULT BY EMPLOYEE. EMPLOYEE acknowledges that his loyal, faithful and effective performance of the employment provided for herein, is of vital importance to the success of the COMPANY, and that EMPLOYEE'S commitment to perform for the entire term of this Agreement is an essential inducement to and condition of COMPANY'S employment of EMPLOYEE, and that premature termination, abandonment or failure of performance by EMPLOYEE would in all probability result in substantial damages to the COMPANY, and that EMPLOYEE possesses peculiar knowledge and expertise important to the success of the COMPANY. Accordingly, EMPLOYEE expressly warrants and represents to and covenants with COMPANY that EMPLOYEE shall not voluntarily terminate his employment with COMPANY or otherwise abandon the full and faithful performance of his duties of employment prior to the expiration of the term of this Agreement. In the event that EMPLOYEE shall breach any covenant set forth in this Paragraph 6.1, COMPANY shall have the right to pursue and enforce any remedies available to COMPANY by law, at equity or pursuant to this Agreement, including without limitation, specific performance as a result of such breach. COMPANY may commence a lawsuit for enforcement of its rights hereunder seeking damages without waiving any other rights it may possess. 6.2 DEFAULT BY COMPANY. In the event COMPANY shall terminate the employment of EMPLOYEE prior to the expiration of the term of this Agreement for reasons other than good cause, COMPANY'S liability to EMPLOYEE shall be limited to an amount equal to one-hundred percent (100%) of the EMPLOYEE'S compensation as set forth in paragraph 3 herein for the remainder of the contract term in complete discharge of any further obligations COMPANY may have to EMPLOYEE by law, in equity or under this Agreement. If such termination is for good cause, COMPANY shall pay to EMPLOYEE an amount equal to one month of EMPLOYEE'S annual compensation and shall not be liable to EMPLOYEE for any further damages or severance compensation whatsoever. COMPANY shall be deemed to have terminated EMPLOYEE without good cause if COMPANY conditions EMPLOYEE'S further employment upon charging his residence from northwest Arkansas. 7. EXCLUSIVE CONSULTING CONTRACT. Upon termination of EMPLOYEE'S employment with COMPANY for any reason whatsoever, COMPANY shall have the right, at its option, to retain EMPLOYEE as an independent consultant under an exclusive consulting contract, for the performance by EMPLOYEE of such duties as may be reasonably assigned by the Board of Directors of P.A.M. consistent with the position of an independent consultant, and EMPLOYEE shall be bound by the restrictions on competition set forth in Paragraphs 4 and 5 hereof. EMPLOYEE shall be entitled as full compensation for his services under such consulting contract to an annual salary equal to fifty percent (50%) of his average total annual compensation hereunder, averaged over the term of his employment with COMPANY from and after January 1, 1995, payable in equal monthly payments. The specific terms regarding the actual 3 4 services to be performed, length of service and other contractual terms not set forth in this paragraph, shall be mutually agreeable to the EMPLOYEE and the COMPANY. 8. OPTION TO EXTEND. COMPANY shall have the right to extend this Agreement for an additional one (1) year beyond termination of this Agreement. The EMPLOYEE'S annual salary for the one year option period shall be three hundred thousand dollars ($300,000) payable in equal bi-weekly payments. COMPANY must elect to exercise this extension right between January 1, 1998 and February 28, 1998. 9. MISCELLANEOUS 9.1 NON-WAIVER. No covenant or condition of this Agreement may be waived except by the written consent of the COMPANY. Forbearance or indulgence by COMPANY in any regard whatsoever shall not constitute a waiver of the covenants or conditions to be performed by EMPLOYEE to which the same may apply, and, until complete performance by EMPLOYEE of said covenant or condition, COMPANY shall be entitled to invoke any remedy available COMPANY under this Agreement or by law or in equity, despite said forbearance or indulgence. 9.2 MODIFICATION OF AGREEMENT. This instrument constitutes the entire agreement between P.A.M. and EMPLOYEE and no modification, extension, waiver, renewal or termination of the Agreement or any of the provisions hereof may be binding upon either party unless made in writing and signed by each of the parties. No modification of this Agreement may be signed by COMPANY except upon approval by the P.A.M. Board of Directors. 9.3 NOTICES. Service of all notices under this Agreement shall be sufficient if given personally or mailed by certified mail, return receipt requested, with postage prepaid, addressed to the party involved at the address set forth below or at such other address as such party shall provide in writing from time to time. Any notice mailed to such address shall be effective when deposited in the United States mail. COMPANY: Matthew Moroun Daniel Sullivan c/o 12225 Stephens Sullivan & Hincks Warren, Michigan 48089 122 West 22nd Street Suite 350 Oak Brook, Illinois 60521 EMPLOYEE: Robert W. Weaver 4470 Bridgewater Lane Fayetteville, AR 72703 9.4 PARAGRAPH HEADINGS. The titles to the paragraphs of this Agreement are for convenience of the parties only and shall not affect in any way the meaning or construction of any paragraph of this Agreement. 9.5. SEVERABILITY. All agreements, terms and covenants contained herein are severable 4 5 and in the event any of them, with the exception of those contained in Paragraph 1, shall be held to be invalid by a court of competent jurisdiction and venue as defined herein, this Agreement shall be interpreted as if such invalid agreements, terms or covenants were not contained herein unless within thirty (30) days of the issuance of a final and unappealable Order of a Court of competent jurisdiction and venue, COMPANY shall have rendered to EMPLOYEE in the manner provided for notices hereunder, its election to cancel this Agreement. 9.6 TIME OF THE ESSENCE. Time is to be deemed of the essence of this Agreement and each and all of its provisions. 9.7 CONSTRUCTION. This Agreement shall be construed according to the laws of the State of Arkansas and exclusive jurisdiction and venue shall be deemed to lie within the Circuit or Chancery Courts of Washington County, Arkansas. 10. BINDING EFFECTS. This Agreement shall, upon approval by the Board of Directors of P.A.M. by corporate resolution, be binding upon the parties hereto, their successors, assigns, heirs, estates or legal representatives and shall insure to the benefit of COMPANY and its successors and assigns. Each subsidiary of P.A.M., of whether presently existing, shall be a third party beneficiary of this Agreement. IN WITNESS WHEREOF, the parties hereto have hereunto caused this Agreement to be executed and delivered as of the date first above written. P.A.M. TRANSPORTATION SERVICES, INC., a Delaware corporation BY: /s/ Matthew T. Moroun ---------------------------------- Matthew T. Moroun Its: Director ---------------------------------- "P.A.M." and BY: /s/ W. Clif Lawson ----------------------------------- W. Clif Lawson Executive Vice President and Chief Operating Officer /s/ Robert W. Weaver ---------------------------------------- ROBERT W. WEAVER, EMPLOYEE WITNESSES: /s/ June Erisman - --------------------------------- /s/ Laura Rascchacki - --------------------------------- 5 EX-21.1 3 SUBDIDIARIES OF REGISTRANT 1 EXHIBIT 21.1 SUBSIDIARIES OF REGISTRANT P.A.M. Transport, Inc. (Arkansas Corporation) P.A.M. Special Services, Inc. (Arkansas Corporation) P.A.M. Dedicated Services, Inc. (Ohio Corporation) T.T.X., Inc. (Texas Corporation) Choctaw Express, Inc. (Oklahoma Corporation) Choctaw Brokerage, Inc. (Oklahoma Corporation) Allen Freight Services, Inc. (Missouri Corporation) EX-23.1 4 CONSENT OF ERNST AND YOUNG 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 14, 1996, with respect to the consolidated financial statements and schedule of P.A.M. Transportation Services, Inc. included in the Annual Report (Form 10-K) for the year ended December 31, 1995. ERNST & YOUNG LLP Little Rock, Arkansas March 28, 1996 EX-27 5 FINANCIAL DATA SCHEDULE
5 1,000 YEAR DEC-31-1995 JAN-01-1995 DEC-31-1995 7,429 0 13,148 324 0 26,271 78,829 21,540 86,808 25,306 37,966 0 0 50 18,182 86,808 91,595 91,595 80,153 80,153 166 89 3,521 8,087 3,073 5,014 0 0 0 5,014 .65 .65
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