UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-Q
ý
QUARTERLY REPORT
PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF
1934
For the
quarterly period ended June 30, 2009
or
o
TRANSITION REPORT
PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF
1934
For the
transition period from __________to__________
Commission
File Number: 0-15057
P.A.M. TRANSPORTATION
SERVICES, INC.
(Exact
name of registrant as specified in its charter)
|
Delaware
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71-0633135
|
|
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(State
or other jurisdiction of incorporation or organization)
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(I.R.S.
Employer Identification no.)
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297 West Henri De Tonti,
Tontitown, Arkansas 72770
(Address
of principal executive offices) (Zip Code)
Registrant’s
telephone number, including area code:
(479)
361-9111
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N/A
|
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(Former
name, former address and former fiscal year, if changed since last
report)
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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 the filing requirements for
the past 90 days.
|
Yes
ý
|
No
o
|
Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405
of this chapter) during the preceding 12 months (or for such shorter period
that the registrant was required to submit and post such files).
|
Yes
o
|
No
o
|
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
the definitions of “large accelerated filer,” “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act.
|
Large
accelerated filer
o
|
Accelerated
filer
ý
|
|||
|
Non-accelerated
filer
o
(Do not check if
a smaller reporting company)
|
Smaller
reporting company
o
|
|||
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).
|
Yes
o
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No
ý
|
Indicate
the number of shares outstanding of each of the issuer’s classes of common
stock, as of the latest practicable date:
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Class
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Outstanding
at July 29, 2009
|
|
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Common
Stock, $.01 Par Value
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9,411,607
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Form
10-Q
For The
Quarter Ended June 30, 2009
Table of
Contents
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Part
I. Financial Information
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|
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Item
1.
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Financial
Statements.
|
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Item
2.
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Item
3.
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Item
4.
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Part
II. Other Information
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Item
1.
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Item
4.
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Item
6.
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PART I.
FINANCIAL INFORMATION
Item 1. Financial
Statements.
Notes
to Condensed Consolidated Financial Statements (unaudited)
June
30, 2009
NOTE A: BASIS OF
PRESENTATION
The
accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In management’s opinion, all adjustments (consisting of
normal recurring accruals) necessary for a fair presentation have been included.
Operating results for the six-month period ended June 30, 2009 are not
necessarily indicative of the results that may be expected for the year ending
December 31, 2009. For further information, refer to the consolidated financial
statements and the footnotes thereto included in the Company’s annual report on
Form 10-K for the year ended December 31, 2008.
NOTE B: RECENT
ACCOUNTING PRONOUNCEMENTS
In
September 2006, the Financial Accounting Standards Board (“FASB”) issued
Statement of Financial Accounting Standards No. 157,
Fair Value Measurements
(“SFAS No. 157”). SFAS No. 157 defines fair value, establishes a framework
for measuring fair value and enhances disclosures about fair value measurements
required under other accounting pronouncements, but does not change existing
guidance as to whether or not an instrument is carried at fair value. In
February 2008, the FASB issued FSP FAS 157-2,
Effective Date of FASB Statement
No. 157,
which delayed the implementation of the provisions of SFAS
No. 157 with regard to non-financial assets and liabilities that are not
carried at fair value on a recurring basis in financial statements. On
January 1, 2009, the Company adopted SFAS No. 157, as it relates to
nonfinancial assets and nonfinancial liabilities that are not recognized or
disclosed at fair value in the financial statements on at least an annual basis.
The adoption of SFAS No. 157, as it relates to nonfinancial assets and
nonfinancial liabilities did not have a material impact on the Company’s
financial condition, results of operations, or cash flow. See Note J for
additional discussion on fair value measurements.
In
April 2009, the FASB issued FASB Staff Position (“FSP”) FAS 157-4,
Determining Fair Value when the
Volume and Level of Activity for the Asset or Liability have Significantly
Decreased and Identifying Transactions that are not Orderly
(“FSP
157-4”), which is effective for the Company for the quarterly period beginning
April 1, 2009. FSP 157-4 affirms that the objective of fair value when the
market for an asset is not active is the price that would be received to sell an
asset or paid to transfer a liability in an orderly transaction between market
participants at the measurement date under current market conditions. The FSP
provides guidance for estimating fair value when the volume and level of market
activity for an asset or liability have significantly decreased and determining
whether a transaction was orderly. This FSP applies to all fair value
measurements when appropriate. The adoption of FAS 157-4 did not have a material
impact on the Company’s financial condition, results of operations, or cash
flow.
In
April 2009, the FASB issued FSP FAS 115-2 and FAS 124-2,
Recognition and Presentation of
Other-Than-Temporary Impairments
(“FSP 115-2”), which is effective for
the Company for the quarterly period beginning April 1, 2009. FSP 115-2
amends existing guidance for determining whether an other-than-temporary
impairment of debt securities has occurred. Among other changes, the FASB
replaced the existing requirement that an entity’s management assert it has both
the intent and ability to hold an impaired security until recovery with a
requirement that management assert (a) it does not have the intent to sell
the security, and (b) it is more likely than not it will not have to sell
the security before recovery of its cost basis. The adoption of FAS 115-2 did
not have a material impact on the Company’s financial condition, results of
operations, or cash flow.
In
April 2009, the FASB issued FSP FAS 107-1 and APB 28-1,
Interim Disclosures about Fair Value
of Financial Instruments
(“FSP 107-1”), which is effective for the
Company for the quarterly period beginning April 1, 2009. FSP 107-1
requires an entity to provide the annual disclosures required by FASB Financial
Accounting Standards No. 107,
Disclosures about Fair Value of
Financial Instruments
, in its interim financial statements. The adoption
of FSP 107-1 did not have a material impact on the Company’s financial
condition, results of operations, or cash flow.
In
April 2009, the FASB issued SFAS No. 165,
Subsequent Events
(“SFAS No.
165”). SFAS No. 165 establishes general standards of accounting for and
disclosure of events that occur after the balance sheet date but before
financial statements are issued or available to be issued. The adoption of SFAS
No. 165 did not have a material impact on the Company’s financial condition,
results of operations, or cash flow.
In June
2009, the Financial Accounting Standards Board (“FASB”) issued Statement of
Financial Accounting Standards No. 168,
FASB Accounting Standards
Codification and the Hierarchy of Generally Accepted Accounting Principles
(“SFAS No. 168”). SFAS No. 168 replaces SFAS No. 162,
The Hierarchy of Generally Accepted
Accounting Principles,
and establishes the FASB Accounting Standards
Codification (“Codification”) as the single source of authoritative U.S.
generally accepted accounting principles (“U.S. GAAP”) recognized by the FASB to
be applied by nongovernmental entities. Rules and interpretive releases of the
Securities and Exchange Commission (“SEC”) under authority of federal securities
laws are also sources of authoritative U.S. GAAP for SEC registrants. SFAS No.
168 and the Codification are effective for financial statements issued for
interim and annual periods ending after September 15, 2009. When effective, the
Codification will supersede all existing non-SEC accounting and reporting
standards. All other non-grandfathered non-SEC accounting literature not
included in the Codification will become non-authoritative. Following the
issuance of SFAS No. 168, the FASB will not issue new standards in the form of
Statements, FASB Staff Positions, or Emerging Issues Task Force Abstracts.
Instead, the FASB will issue Accounting Standards Updates, which will serve only
to: (a) update the Codification; (b) provide background information about the
guidance; and (c) provide the bases for conclusions on the change(s) in the
Codification. The adoption of SFAS No. 168 is not expected to have a material
effect on the Company’s financial statements.
NOTE
C: MARKETABLE EQUITY SECURITIES
The
Company accounts for its marketable securities in accordance with Statement of
Financial Accounting Standards No. 115,
Accounting for Certain Investments
in Debt and Equity Securities
(“SFAS No. 115”). SFAS No. 115 requires
companies to classify their investments as trading, available-for-sale or
held-to-maturity. The Company’s investments in marketable securities are
classified as either trading or available-for-sale and consist of equity
securities. Management determines the appropriate classification of these
securities at the time of purchase and re-evaluates such designation as of each
balance sheet date. Sales of securities during the first six months of 2009 were
insignificant.
Marketable
equity securities are carried at fair value, with the unrealized gains and
losses, net of tax, included as a component of accumulated other comprehensive
income in shareholders’ equity. Realized gains and losses, declines in value
judged to be other-than-temporary on available-for-sale securities, and
increases or decreases in value on trading securities, if any, are included in
the determination of net income. A quarterly evaluation is performed in order to
judge whether declines in value below cost should be considered temporary and
when losses are deemed to be other-than-temporary. Several factors are
considered in this evaluation process including the severity and duration of the
decline in value, the financial condition and near-term outlook for the specific
issuer and the Company’s ability to hold the securities. There were no
securities in a cumulative loss position for twelve months or longer at June 30,
2009. However, based on the severity of declines in certain securities during
the first six months of 2009 and the fact that the Company has no evidence that
indicates these securities will regain a value equal to or greater than their
cost basis, their declines in value have been determined to be
other-than-temporary. As a result of this evaluation, the Company recorded an
impairment charge of approximately $109,000 in non-operating expense in its
income statement for the quarter ending June 30, 2009. These declines came
primarily from our equity securities in the pharmaceutical, financial, and
automotive sectors. The cost of securities sold is based on the specific
identification method and interest and dividends on securities are included in
non-operating income.
As of
June 30, 2009, equity securities classified as available-for-sale and equity
securities classified as trading had a cost basis of approximately $9,945,000
and $505,000, respectively, and fair market values of approximately $11,991,000
and $657,000, respectively. For the six months ended June 30, 2009, the Company
had net unrealized gains in market value on securities classified as
available-for-sale of approximately $666,000, net of deferred income taxes. Also
during this period, the Company recognized gains on trading securities of
approximately $129,000, net of deferred income taxes. During the quarter ending
June 30, 2009, the Company recognized gains on trading securities of
approximately $115,000, net of deferred income taxes. As of June 30, 2009, the
Company’s marketable securities that are classified as available-for-sale had
gross unrealized gains of approximately $2,990,000 and gross unrealized losses
of approximately $944,000. The Company’s marketable securities that are
classified as trading had gross recognized gains of approximately $155,000 and
gross recognized losses of approximately $3,000. As of June 30, 2009, the total
net unrealized gain, net of deferred income taxes, in accumulated other
comprehensive income was approximately $1,277,000.
The
following table shows the Company’s investments’ approximate gross unrealized
losses and fair value at June 30, 2009 and December 31, 2008. These investments
consist of equity securities. As of June 30, 2009 and December 31, 2008 there
were no investments that had been in a continuous unrealized loss position for
twelve months or longer.
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June
30, 2009
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December
31, 2008
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|||||||||||||||
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(in
thousands)
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||||||||||||||||
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Fair
Value
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Unrealized
Losses
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Fair
Value
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Unrealized
Losses
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|||||||||||||
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Equity
securities – Available for sale
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$ | 4,370 | $ | 944 | $ | 4,775 | $ | 1,237 | ||||||||
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Equity
securities – Trading
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43 | 3 | 372 | 67 | ||||||||||||
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Totals
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$ | 4,413 | $ | 947 | $ | 5,147 | $ | 1,304 | ||||||||
The
market value of the Company’s equity securities are used as collateral against
any outstanding margin account borrowings. As of June 30, 2009, the Company had
outstanding borrowings of approximately $5.0 million under its margin account
which were used for the purchase of marketable equity securities and as a source
of short-term liquidity.
NOTE D: STOCK
BASED COMPENSATION
The
Company maintains a stock option plan under which incentive stock options and
nonqualified stock options may be granted. On March 2, 2006, the Company’s Board
of Director’s adopted, and shareholders later approved, the 2006 Stock Option
Plan (the “2006 Plan”). Under the 2006 Plan 750,000 shares are reserved for the
issuance of stock options to directors, officers, key employees and others. The
option exercise price under the 2006 Plan is the fair market value of the stock
on the date the option is granted. The fair market value is determined by the
average of the highest and lowest sales prices for a share of the Company’s
common stock, on its primary exchange, on the same date that the option is
granted. During the first six months of 2009, options for 16,000 shares were
issued under the 2006 Plan at an option exercise price of $3.84 per share, and
at June 30, 2009, 686,000 shares were available for granting future
options.
Outstanding
incentive stock options at June 30, 2009, must be exercised within six years
from the date of grant and vest in increments of 20% each year. Outstanding
nonqualified stock options at June 30, 2009, must be exercised within five to
ten years from the date of grant.
In August
2002, the Company granted performance-based variable stock options for 300,000
shares to certain key executives. The exercise price for these awards was fixed
at the grant date and was equal to the fair market value of the stock on that
date. On the date of grant, options for 60,000 shares vested immediately and
vesting of the options for the remaining 240,000 shares was scheduled to occur
on a straight-line basis each year from March 15, 2003 through March 15, 2008
upon meeting performance criteria. In order to meet the performance criteria,
net income for each fiscal year must have been at least equal to 1.05 times net
income for the preceding fiscal year, unless net income for the preceding fiscal
year was zero or negative, in which case net income for the fiscal year must
have been at least 90% of net income for the most recent year with positive
income. As of June 30, 2009, options for 180,000 shares had vested under this
300,000 share option grant (including those options which immediately vested
upon grant) while options for 120,000 shares have been forfeited as the
performance criteria were not met for the fiscal years 2003, 2004 and
2007.
The total
fair value of options vested during the first six months of 2009 was
approximately $29,000. As of June 30, 2009, the Company did not have any
stock-based compensation plans with unrecognized stock-based compensation
expense. Total pre-tax stock-based compensation expense, recognized in Salaries,
wages and benefits during the first six months of 2009 was approximately $29,000
which resulted from the annual grant of an option for 2,000 shares to each
non-employee director during the first quarter of 2009. Total pre-tax
stock-based compensation expense, recognized in Salaries, wages and benefits was
approximately $91,000 during the first six months of 2008 and includes
approximately $80,000 recognized as a result of the annual grant of an option
for 2,000 shares to each non-employee director during the first quarter of 2008.
The recognition of stock-based compensation expense decreased diluted and basic
earnings per common share by approximately $0.01 during the six months ending
June 30, 2009 but did not have a recognizable impact on diluted or basic
earnings per share reported for the second quarter ending June 30, 2009. The
recognition of stock-based compensation expense decreased diluted and basic
earnings per common share by approximately $0.01 during the six months ending
June 30, 2008 but did not have a recognizable impact on diluted or basic
earnings per share reported for the second quarter ending June 30, 2008. The
weighted average grant date fair value of options granted during the first six
months of 2009 and 2008 was $1.84 per share and $4.98 per share,
respectively.
The fair
value of the Company’s employee stock options was estimated at the date of grant
using a Black-Scholes-Merton (“BSM”) option-pricing model using the following
assumptions:
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Six
Months Ended
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|||
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June
30,
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|||
|
2009
|
2008
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||
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Dividend
yield
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0%
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0%
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|
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Volatility
range
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58.07%
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36.67%
- 38.54%
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|
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Risk-free
rate range
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1.57%
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2.50%
- 4.38%
|
|
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Expected
life
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4.4
years
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4.3
years - 5 years
|
|
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Fair
value of options
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$1.84
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$4.98
- $8.89
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The
Company has never paid any cash dividends on its common stock and we do not
anticipate paying any cash dividends in the foreseeable future. The estimated
volatility is based on the historical volatility of our stock. The risk free
rate for the periods within the expected life of the option is based on the U.S.
Treasury yield curve in effect at the time of grant. The expected life of the
options was calculated based on the historical exercise
behavior.
Information
related to option activity for the three months ended June 30, 2009 is as
follows:
The
number, weighted average exercise price and weighted average remaining
contractual life of options outstanding as of June 30, 2009 and the number and
weighted average exercise price of options exercisable as of June 30, 2009 are
as follows:
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Exercise
Price
|
Shares
Under Outstanding Options
|
Weighted-Average
Remaining Contractual Term
|
Shares
Under Exercisable Options
|
|||
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(in
years)
|
||||||
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$3.84
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16,000
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4.7
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16,000
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|||
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$14.98
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16,000
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3.7
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16,000
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|||
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$18.27
|
10,000
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0.7
|
10,000
|
|||
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$19.88
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12,500
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3.3
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12,500
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|||
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$22.92
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14,000
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2.7
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14,000
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|||
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$23.22
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180,000
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3.2
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180,000
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|||
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$26.73
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14,000
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1.9
|
14,000
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|||
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262,500
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3.2
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262,500
|
There
were no option exercises during the six months ended June 30, 2009 or 2008. The
Company issues new shares upon option exercise.
NOTE E: SEGMENT
INFORMATION
The
Company considers the guidance provided by Statement of Financial Accounting
Standards No. 131,
Disclosures
about Segments of an Enterprise and Related Information
(“SFAS No. 131”),
in its identification of operating segments. The Company has determined that it
has a total of eight operating segments whose primary operations can be
characterized as either Truckload Services or Brokerage and Logistics Services,
however in accordance with the aggregation criteria provided by SFAS No. 131 the
Company has determined that the operations of the eight operating segments can
be aggregated into a single reporting segment, motor carrier operations.
Truckload Services revenues and Brokerage and Logistics Services revenues, each
before fuel surcharges, were as follows:
|
Three
Months Ended June 30,
|
Six
Months Ended June 30,
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|||||||||||||||||||||||||||||||
|
2009
|
2008
|
2009
|
2008
|
|||||||||||||||||||||||||||||
|
Amount
|
%
|
Amount
|
%
|
Amount
|
%
|
Amount
|
%
|
|||||||||||||||||||||||||
|
(in
thousands, except percentage data)
|
||||||||||||||||||||||||||||||||
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Truckload
Services revenue
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$ | 53,255 | 85.4 | $ | 75,129 | 88.7 | $ | 104,904 | 85.5 | $ | 153,485 | 89.7 | ||||||||||||||||||||
|
Brokerage
and Logistics
Services
revenue
|
9,112 | 14.6 | 9,551 | 11.3 | 17,733 | 14.5 | 17,640 | 10.3 | ||||||||||||||||||||||||
|
Total
revenues
|
$ | 62,367 | 100.0 | $ | 84,680 | 100.0 | $ | 122,637 | 100.0 | $ | 171,125 | 100.0 | ||||||||||||||||||||
NOTE F: TREASURY
STOCK
The
Company accounts for Treasury stock using the cost method and as of June 30,
2009, 1,958,600 shares were held in the treasury at an aggregate cost of
approximately $29,127,000.
NOTE
G: COMPREHENSIVE INCOME
Comprehensive
income was comprised of net income plus or minus market value adjustments
related to our marketable securities. The components of comprehensive income
were as follows:
|
Three
Months Ended
|
Six
Months Ended
|
|||||||||||||||
|
June
30,
|
June
30,
|
|||||||||||||||
|
2009
|
2008
|
2009
|
2008
|
|||||||||||||
|
(in
thousands)
|
||||||||||||||||
|
Net
loss
|
$ | (2,356 | ) | $ | (1,332 | ) | $ | (5,702 | ) | $ | (4,160 | ) | ||||
|
Other
comprehensive (loss) income:
|
||||||||||||||||
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Reclassification
adjustment for unrealized losses on marketable
|
||||||||||||||||
|
securities
included in net income, net of income taxes
|
68 | 122 | 715 | 342 | ||||||||||||
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Change
in fair value of marketable securities, net of income
taxes
|
1,225 | (1,575 | ) | (49 | ) | (2,662 | ) | |||||||||
|
Total
comprehensive loss
|
$ | (1,063 | ) | $ | (2,785 | ) | $ | (5,036 | ) | $ | (6,480 | ) | ||||
NOTE H: EARNINGS
PER SHARE
Diluted
earnings per share computations assume the exercise of stock options to purchase
shares of common stock. The shares assumed exercised are based on the weighted
average number of shares under options outstanding during the period and only
include those options for which the exercise price is less than the average
share price during the period. The net additional shares issuable are calculated
based on the treasury stock method and are added to the weighted average number
of shares outstanding during the period.
A
reconciliation of the basic and diluted income per share computations for the
three
and six
months ended
June
30
,
200
9
and
200
8,
respectively,
is as
follows:
|
Three
Months Ended
|
Six
Months Ended
|
|||||||||||||||
|
June
30,
|
June
30,
|
|||||||||||||||
|
2009
|
2008
|
2009
|
2008
|
|||||||||||||
|
(in
thousands, except per share data)
|
||||||||||||||||
|
Net
loss
|
$ | (2,356 | ) | $ | (1,332 | ) | $ | (5,702 | ) | $ | (4,160 | ) | ||||
|
Basic
weighted average common shares outstanding
|
9,410 | 9,708 | 9,410 | 9,752 | ||||||||||||
|
Dilutive
effect of common stock equivalents
|
2 | - | 2 | - | ||||||||||||
|
Diluted
weighted average common shares outstanding
|
9,412 | 9,708 | 9,412 | 9,752 | ||||||||||||
|
Basic
loss per share
|
$ | (0.25 | ) | $ | (0.14 | ) | $ | (0.61 | ) | $ | (0.43 | ) | ||||
|
Diluted
loss per share
|
$ | (0.25 | ) | $ | (0.14 | ) | $ | (0.61 | ) | $ | (0.43 | ) | ||||
Options
to purchase 246,500 and 254,500 shares of common stock were outstanding at June
30, 2009 and 2008, respectively, but were not included in the computation of
diluted earnings per share because to do so would have an anti-dilutive
effect.
NOTE I: INCOME
TAXES
The
Company adopted the provisions of FASB Interpretation 48,
Accounting for Uncertainty in Income
Taxes
(“FIN 48”), on January 1, 2007. FIN 48 addressed the determination
of how tax benefits claimed or expected to be claimed on a tax return should be
recorded in the financial statements. Under FIN 48, the Company may recognize
the tax benefit from an uncertain tax position only if it is more likely than
not that the position will be sustained on examination by taxing authorities,
based on the technical merits of the position. Upon adoption, and as of June 30,
2009, an adjustment to the Company’s consolidated financial statements for
uncertain tax positions was not required as management believes that the
Company’s tax positions taken in income tax returns filed or to be filed are
supported by clear and unambiguous income tax laws.
The
Company and its subsidiaries are subject to U.S. and Canadian federal income tax
laws as well as the income tax laws of multiple state jurisdictions. The major
tax jurisdictions in which we operate generally provide for a deficiency
assessment statute of limitation period of three years and as a result, the
Company’s tax years 2005 through 2008 remain open to examination in those
jurisdictions. The Company recognizes interest and penalties related to
uncertain income tax positions, if any, in income tax expense. During the three
and six months ended June 30, 2009, the Company has not recognized or accrued
any interest or penalties related to uncertain income tax
positions.
NOTE J: FAIR
VALUE OF FINANCIAL INSTRUMENTS
Our
financial instruments consist of cash and cash equivalents, marketable equity
securities, accounts receivable, trade accounts payable, and
borrowings.
The
Company adopted SFAS No. 157 effective January 1, 2008 for financial
assets and liabilities measured on a recurring basis. SFAS No. 157 defines fair
value as the exchange price that would be received for an asset or paid to
transfer a liability (an exit price) in the principal or most advantageous
market for the asset or liability in an orderly transaction between market
participants on the measurement date. SFAS No. 157 also establishes a fair value
hierarchy which requires an entity to maximize the use of observable inputs and
minimize the use of unobservable inputs when measuring fair value. The standard
describes three levels of inputs that may be used to measure fair
value:
|
Level
1:
|
Quoted
market prices in active markets for identical assets or
liabilities.
|
||
|
Level
2:
|
Inputs
other than Level 1 inputs that are either directly or indirectly
observable such as quoted prices for similar assets or liabilities in
active markets; quoted prices for identical or similar assets or
liabilities in markets that are not active; inputs other than quoted
prices that are observable; or other inputs not directly observable, but
derived principally from, or corroborated by, observable market
data.
|
||
|
Level
3:
|
Unobservable
inputs that are supported by little or no market activity.
|
The
Company utilizes the market approach to measure fair value for its financial
assets and liabilities. The market approach uses prices and other relevant
information generated by market transactions involving identical or comparable
assets or liabilities.
Assets
and liabilities measured at fair value on a recurring basis and subject to
the disclosure requirements of SFAS No. 157 as of June 30, 2009 are
summarized below:
|
Total
|
Level
1
|
Level
2
|
Level
3
|
|||||||||||||
|
(in
thousands)
|
||||||||||||||||
|
Marketable
securities
|
$ | 12,648 | $ | 12,648 | $ | - | $ | - | ||||||||
The
Company’s investments in marketable securities are recorded at fair value based
on quoted market prices. The carrying value of other financial instruments,
including cash, accounts receivable, accounts payable, and accrued liabilities
approximate fair value due to their short maturities.
The
carrying amount for the line of credit approximates fair value because the line
of credit interest rate is adjusted frequently.
For
long-term debt other than the lines of credit, the fair values are estimated
using discounted cash flow analyses, based on the Company’s current incremental
borrowing rates for similar types of borrowing arrangements. The carrying value
and estimated fair value of this other long-term debt at June 30, 2009 was as
follows:
|
Carrying
Value
|
Estimated
Fair
Value
|
|||||||
|
(in
thousands)
|
||||||||
|
Long-term
debt
|
$ | 43,866 | $ | 43,483 | ||||
The
Company adopted SFAS No. 159 effective January 1, 2008 and did not
elect the fair value option for our financial instruments.
NOTE K: NOTES
PAYABLE AND LONG-TERM DEBT
During
the first six months of 2009, the Company’s subsidiaries entered into
installment obligations totaling approximately $6.7 million for the purpose of
purchasing revenue equipment. These obligations are each payable in 36 monthly
installments at an interest rate of 5.45%.
NOTE
L: SUBSEQUENT EVENTS
Subsequent
events have been evaluated for recognition and disclosure through the date these
financial statements were filed with the Securities and Exchange
Commission.
FORWARD-LOOKING
INFORMATION
Certain
information included in this Quarterly Report on Form 10-Q constitutes
“forward-looking statements” within the meaning of the Private Securities
Litigation Reform Act of 1995. Such forward-looking statements may relate to
expected future financial and operating results or events, and are thus
prospective. Such forward-looking statements are subject to risks, uncertainties
and other factors which could cause actual results to differ materially from
future results expressed or implied by such forward-looking statements.
Potential risks and uncertainties include, but are not limited to, excess
capacity in the trucking industry; surplus inventories; recessionary economic
cycles and downturns in customers’ business cycles; increases or rapid
fluctuations in fuel prices, interest rates, fuel taxes, tolls, license and
registration fees; the resale value of the Company’s used equipment and the
price of new equipment; increases in compensation for and difficulty in
attracting and retaining qualified drivers and owner-operators; increases in
insurance premiums and deductible amounts relating to accident, cargo, workers'
compensation, health, and other claims; unanticipated increases in the number or
amount of claims for which the Company is self insured; inability of the Company
to continue to secure acceptable financing arrangements; seasonal factors such
as harsh weather conditions that increase operating costs; competition from
trucking, rail, and intermodal competitors including reductions in rates
resulting from competitive bidding; the ability to identify acceptable
acquisition candidates, consummate acquisitions, and integrate acquired
operations; a significant reduction in or termination of the Company's trucking
service by a key customer; and other factors, including risk factors, included
from time to time in filings made by the Company with the SEC. The Company
undertakes no obligation to update or clarify forward-looking statements,
whether as a result of new information, future events or otherwise.
CRITICAL ACCOUNTING
POLICIES
There
have been no material changes to our critical accounting policies and estimates
from the information provided in Item 7,
Management’s Discussion and Analysis
of Financial Condition and Results of Operations,
included in our Form
10-K for the fiscal year ended December 31, 2008.
BUSINESS
OVERVIEW
The
Company’s administrative headquarters are in Tontitown, Arkansas. From this
location we manage operations conducted through wholly owned subsidiaries based
in various locations around the United States and Canada. The operations of
these subsidiaries can generally be classified into either truckload services or
brokerage and logistics services. Truckload services include those
transportation services in which we utilize company owned trucks or
owner-operator owned trucks. Brokerage and logistics services consist of
services such as transportation scheduling, routing, mode selection,
transloading and other value added services related to the transportation of
freight which may or may not involve the usage of company owned or
owner-operator owned equipment. Both our truckload operations and our
brokerage/logistics operations have similar economic characteristics and are
impacted by virtually the same economic factors as discussed elsewhere in this
Report. All of the Company’s operations are in the motor carrier
segment.
For both
operations, substantially all of our revenue is generated by transporting
freight for customers and is predominantly affected by the rates per mile
received from our customers, equipment utilization, and our percentage of
non-compensated miles. These aspects of our business are carefully managed and
efforts are continuously underway to achieve favorable results. For the three
and six month periods ended June 30, 2009, truckload services revenues,
excluding fuel surcharges, represented 85.4% and 85.5% of total revenues,
excluding fuel surcharges, with remaining revenues, excluding fuel surcharges,
being generated from brokerage and logistics services. For the three and six
month periods ended June 30, 2008, truckload services revenues, excluding fuel
surcharges, represented 88.7% and 89.7% of total revenues, excluding fuel
surcharges, with remaining revenues, excluding fuel surcharges, being generated
from brokerage and logistics services.
The main
factors that impact our profitability on the expense side are costs incurred in
transporting freight for our customers. Currently our most challenging costs
include fuel, driver recruitment, training, wage and benefit costs, independent
broker costs (which we record as purchased transportation), insurance, and
maintenance and capital equipment costs.
In
discussing our results of operations we use revenue, before fuel surcharge, (and
fuel expense, net of surcharge), because management believes that eliminating
the impact of this sometimes volatile source of revenue allows a more consistent
basis for comparing our results of operations from period to period. During the
three and six months ending June 30, 2009, approximately $6.1 million and $11.7
million, respectively, of the Company’s total revenue was generated from fuel
surcharges. During the three and six months ending June 30, 2008 approximately
$26.3 million and $45.6 million, respectively, of the Company’s total revenue
was generated from fuel surcharges. We may also discuss certain changes in our
expenses as a percentage of revenue, before fuel surcharge, rather than absolute
dollar changes. We do this because we believe the high variable cost nature of
certain expenses makes a comparison of changes in expenses as a percentage of
revenue more meaningful than absolute dollar changes.
RESULTS OF OPERATIONS –
TRUCKLOAD SERVICES
The
following table sets forth, for truckload services, the percentage relationship
of expense items to operating revenues, before fuel surcharges, for the periods
indicated. Fuel costs are shown net of fuel surcharges.
|
Three
Months Ended
|
Six
Months Ended
|
|||||||||||||||
|
June
30,
|
June
30,
|
|||||||||||||||
|
2009
|
2008
|
2009
|
2008
|
|||||||||||||
|
(percentages)
|
||||||||||||||||
|
Operating
revenues, before fuel surcharge
|
100.0 | 100.0 | 100.0 | 100.0 | ||||||||||||
|
Operating
expenses:
|
||||||||||||||||
|
Salaries,
wages and benefits
|
44.1 | 41.4 | 44.9 | 42.4 | ||||||||||||
|
Fuel
expense, net of fuel surcharge
|
16.1 | 22.6 | 15.3 | 22.9 | ||||||||||||
|
Rent
and purchased transportation
|
2.4 | 2.9 | 2.5 | 2.9 | ||||||||||||
|
Depreciation
|
16.1 | 12.4 | 16.6 | 11.9 | ||||||||||||
|
Operating
supplies and expenses
|
12.8 | 9.9 | 12.6 | 10.1 | ||||||||||||
|
Operating
taxes and license
|
6.2 | 5.5 | 6.2 | 5.6 | ||||||||||||
|
Insurance
and claims
|
5.9 | 5.5 | 5.9 | 5.6 | ||||||||||||
|
Communications
and utilities
|
1.1 | 1.0 | 1.2 | 1.0 | ||||||||||||
|
Other
|
2.3 | 1.4 | 2.2 | 1.5 | ||||||||||||
|
Loss
on sale or disposal of property
|
0.1 | 0.0 | 0.0 | 0.1 | ||||||||||||
|
Total
operating expenses
|
107.1 | 102.6 | 107.4 | 104.0 | ||||||||||||
|
Operating
loss
|
(7.1 | ) | (2.6 | ) | (7.4 | ) | (4.0 | ) | ||||||||
|
Non-operating
income (expense)
|
0.4 | 0.0 | (0.6 | ) | (0.2 | ) | ||||||||||
|
Interest
expense
|
(1.2 | ) | (0.7 | ) | (1.2 | ) | (0.7 | ) | ||||||||
|
Loss
before income taxes
|
(7.9 | ) | (3.3 | ) | (9.2 | ) | (4.9 | ) | ||||||||
THREE
MONTHS ENDED JUNE 30, 2009 VS. THREE MONTHS ENDED JUNE 30, 2008
For the
quarter ended June 30, 2009, truckload services revenue, before fuel surcharges,
decreased 29.1% to $53.3 million as compared to $75.1 million for the quarter
ended June 30, 2008. The decrease was primarily due to a decrease in the number
of miles traveled from 57.6 million miles during the second quarter of 2008 to
42.9 million miles during the second quarter of 2009. The comparative decrease
in miles traveled resulted primarily from a decrease in equipment utilization
and a decrease in the average number of revenue generating trucks. During the
second quarter of 2009, the continued weak demand for our services had a
negative impact on our equipment utilization and contributed to a decrease in
the average number of miles traveled per truck each work day from 443 miles
during the second quarter of 2008 to 392 miles during the second quarter of
2009. Also contributing to the decrease in miles traveled was a decrease in the
number of trucks utilized in our operations from 2,031 trucks during the second
quarter of 2008 to 1,712 trucks during the second quarter of 2009 as we continue
to downsize our operations in response to reduced demand in the truckload
freight market. The effect of this reduced demand along with excess industry
capacity has also had a negative impact on the average rate we have been able to
charge for our services.
Salaries,
wages and benefits increased from 41.4% of revenues, before fuel surcharges, in
the second quarter of 2008 to 44.1% of revenues, before fuel surcharges, during
the second quarter of 2009. The increase, as a percentage of revenue, relates to
the interaction of expenses with fixed-cost characteristics, such as general and
administrative wages, maintenance wages, operations wages, and payroll taxes,
with a decrease in revenues for the periods compared. On a dollar basis,
salaries, wages and benefits decreased from $31.1 million during the second
quarter of 2008 to $23.5 million during the second quarter of 2009 as the number
of company driver compensated miles decreased from 57.6 million miles during the
second quarter of 2008 to 42.9 million miles during the second quarter of 2009.
Also contributing to the decrease on a dollar basis was a decrease in amounts
paid for driver lease expense, a gain related to life insurance proceeds, and a
pay rate cut for all employees. Driver lease expense, which is a component of
salaries, wages and benefits, decreased as the average number of owner-operators
under contract decreased from 46 during the second quarter of 2008 to 33 during
the second quarter of 2009. During June 2009, the Company recorded a one-time
gain related to life insurance proceeds of $0.8 million due to the death of one
of its former officers. Also, during June 2009, the Company implemented an
across-the-board 5% employee pay rate reduction.
Fuel
expense, net of fuel surcharge, decreased from 22.6% of revenues, before fuel
surcharges, during the second quarter of 2008 to 16.1% of revenues, before fuel
surcharges, during the second quarter of 2009, which, on a dollar basis,
represented a decrease from $17.0 million during the second quarter of 2008 to
$8.6 million during the second quarter of 2009. The decrease was related to a
decrease in the average surcharge-adjusted fuel price paid per gallon of diesel
fuel from $1.81 during the second quarter of 2008 to an average cost of $1.33
during the second quarter of 2009. Fuel surcharge collections vary from period
to period as they are generally based on changes in fuel prices from period to
period so that during periods of rising fuel prices fuel surcharge collections
increase while fuel surcharge collections decrease during periods of falling
fuel prices.
Rent and
purchased transportation decreased from 2.9% of revenues, before fuel
surcharges, during the second quarter of 2008 to 2.4% of revenues, before fuel
surcharges, during the second quarter of 2009. The decrease relates to a
decrease in amounts paid to third party transportation companies for intermodal
services for the periods compared.
Depreciation
increased from 12.4% of revenues, before fuel surcharges, during the second
quarter of 2008 to 16.1% of revenues, before fuel surcharges, during the second
quarter of 2009. The increase, as a percentage of revenue, relates to the
interaction of lower revenues during the second quarter of 2009 as compared to
the second quarter of 2008 and the fixed-cost nature of depreciation expense. On
a dollar basis, depreciation decreased from $9.3 million during the second
quarter of 2008 to $8.6 million during the second quarter of 2009 as the Company
continues to reduce the size of its truck fleet in response to reduced demand in
the truckload freight market.
Operating
supplies and expenses increased from 9.9% of revenues, before fuel surcharges,
during the second quarter of 2008 to 12.8% of revenues, before fuel surcharges,
during the second quarter of 2009. The increase, as a percentage of revenue,
relates to the interaction of expenses with fixed-cost characteristics, such as
routine equipment maintenance costs, driver layover payments, drop lot rentals,
and new tire amortization, with a decrease in revenues for the periods compared.
On a dollar basis, operating supplies and expenses decreased from $7.4 million
during the second quarter of 2008 to $6.8 million during the second quarter of
2009 primarily due to a decrease in amounts paid for driver recruiting and
outside tractor and trailer repairs.
Operating
taxes and licenses increased from 5.5% of revenues, before fuel surcharges,
during the second quarter of 2008 to 6.2% of revenues, before fuel surcharges,
during the second quarter of 2009. As a percentage of revenue, the increase
relates to the interaction of expenses with fixed-cost characteristics, such as
registration fees, with a decrease in revenues for the periods compared. On a
dollar basis, operating taxes and licenses decreased from $4.2 million during
the second quarter of 2008 to $3.3 million during the second quarter of 2009.
The dollar-based decrease relates primarily to a decrease in amounts paid for
federal and state fuel taxes as fewer gallons of fuel were purchased and used
during the second quarter of 2009 as compared to the second quarter of
2008.
Insurance
and claims increased from 5.5% of revenues, before fuel surcharges, during the
second quarter of 2008 to 5.9% of revenues, before fuel surcharges, during the
second quarter of 2009. On a dollar basis, insurance and claims expense
decreased from $4.1 million during the second quarter of 2008 to $3.1 million
during the second quarter of 2009. The dollar-based decrease relates primarily
to a decrease in auto liability insurance premiums for the periods compared.
During the second quarter of 2009, the number of miles traveled, which serves as
the basis for calculating auto liability insurance premiums, decreased to 42.9
million from 57.6 million miles during the second quarter of 2008. The most
recent auto liability insurance policy renewal was also at a rate that
represented a 2.6% decrease compared to the previous policy rate and contributed
to the dollar-based decrease for the periods compared.
Other
expenses increased from 1.4% of revenues, before fuel surcharges, during the
second quarter of 2008 to 2.3% of revenues, before fuel surcharges, during the
second quarter of 2009. The increase relates primarily to an increase in
uncollectible revenue expense.
The
truckload services division operating ratio, which measures the ratio of
operating expenses, net of fuel surcharges, to operating revenues, before fuel
surcharges, increased from 102.6% for the second quarter 2008 to 107.1% for the
second quarter of 2009.
SIX
MONTHS ENDED JUNE 30, 2009 VS. SIX MONTHS ENDED JUNE 30, 2008
For the
first six months ended June 30, 2009, truckload services revenue, before fuel
surcharges, decreased 31.7% to $104.9 million as compared to $153.5 million for
the first six months ended June 30, 2008. The decrease was primarily due to a
decrease in the number of miles traveled from 119.7 million miles during the
first six months of 2008 to 83.5 million miles during the first six months of
2009 resulting largely from a decrease in the average number of revenue
generating trucks from 2,042 during the first six months of 2008 to 1,744 during
the first six months of 2009. Also contributing to the decrease in revenues and
resulting from the continued weakness in the truckload freight market during the
first six months of 2009 as compared to the first six months of 2008 was both a
decrease in the average rate per total mile charged to customers from
approximately $1.28 during the first six months 2008 to approximately $1.26
during the first six months of 2009 and lower equipment utilization as the
average miles traveled each work day per truck decreased from 458 miles each
work day in the first six months of 2008 to 377 miles each work day in the first
six months of 2009.
Salaries,
wages and benefits increased from 42.4% of revenues, before fuel surcharges, in
the first six months of 2008 to 44.9% of revenues, before fuel surcharges,
during the first six months of 2009. The increase, as a percentage of revenue,
relates to the interaction of expenses with fixed-cost characteristics, such as
general and administrative wages, maintenance wages, operations wages, and
payroll taxes with a decrease in revenues for the periods compared. Based on a
dollar comparison, salaries, wages and benefits decreased from $65.1 million
during the first six months of 2008 to $47.1 million during the first six months
of 2009 as the number of driver compensated miles decreased from 119.7 million
miles during the first six months of 2008 to 83.5 million miles during the first
six months of 2009. Also contributing to the decrease on a dollar basis was a
decrease in amounts paid for driver lease expense, a gain related to life
insurance proceeds, and a pay rate cut for all employees. Driver lease expense,
which is a component of salaries, wages and benefits, decreased as the average
number of owner-operators under contract decreased from 50 during the first six
months of 2008 to 33 during the first six months of 2009. During June 2009, the
Company recorded a one-time gain related to life insurance proceeds of $0.8
million due to the death of one of its former officers. Also, during June 2009,
the Company implemented an across-the-board 5% employee pay rate reduction
plan.
Fuel
expense, net of fuel surcharge, decreased from 22.9% of revenues, before fuel
surcharges, during the first six months of 2008 to 15.3% of revenues, before
fuel surcharges, during the first six months of 2009 which, on a dollar basis,
represented a decrease from $35.2 million during the first six months of 2008 to
$16.1 million during the first six months of 2009. The decrease was related to a
decrease in the average surcharge-adjusted fuel price paid per gallon of diesel
fuel from $1.79 during the first six months of 2008 to an average cost of $1.26
during the first six months of 2009. Fuel surcharge collections vary from period
to period as they are generally based on changes in fuel prices from period to
period so that during periods of rising fuel prices fuel surcharge collections
increase while fuel surcharge collections decrease during periods of declining
fuel prices.
Rent and
purchased transportation decreased from 2.9% of revenues, before fuel
surcharges, during the first six months of 2008 to 2.5% of revenues, before fuel
surcharges, during the first six months of 2009. The decrease relates to a
decrease in amounts paid to third party transportation companies for intermodal
services.
Depreciation
increased from 11.9% of revenues, before fuel surcharges, during the first six
months of 2008 to 16.6% of revenues, before fuel surcharges, during the first
six months of 2009. The increase, as a percentage of revenue, relates to the
interaction of lower revenues during the first six months of 2009 as compared to
the first six months of 2008 and the fixed-cost nature of depreciation expense.
On a dollar basis, depreciation decreased from $18.3 million during the first
six months of 2008 to $17.4 million during the first six months of 2009 as the
Company continues to reduce the size of its truck fleet in response to the
continued weak demand in the truckload freight market.
Operating
supplies and expenses increased from 10.1% of revenues, before fuel surcharges,
during the first six months of 2008 to 12.6% of revenues, before fuel
surcharges, during the first six months of 2009. The increase, as a percentage
of revenue, relates to the interaction of expenses with fixed-cost
characteristics, such as routine equipment maintenance costs, driver layover
payments, drop lot rentals, and new tire amortization with a decrease in
revenues for the periods compared. On a dollar basis, operating supplies and
expenses decreased from $15.5 million during the first six months of 2008 to
$13.2 million during the first six months of 2009 primarily due to a decrease in
amounts paid for driver recruiting and outside tractor and trailer
repairs.
Operating
taxes and licenses increased from 5.6% of revenues, before fuel surcharges,
during the first six months of 2008 to 6.2% of revenues, before fuel surcharges,
during the first six months of 2009. As a percentage of revenue, the increase
relates to the interaction of expenses with fixed-cost characteristics, such as
registration fees, with a decrease in revenues for the periods compared. On a
dollar basis, operating taxes and licenses decreased from $8.5 million during
the first six months of 2008 to $6.5 million during the first six months of
2009. The dollar-based decrease relates primarily to a decrease in amounts paid
for federal and state fuel taxes as fewer gallons of fuel were purchased and
used during the first six months of 2009 as compared to the first six months of
2008.
Insurance
and claims increased from 5.6% of revenues, before fuel surcharges, during the
first six months of 2008 to 5.9% of revenues, before fuel surcharges, during the
first six months of 2009. On a dollar basis, insurance and claims expense
decreased from $8.6 million during the first six months of 2008 to $6.2 million
during the first six months of 2009. The dollar-based decrease relates primarily
to a decrease in auto liability insurance premiums for the periods compared.
During the first six months of 2009, the number of miles traveled, which serves
as the basis for calculating auto liability insurance premiums, decreased to
83.5 million from 119.7 million miles during the first six months of 2008. The
most recent auto liability insurance policy renewal was also at a rate that
represented a 2.6% decrease compared to the previous policy rate and contributed
to the dollar-based decrease for the periods compared.
Other
expenses increased from 1.5% of revenues, before fuel surcharges, during the
first six months of 2008 to 2.2% of revenues, before fuel surcharges, during the
first six months of 2009. The increase relates primarily to an increase in
uncollectible revenue expense.
The
truckload services division operating ratio, which measures the ratio of
operating expenses, net of fuel surcharges, to operating revenues, before fuel
surcharges, increased from 104.0% for the first six months 2008 to 107.4% for
the first six months of 2009.
RESULTS OF OPERATIONS –
LOGISTICS AND BROKERAGE SERVICES
The
following table sets forth, for logistics and brokerage services, the percentage
relationship of expense items to operating revenues, before fuel surcharges, for
the periods indicated. Brokerage service operations occur specifically in
certain divisions; however, brokerage operations occur throughout the Company in
similar operations having substantially similar economic characteristics. Rent
and purchased transportation, which includes costs paid to third party carriers,
are shown net of fuel surcharges.
|
Three
Months Ended
|
Six
Months Ended
|
|||||||||||||||
|
June
30,
|
June
30,
|
|||||||||||||||
|
2009
|
2008
|
2009
|
2008
|
|||||||||||||
|
(percentages)
|
||||||||||||||||
|
Operating
revenues, before fuel surcharge
|
100.0 | 100.0 | 100.0 | 100.0 | ||||||||||||
|
Operating
expenses:
|
||||||||||||||||
|
Salaries,
wages and benefits
|
5.7 | 5.7 | 5.8 | 5.9 | ||||||||||||
|
Rent
and purchased transportation
|
90.5 | 89.3 | 89.8 | 89.0 | ||||||||||||
|
Operating
supplies and expenses
|
0.1 | 0.0 | 0.1 | 0.0 | ||||||||||||
|
Insurance
and claims
|
0.1 | 0.1 | 0.1 | 0.1 | ||||||||||||
|
Communications
and utilities
|
0.2 | 0.2 | 0.2 | 0.3 | ||||||||||||
|
Other
|
0.9 | 0.4 | 0.9 | 0.8 | ||||||||||||
|
Total
operating expenses
|
97.5 | 95.7 | 96.9 | 96.1 | ||||||||||||
|
Operating
income
|
2.5 | 4.3 | 3.1 | 3.9 | ||||||||||||
|
Interest
expense
|
(0.1 | ) | (0.2 | ) | (0.1 | ) | (0.3 | ) | ||||||||
|
Income
before income taxes
|
2.4 | 4.1 | 3.0 | 3.6 | ||||||||||||
THREE
MONTHS ENDED JUNE 30, 2009 VS. THREE MONTHS ENDED JUNE 30, 2008
For the
quarter ended June 30, 2009, logistics and brokerage services revenue, before
fuel surcharges, decreased 4.6% to $9.1 million as compared to $9.6 million for
the quarter ended June 30, 2008. The decrease was primarily the result of a
decrease in the number of loads brokered during the second quarter of 2009 as
compared to the second quarter of 2008.
Rent and
purchased transportation increased from 89.3% of revenues, before fuel
surcharges, during the second quarter of 2008 to 90.5% of revenues, before fuel
surcharges, during the second quarter of 2009. The increase relates to an
increase in amounts charged by third party logistics and brokerage service
providers.
Other
expenses increased from 0.4% of revenues, before fuel surcharges, during the
second quarter of 2008 to 0.9% of revenues, before fuel surcharges, during the
second quarter of 2009. The increase relates primarily to an increase in
uncollectible revenue expense.
The
logistics and brokerage services division operating ratio, which measures the
ratio of operating expenses, net of fuel surcharges, to operating revenues,
before fuel surcharges, increased from 95.7% for the second quarter 2008 to
97.5% for the second quarter of 2009.
SIX
MONTHS ENDED JUNE 30, 2009 VS. SIX MONTHS ENDED JUNE 30, 2008
For the
first six months ended June 30, 2009, logistics and brokerage services revenue,
before fuel surcharges, increased 0.5% to $17.7 million as compared to $17.6
million for the first six months ended June 30, 2008. The increase was primarily
the result of increased rates charged which were partially offset by a decrease
in the number of loads brokered during the first six months of 2009 as compared
to the first six months of 2008.
Rent and
purchased transportation increased from 89.0% of revenues, before fuel
surcharges, during the first six months of 2008 to 89.8% of revenues, before
fuel surcharges during the first six months of 2009. The increase relates to an
increase in amounts charged by third party logistics and brokerage service
providers.
The
logistics and brokerage services division operating ratio, which measures the
ratio of operating expenses, net of fuel surcharges, to operating revenues,
before fuel surcharges, increased from 96.1% for the first six months of 2008 to
96.9% for the first six months of 2009.
RESULTS OF OPERATIONS –
COMBINED SERVICES
THREE
MONTHS ENDED JUNE 30, 2009 VS. THREE MONTHS ENDED JUNE 30, 2008
Net loss
for all divisions was approximately $2.4 million, or 3.8% of revenues, before
fuel surcharge for the second quarter of 2009 as compared to net loss of $1.3
million or 1.6% of revenues, before fuel surcharge for the second quarter of
2008. The increase in loss resulted in an increase in diluted loss per share
from $0.14 for the second quarter of 2008 to a diluted loss per share of $0.25
for the second quarter of 2009.
SIX
MONTHS ENDED JUNE 30, 2009 VS. SIX MONTHS ENDED JUNE 30, 2008
Net loss
for all divisions was $5.7 million, or 4.6% of revenues, before fuel surcharge
for the first six months of 2009 as compared to net loss of $4.2 million or 2.4%
of revenues, before fuel surcharge for the first six months of 2008. The
increase in loss resulted in an increase in diluted loss per share from $0.43
for the first six months of 2008 to a diluted loss per share of $0.61 for the
first six months of 2009.
LIQUIDITY AND CAPITAL
RESOURCES
The
nature of our business has required, and will continue to require, a significant
investment in new revenue equipment. Our primary sources of liquidity have been
funds provided by operations, proceeds from the sales of revenue equipment,
issuances of equity securities, borrowings under our line of credit, installment
note agreements, and borrowings under our investment margin
account.
During
the first six months of 2009, we generated $11.2 million in cash from operating
activities. Investing activities used $1.0 million in cash in the first six
months of 2009. Financing activities used $9.5 million in cash in the first six
months of 2009.
Our
primary use of funds is typically for the purchase of revenue equipment. We
regularly use installment notes, our existing line of credit on an interim
basis, proceeds from the sale or trade of equipment, and cash flows from
operations, to finance capital expenditures and repay long-term
debt.
Occasionally
we finance the acquisition of revenue equipment through installment notes with
fixed interest rates and terms ranging from 12 to 48 months. During the first
six months of 2009, the Company’s subsidiaries entered into installment
obligations totaling approximately $6.7 million for the purpose of purchasing
revenue equipment. These obligations are payable in 36 monthly installments at
an interest rate of 5.45%.
During
the remainder of 2009, we do not expect to purchase any new trucks or new
trailers but will continue to sell or trade older equipment. Management believes
we will be able to finance our near term needs for working capital over the next
twelve months, as well as any planned capital expenditures during such period,
with cash balances, cash flows from operations, and borrowings believed to be
available from financing sources. We will continue to have significant capital
requirements over the long-term, which may require us to incur debt or seek
additional equity capital. The availability of additional capital will depend
upon prevailing market conditions, the market price of our common stock and
several other factors over which we have limited control, as well as our
financial condition and results of operations. Nevertheless, based on our recent
operating results, current cash position, anticipated future cash flows, and
sources of financing that we expect will be available to us, we do not expect
that we will experience any significant liquidity constraints in the foreseeable
future.
During
the first six months of 2009 we maintained a $30.0 million revolving line of
credit. Amounts outstanding under the line of credit bear interest at LIBOR
(determined as of the first day of each month) plus 1.95% (2.27% at June 30,
2009), are secured by our accounts receivable and mature on May 31, 2010;
however, the Company has the intent and ability to extend the terms of this line
of credit for an additional one year period until May 31, 2011. At June 30, 2009
outstanding advances on the line of credit were approximately $1.2 million,
consisting entirely of letters of credit, with availability to borrow $28.8
million.
Trade
accounts receivable at June 30, 2009 decreased approximately $5.3 million as
compared to December 31, 2008. The decrease relates to a general decrease in
revenue, which flows through the accounts receivable account.
Prepaid
expenses and deposits at June 30, 2009 increased approximately $2.2 million as
compared to December 31, 2008. The primary reason for the increase relates to
the prepayment of revenue equipment license fees and auto liability insurance
premiums paid during the first six months of 2009. These prepaid expenses will
be amortized to expense throughout the year.
Revenue
equipment, which generally consists of trucks, trailers, and revenue equipment
accessories such as Qualcomm™ satellite tracking units, decreased approximately
$16.6 million as compared to December 31, 2008. This decrease relates primarily
to the continued process of turning in older trade tractors during the first six
months of 2009 for new tractors purchased in December 2008. During the first six
months of 2009, the cost basis of revenue equipment sold or traded was
approximately $20.9 million. Partially offsetting the decrease related to trades
or sales were purchases of auxiliary power units and the final group of
replacement trailers related to the 2008 capital expenditures plan.
Accounts
payable at June 30, 2009 decreased approximately $6.6 million as compared to
December 31, 2008. The decrease was primarily related to $4.4 million of asset
purchase accruals for assets purchased in December 2008 for which payment was
not due until January 2009. The decrease also reflects a decrease of
approximately $3.0 million in amounts reclassified to accounts payable as bank
drafts outstanding at June 30, 2009 as compared to December 31,
2008.
Current
maturities of long-term debt at June 30, 2009 decreased approximately $4.4
million as compared to December 31, 2008. The decrease is related to the payment
of scheduled installment note payments during the first six months of
2009.
Long-term
debt at June 30, 2009 decreased approximately $3.1 million as compared to
December 31, 2008. The decrease is primarily related to a decrease in the
balance due on the Company’s line of credit at June 30, 2009 as compared to
December 31, 2008. During the first six months of 2009 the Company repaid
approximately $3.7 million more than it borrowed under its line of
credit.
NEW ACCOUNTING
PRONOUNCEMENTS
See Note
B to the condensed consolidated financial statements for a description of the
most recent accounting pronouncements and their impact, if any, on the
Company.
Our
primary market risk exposures include equity price risk, interest rate risk, and
commodity price risk (the price paid to obtain diesel fuel for our trucks). The
potential adverse impact of these risks and the general strategies we employ to
manage such risks are discussed below.
The
following sensitivity analyses do not consider the effects that an adverse
change may have on the overall economy nor do they consider additional actions
we may take to mitigate our exposure to such changes. Actual results of changes
in prices or rates may differ materially from the hypothetical results described
below.
Equity Price
Risk
We hold
certain actively traded marketable equity securities which subjects the Company
to fluctuations in the fair market value of its investment portfolio based on
the current market price of such securities. The recorded value of marketable
equity securities increased to $12.6 million at June 30, 2009 from $12.5 million
at December 31, 2008. The increase during the first six months of 2009 reflects
purchases of approximately $23,000, returns of capital of approximately
$107,000, and an increase in the fair market value of approximately $192,000. A
10% decrease in the market price of our marketable equity securities would cause
a corresponding 10% decrease in the carrying amounts of these securities, or
approximately $1.3 million. For additional information with respect to the
marketable equity securities, see Note C to our condensed consolidated financial
statements.
Interest Rate
Risk
Our line
of credit bears interest at a floating rate equal to LIBOR plus a fixed
percentage. Accordingly, changes in LIBOR, which are effected by changes in
interest rates, will affect the interest rate on, and therefore our costs under,
the line of credit. Assuming $1.0 million of variable rate debt was outstanding;
a hypothetical 100 basis point increase in LIBOR for a one year period would
result in approximately $10,000 of additional interest expense.
Commodity Price
Risk
Prices
and availability of all petroleum products are subject to political, economic
and market factors that are generally outside of our control. Accordingly, the
price and availability of diesel fuel, as well as other petroleum products, can
be unpredictable. Because our operations are dependent upon diesel fuel,
significant increases in diesel fuel costs could materially and adversely affect
our results of operations and financial condition. Based upon our 2008 fuel
consumption, a 10% increase in the average annual price per gallon of diesel
fuel would increase our annual fuel expenses by $14.1 million.
Evaluation
of disclosure controls and procedures.
Our management, with the
participation of our chief executive officer and chief financial officer,
evaluated the effectiveness of our disclosure controls and procedures pursuant
to Rule 13a-15 under the Securities Exchange Act of 1934, as amended (the
“Exchange Act”). In designing and evaluating the disclosure controls and
procedures, management recognizes that any controls and procedures, no matter
how well designed and operated, can provide only reasonable assurance of
achieving the desired control objectives. In addition, the design of disclosure
controls and procedures must reflect the fact that there are resource
constraints and that management is required to apply its judgment in evaluating
the benefits of possible controls and procedures relative to their
costs.
Based on
management’s evaluation, our chief executive officer and chief financial officer
concluded that, as of June 30, 2009, our disclosure controls and procedures are
designed at a reasonable assurance level and are effective to provide reasonable
assurance that information we are required to disclose in reports that we file
or submit under the Exchange Act is recorded, processed, summarized and reported
within the time periods specified in Securities and Exchange Commission rules
and forms, and that such information is accumulated and communicated to our
management, including our chief executive officer and chief financial officer,
as appropriate, to allow timely decisions regarding required
disclosure.
Changes
in internal controls over financial reporting.
We regularly review our
system of internal control over financial reporting and make changes to our
processes and systems to improve controls and increase efficiency, while
ensuring that we maintain an effective internal control environment. Changes may
include such activities as implementing new, more efficient systems,
consolidating activities, and migrating processes.
There
were no changes in our internal control over financial reporting that occurred
during the quarter ended June 30, 2009 that has materially affected, or is
reasonably likely to materially affect, the Company's internal control over
financial reporting.
PART
II. OTHER INFORMATION
The
nature of our business routinely results in litigation, primarily involving
claims for personal injuries and property damage incurred in the transportation
of freight. We believe that all such routine litigation is adequately covered by
insurance and that adverse results in one or more of those cases would not have
a material adverse effect on our financial condition.
Our
annual meeting of stockholders was held on May 28, 2009. The matters voted on at
the meeting and the votes cast with respect to each matter were as
follows:
|
Proposal to elect nine
directors:
|
Votes
For
|
Votes
Withheld
|
Abstentions
|
Broker
Non-votes
|
||||||
|
Frederick
P. Calderone
|
7,250,291
|
1,973,525
|
0
|
0
|
||||||
|
Frank
L. Conner
|
9,088,251
|
135,565
|
0
|
0
|
||||||
|
W.
Scott Davis
|
9,171,425
|
52,391
|
0
|
0
|
||||||
|
Christopher
L. Ellis
|
8,477,911
|
745,905
|
0
|
0
|
||||||
|
Manual
J. Moroun
|
7,324,224
|
1,899,592
|
0
|
0
|
||||||
|
Matthew
T. Moroun
|
7,323,824
|
1,899,992
|
0
|
0
|
||||||
|
Daniel
C. Sullivan
|
9,156,125
|
67,691
|
0
|
0
|
||||||
|
Robert
W. Weaver
|
7,885,016
|
1,338,800
|
0
|
0
|
||||||
|
Charles
F. Wilkins
|
8,951,072
|
272,744
|
0
|
0
|
|
Exhibits
required by Item 601 of Regulation S-K:
|
|
|
3.1
|
Amended
and Restated Certificate of Incorporation of the Registrant (incorporated
by reference to Exhibit 3.1 of the Company's Form 10-Q filed on May 15,
2002)
|
|
3.2
|
Amended
and Restated By-Laws of the Registrant (incorporated by reference to
Exhibit 3.2 of the Company's Form 8-K filed on December 11,
2007.)
|
|
Employment
agreement between Daniel H. Cushman and the Company
|
|
|
Relocation
agreement between Daniel H. Cushman and the Company
|
|
|
P.A.M.
Transportation Services, Inc. Incentive Compensation Plan Calendar Year
2010
|
|
|
Rule
13a-14(a) Certification of Principal Executive Officer
|
|
|
Rule
13a-14(a) Certification of Principal Financial Officer
|
|
|
Certifications
of Chief Executive Officer and Chief Financial
Officer
|
|
Pursuant
to the requirements of the Securities Exchange Act of 1934, the Registrant has
duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.
|
P.A.M.
TRANSPORTATION SERVICES, INC.
|
|
|
Dated: August
6, 2009
|
By: /s/ Daniel H.
Cushman
|
|
Daniel
H. Cushman
|
|
|
President
and Chief Executive Officer
|
|
|
(principal
executive officer)
|
|
|
Dated: August
6, 2009
|
By: /s/ Larry J. Goddard
|
|
Larry
J. Goddard
|
|
|
Vice
President-Finance, Chief Financial
|
|
|
Officer,
Secretary and Treasurer
|
|
|
(principal
accounting and financial officer)
|
|
Index to
Exhibits to Form 10-Q
|
Exhibit
Number
|
Exhibit
Description
|
|
|
3.1
|
Amended
and Restated Certificate of Incorporation of the Registrant (incorporated
by reference to Exhibit 3.1 of the Company's Form 10-Q filed on May 15,
2002.)
|
|
|
3.2
|
Amended
and Restated By-Laws of the Registrant (incorporated by reference to
Exhibit 3.2 of the Company's Form 8-K filed on December 11,
2007.)
|
|
|
Employment
agreement between Daniel H. Cushman and the Company
|
||
|
Relocation
agreement between Daniel H. Cushman and the Company
|
||
|
P.A.M.
Transportation Services, Inc. Incentive Compensation Plan Calendar Year
2010
|
||
|
Rule
13a-14(a) Certification of Principal Executive Officer
|
||
|
Rule
13a-14(a) Certification of Principal Financial Officer
|
||
|
Certifications
of Chief Executive Officer and Chief Financial
Officer
|
23