As filed with the Securities and Exchange Commission on February 20, 2002
Registration No. 333-_________
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------------------
FORM S-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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P.A.M. TRANSPORTATION SERVICES, INC.
(Exact name of registrant as specified in its charter)
------------------------------
Delaware 71-0633135
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification Number)
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Highway 412 West
Tontitown, Arkansas 72770
(479) 361-9111
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
------------------------------
ROBERT W. WEAVER
President and Chief Executive Officer
P.A.M. Transportation Services, Inc.
Highway 412 West
Tontitown, Arkansas 72770
(479) 361-9111
(Name, address, including zip code, and telephone
number, including area code, of agent for service)
------------------------------
Copies Requested to:
MARLON F. STARR, ESQ. C. DOUGLAS BUFORD, JR., ESQ.
Smith, Gambrell & Russell, LLP Wright, Lindsey & Jennings LLP
1230 Peachtree Street, N.E., Suite 3100 200 West Capitol Avenue, Suite 2200
Atlanta, Georgia 30309-3592 Little Rock, Arkansas 72201
(404) 815-3500 (501) 371-0808
(404) 685-7053 (fax) (501) 376-9442 (fax)
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Approximate date of commencement of proposed sale to the public: As soon as
practicable after this Registration Statement becomes effective.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415, check the following box. [_]
If the registrant elects to deliver its latest annual report to security
holders, or a complete and legal facsimile thereof, pursuant to Item 11(a)(1) of
this Form, check the following box. [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
check the following box. [_]
CALCULATION OF REGISTRATION FEE
================================================ =============== ==================== =========================== ==================
Proposed Proposed maximum
Title of each class of securities to be Amount to be maximum offering aggregate offering price Amount of
registered registered (1) price per share (2) (2) registration fee
- ------------------------------------------------ --------------- -------------------- --------------------------- ------------------
Common stock, $.01 par value 3,996,250 $16.595 $66,317,769 $6,101.23
================================================ =============== ==================== =========================== ==================
(1) Includes 521,250 shares that the underwriters have the option to purchase to
cover over-allotments, if any.
(2) Estimated solely for the purpose of computing the registration fee in
accordance with rule 457(c) under the Securities Act based on the average of
the high and low reported sales prices on the Nasdaq National Market on
February 14, 2002.
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to Section 8(a), may
determine.
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++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+The information in this preliminary prospectus is not complete and may be +
+changed. We may not sell these securities until the registration statement +
+filed with the Securities and Exchange Commission is effective. This +
+preliminary prospectus is not an offer to sell these securities and it is not +
+ a solicitation of an offer to buy these securities in any jurisdiction where +
+such an offer or sale is not permitted. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
Subject to Completion, dated February 20, 2002
PROSPECTUS
3,475,000 Shares
P.A.M. TRANSPORTATION SERVICES, INC.
Common Stock
--------------------
We are selling 2,100,000 shares of our common stock. The selling
stockholders identified in this prospectus are selling an additional 1,375,000
shares. We will not receive any of the proceeds from the sale of shares by the
selling stockholders. Our common stock is traded on the Nasdaq National Market
under the symbol "PTSI."
On February 19, 2002, the last reported sale price of our common stock
on the Nasdaq National Market was $17.50.
You should consider the risks we have described in "Risk Factors"
beginning on page 5 before buying shares of our common stock.
--------------------
Per Share Total
--------- -----
Public offering price ....................................... $ $
Underwriting discount ....................................... $ $
Proceeds, before expenses, to us ............................ $ $
Proceeds, before expenses, to the selling stockholders ...... $ $
The underwriters may purchase up to an additional 521,250 shares from
us at the public offering price, less the underwriting discount, within 30 days
from the date of this prospectus to cover over-allotments.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
The underwriters expect to deliver the shares to purchasers on or
before __________ ___, 2002.
--------------------
Stephens Inc.
BB&T Capital Markets
A.G. Edwards & Sons, Inc.
The date of this prospectus is ______________, 2002.
TABLE OF CONTENTS
Page
----
Prospectus Summary ...................................................................................... 1
Risk Factors ............................................................................................ 5
Disclosure Regarding Forward-Looking Statements ......................................................... 8
Use of Proceeds ......................................................................................... 9
Dividend Policy ......................................................................................... 9
Common Stock Price Range ................................................................................ 10
Capitalization .......................................................................................... 11
Selected Consolidated Financial and Operating Data ...................................................... 12
Management's Discussion and Analysis of Financial Condition and Results of Operations ................... 14
Business ................................................................................................ 19
Management .............................................................................................. 24
Principal and Selling Stockholders ...................................................................... 25
Description of Capital Stock ............................................................................ 26
Shares Eligible for Future Sale ......................................................................... 28
Underwriting ............................................................................................ 29
Legal Matters ........................................................................................... 31
Experts ................................................................................................. 31
Where You Can Find More Information ..................................................................... 31
Index to Consolidated Financial Statements .............................................................. F-1
--------------------
You should rely only on the information contained in or incorporated by
reference in this prospectus. We have not, and the underwriters have not,
authorized any person to provide you with different information. You should not
rely on any information provided by anyone that is different or inconsistent. We
are not, and the underwriters are not, making an offer to sell these securities
in any jurisdiction where the offer or sale is not permitted. You should not
assume that the information in this prospectus and the documents incorporated by
reference is accurate as of any date other than their respective dates. Our
business, financial condition, results of operations and prospects may have
changed since those dates.
PROSPECTUS SUMMARY
This summary highlights information contained elsewhere in this
prospectus. Because it is a summary, it may not contain all of the information
that is important to you. We recommend that you read carefully this entire
prospectus, especially the section entitled "Where You Can Find More
Information" on page 30 and the section entitled "Risk Factors" beginning on
page 5, as well as the documents incorporated by reference in this prospectus,
before making a decision to invest in our common stock.
As used in this prospectus, the terms "P.A.M.," the "company," "we,"
"our" or "us" mean P.A.M. Transportation Services, Inc. and its subsidiaries.
Unless otherwise stated in this prospectus, we have assumed throughout
this prospectus that the underwriters' over-allotment option is not exercised.
Our Business
We are a leading truckload dry van carrier transporting general
commodities throughout the continental United States, as well as in the Canadian
provinces of Ontario and Quebec. We also provide transportation services in
Mexico through our gateways in Laredo and El Paso, Texas under agreements with
Mexican carriers.
Through our executive officers, who together have over 50 years
experience managing our company, we focus on providing a high level of service
and on becoming a preferred provider, or "core carrier," for our customers,
while strictly controlling costs. As a result, we have consistently had one of
the lowest operating ratios among publicly held truckload carriers.
Our business strategy is designed to achieve long-term profitable
growth. Since 1996, we have achieved substantial growth in revenues and net
income. We increased our operating revenues at a compound annual growth rate of
14.8%, from $113.0 million in 1996 to $225.8 million in 2001. During the same
period, we increased our net income at a compound annual growth rate of 24.9%,
from $3.3 million to $10.1 million. The key elements of our strategy for
achieving long-term profitable growth include:
Maintaining Dedicated Fleets and High Density Lanes. We continually
strive to maximize utilization and increase revenue per tractor while minimizing
our time and empty miles between loads. In this regard, we seek to provide
dedicated equipment to our customers where possible and to concentrate our
equipment in defined regions and disciplined traffic lanes. Dedicated fleets and
high density lanes enable us to:
. maintain consistent equipment capacity;
. provide a high level of service to our customers, including
time-sensitive delivery schedules;
. attract and retain drivers; and
. maintain a sound safety record as drivers travel familiar routes.
During 2001, approximately 61% of our operating revenues were generated through
dedicated equipment and we maintained an empty mile factor of 5.5%, figures
which management believes are among the best among publicly traded truckload
carriers.
Providing Superior and Flexible Customer Service. We believe our
service-oriented operation provides a base for long-term customer retention and
sources of recurring revenue. In addition, we believe that as consolidation
continues to be a trend in our industry, shippers will seek higher quality
providers. Our wide range of services includes dedicated fleet services,
just-in-time delivery, two-man driving teams, cross-docking and consolidation
programs, specialized trailers, and Internet-based customer access to delivery
status. These services combined with a decentralized regional operating strategy
allow us to quickly and reliably respond to the diverse needs of our customers,
and provide an advantage in securing new business. We also maintain ISO 9002
certification, which is
1
required by many of our larger customers to ensure that their truckload carriers
operate in accordance with approved quality assurance standards.
Employing Stringent Cost Controls. We believe that we operate with the
lowest cost per mile among publicly held truckload carriers. We focus intently
on controlling our costs while not sacrificing customer service. We maintain
this balance by scrutinizing all expenditures, minimizing non-driver personnel
(we had a driver to non-driver personnel ratio of 5.2:1 at December 31, 2001),
operating a late-model fleet of tractors and trailers to minimize maintenance
costs and enhance fuel efficiency, and adopting proven technology only when cost
justified.
Strategic Acquisitions. We continually evaluate strategic acquisition
opportunities, focusing on those that complement our existing business or that
could profitably expand our business or services. Since 1995, 48% of our revenue
growth has been attributable to acquisitions, while 52% has been attributable to
internal growth. We believe economic trends are driving further consolidation in
our industry. We have successfully integrated three acquisitions since 1995. Our
operational integration strategy is to centralize administrative functions of
acquired business at our headquarters, while maintaining the localized
operations of acquired businesses. We believe that allowing acquired businesses
to continue to operate under their pre-acquisition names and in their original
regions allows such businesses to maintain driver loyalty and customer
relationships.
Recent Developments
. 2001 Results of Operations. On February 8, 2002, we reported our
operating results for the fiscal year ended December 31, 2001. For the year
ended December 31, 2001, we had operating revenues of $225.8 million, an
increase of $20.6 million, or 10.0%, over operating revenues of $205.2 million
for the fiscal year ended December 31, 2000. Net income for the year ended
December 31, 2001 was $10.1 million, or $1.18 per basic and diluted share, an
increase of $1.4 million, or 16.3%, from $8.7 million, or $1.02 per basic and
diluted share, for the year ended December 31, 2000. Our operating ratio (total
operating expenses as a percentage of total operating revenues) was 90.6% in
2001 compared to 90.5% in 2000.
. Proposed Acquisition of Assets of East Coast Transport, Inc. On
January 18, 2002, we announced that we had entered into a non-binding letter of
intent to purchase for cash certain assets of East Coast Transport, Inc., a
freight brokerage operation based in Paulsboro, New Jersey. East Coast has
represented to us that, for the year ended December 31, 2001, it had revenues of
approximately $32 million. Consummation of the transaction is subject to
satisfactory completion of a due diligence investigation, negotiation of a
definitive agreement, and receipt of various regulatory approvals.
Our principal executive offices are located at Highway 412 West,
Tontitown, Arkansas 72770, and our telephone number is (479) 361-9111.
Information contained on our website does not form a part of this prospectus.
2
The Offering
Common stock being offered by us ............................... 2,100,000 shares
Common stock being offered by the selling stockholders ......... 1,375,000 shares
Common stock to be outstanding after the offering .............. 10,726,957 shares (1)
Use of proceeds ................................................ We estimate that our net proceeds from the
shares of common stock we sell in this
offering, after deducting underwriting
discounts and other estimated expenses,
will be approximately $34.7 million. We
intend to use these net proceeds for the
repayment of indebtedness and for general
corporate purposes. We will not receive
any proceeds from the sale of shares sold
by the selling stockholders.
Nasdaq National Market symbol .................................. PTSI
__________________
(1) Based on 8,626,957 shares outstanding as of February 7, 2002. This number
does not include 88,000 shares of common stock issuable upon the exercise
of stock options outstanding on February 7, 2002.
3
Summary Consolidated Financial Data
The summary consolidated financial data as of and for the fiscal years
ended December 31, 1997 through December 31, 2000 are derived from our audited
consolidated financial statements. The summary consolidated financial data as of
and for the nine months ended September 30, 2000 and 2001 are derived from our
unaudited interim consolidated financial statements and, in the opinion of our
management, include all adjustments, consisting of normal recurring accruals,
necessary for a fair presentation of the results of operations for the interim
period presented. The operating results for the nine months ended September 30,
2000 and 2001 are not necessarily indicative of the results that may be expected
for the entire fiscal year. You should also read the "Management's Discussion
and Analysis of Financial Condition and Results of Operations" section of this
prospectus and our financial statements.
Nine Months Ended
Year Ended December 31, September 30,
------------------------------------------- -----------------------
1997 1998 1999 2000 2000 2001
------------------------------------------- -----------------------
(unaudited)
(in thousands, except per share amounts and ratios)
Statement of Operations Data:
Operating revenues ................................ $127,211 $143,164 $207,381 $205,245 $154,282 $169,530
Operating expenses ................................ 113,596 126,104 182,926 185,845 139,968 153,554
-------- -------- -------- -------- -------- --------
Operating income .................................. 13,615 17,060 24,455 19,400 14,314 15,976
Interest expense .................................. 3,423 3,830 5,650 5,048 3,906 3,455
Income before income taxes ........................ 10,192 13,231 18,805 14,352 10,408 12,521
Income taxes ...................................... 3,892 5,158 7,536 5,694 4,116 4,995
Net income ........................................ $ 6,300 $ 8,073 $ 11,269 $ 8,658 $ 6,292 $ 7,526
======== ======== ======== ======== ======== ========
Net income per common share:
Basic ......................................... $ 0.77 $ 0.97 $ 1.34 $ 1.02 $ 0.74 $ 0.88
======== ======== ======== ======== ======== ========
Diluted ....................................... $ 0.76 $ 0.96 $ 1.33 $ 1.02 $ 0.74 $ 0.88
======== ======== ======== ======== ======== ========
Average common shares outstanding - Basic ......... 8,192 8,306 8,393 8,455 8,450 8,525
Average common shares outstanding - Diluted ....... 8,290 8,444 8,488 8,518 8,518 8,559
Other Financial Data:
Operating ratio/(1)/ .............................. 89.3% 88.1% 88.2% 90.5% 90.7% 90.6%
Return on equity/(2)/ ............................. 21.2% 21.6% 23.8% 15.0% 14.8% 15.2%
EBITDA/(3)/ ....................................... $ 27,050 $ 31,503 $ 43,274 $ 38,337 $ 28,665 $ 31,064
Capital expenditures, net ......................... $ 16,541 $ 38,273 $ 38,812 $ 17,890 $ 12,887 $ 30,710
September 30, 2001
Actual As Adjusted/(4)/
-------------------------------
Balance Sheet Data: (unaudited)
(in thousands)
Total assets ............................................................... $186,517 $ 186,517
Long-term debt, including current portion .................................. 67,047 32,343
Stockholders' equity ....................................................... 69,949 104,653
_______________________
/(1)/ Operating ratio is defined as total operating expenses as a percentage of
total operating revenues.
/(2)/ Return on equity for the nine-month periods ended September 30, 2000 and
2001 has been annualized. Return on equity is defined as net income
divided by average stockholders' equity.
/(3)/ EBITDA is defined as operating income plus depreciation and amortization.
We have included data with respect to EBITDA because it is commonly used
as a measurement of financial performance by investors to analyze and
compare companies on the basis of operating performance. EBITDA is not a
measure of financial performance under generally accepted accounting
principles (GAAP) and should not be considered an alternative to operating
income, as determined in accordance with GAAP, as an indicator of our
operating performance, or to cash flows from operating activities, as
determined in accordance with GAAP, as a measurement of our liquidity.
/(4)/ Gives effect to our sale of 2,100,000 shares of common stock at an assumed
offering price of $17.50 per share and our application of the net proceeds
as described in the "Use of Proceeds" section of this prospectus.
4
Risk Factors
An investment in our common stock involves risks. You should consider
carefully the following information about these risks, together with the other
information contained in this prospectus, including the financial statements and
notes thereto, and the documents incorporated by reference in this prospectus,
before buying shares of our common stock.
Our business is subject to general economic and business factors that
are largely out of our control, any of which could have a material adverse
effect on our operating results.
Our business is dependent upon a number of factors that may have a
material adverse effect on the results of our operations, many of which are
beyond our control. These factors include significant increases or rapid
fluctuations in fuel prices (which affected our operating performance in 2000
and 2001), excess capacity in the trucking industry, surpluses in the market for
used equipment, interest rates, fuel taxes, license and registration fees, and
insurance premiums, self-insurance levels, and difficulty in attracting and
retaining qualified drivers and independent contractors.
We are also affected by recessionary economic cycles and downturns in
customers' business cycles, particularly in market segments and industries, such
as the automotive industry, where we have a significant concentration of
customers. Economic conditions may adversely affect our customers and their
ability to pay for our services. It is not possible to predict the medium- or
long-term effects of the September 11, 2001 terrorist attacks and subsequent
events on the economy or on customer confidence in the United States, or the
impact, if any, on our future results of operations.
We operate in a highly competitive and fragmented industry, and our
business may suffer if we are unable to adequately address downward pricing
pressures and other factors that may adversely affect our ability to compete
with other carriers.
Numerous competitive factors could impair our ability to maintain our
current profitability. These factors include the following:
. we compete with many other truckload carriers of varying sizes
and, to a lesser extent, with less-than-truckload carriers and
railroads, some of which have more equipment and greater capital
resources than we do;
. some of our competitors periodically reduce their freight rates to
gain business, especially during times of reduced growth rates in
the economy, which may limit our ability to maintain or increase
freight rates, maintain our margins or maintain significant growth
in our business;
. many customers reduce the number of carriers they use by selecting
so-called "core carriers" as approved service providers, and in
some instances we may not be selected;
. many customers periodically accept bids from multiple carriers for
their shipping needs, and this process may depress freight rates
or result in the loss of some of our business to competitors;
. the trend toward consolidation in the trucking industry may create
other large carriers with greater financial resources and other
competitive advantages relating to their size and with whom we may
have difficulty competing;
. advances in technology require increased investments to remain
competitive, and our customers may not be willing to accept higher
freight rates to cover the cost of these investments;
. competition from Internet-based and other logistics and freight
brokerage companies may adversely affect our customer
relationships and freight rates; and
5
. economies of scale that may be passed on to smaller carriers by
procurement aggregation providers may improve their ability to
compete with us.
We are highly dependent on our major customers, the loss of one or more
of which could have a material adverse effect on our business.
A significant portion of our revenue is generated from our major
customers. For 2001, our top five customers, based on revenue, accounted for
approximately 59% of our revenue, and our largest customer, General Motors
Corporation, accounted for approximately 40% of our revenue. We also provide
transportation services to other manufacturers who are suppliers for automobile
manufacturers. As a result, concentration of our business within the automobile
industry is greater than the concentration in a single customer. Approximately
55% of our revenues for 2001 were derived from transportation services provided
to the automobile industry.
Generally, we do not have long-term contractual relationships with our
major customers, and we cannot assure you that our customer relationships will
continue as presently in effect. A reduction in or termination of our services
by our major customers would have a material adverse effect on our business and
operating results.
We may be unable to successfully integrate businesses we acquire into
our operations.
Integrating businesses we acquire may involve unanticipated delays,
costs or other operational or financial problems. Successful integration of the
businesses we acquire depends on a number of factors, including our ability to
transition acquired companies to our management information systems. In
integrating businesses we acquire, we may not achieve expected economies of
scale or profitability or realize sufficient revenues to justify our investment.
We also face the risk that an unexpected problem at one of the companies we
acquire will require substantial time and attention from senior management,
diverting management's attention from other aspects of our business. We cannot
be certain that our management and operational controls will be able to support
us as we grow.
Ongoing insurance and claims expenses could significantly reduce our
earnings.
After several years of aggressive pricing, insurance carriers have
begun to raise premiums for most trucking companies. We experienced an increase
of approximately $1.0 million in insurance premiums for 2002 and could
experience an additional increase in our insurance and claims expense after our
current coverage expires in December 2002. If these expenses increase, and we
are unable to offset the increase with higher freight rates, our earnings could
be materially and adversely affected.
Difficulty in attracting drivers could affect our profitability and
ability to grow.
Periodically, the transportation industry experiences difficulty in
attracting and retaining qualified drivers, including independent contractors,
resulting in intense competition for drivers. We have from time to time
experienced under-utilization and increased expenses due to a shortage of
qualified drivers. If we are unable to continue to attract drivers and contract
with independent contractors, we could be required to adjust our driver
compensation package or let trucks sit idle, which could adversely affect our
growth and profitability.
If we are unable to retain our key employees, our business, financial
condition and results of operations could be harmed.
We are highly dependent upon the services of the following key
employees: Robert W. Weaver, our President and Chief Executive Officer; W. Clif
Lawson, our Executive Vice President and Chief Operating Officer; and Larry J.
Goddard, our Vice President and Chief Financial Officer. We do not maintain
key-man life insurance on any of these executives. The loss of any of their
services could have a material adverse effect on our operations and future
profitability. We must continue to develop and retain a core group of managers
if we are to realize our goal of expanding our operations and continuing our
growth. We cannot assure you that we will be able to do so.
6
Matthew T. Moroun, one of our directors and our largest stockholder,
will continue to control a large portion of our stock following this offering
and will continue to have significant influence over us, including the outcome
of key transactions, such as a change of control.
Matthew T. Moroun beneficially owns approximately 65.3% of our
outstanding common stock before this offering and will beneficially own
approximately 41.4% of our outstanding common stock after this offering.
Accordingly, he will continue to have significant influence over decisions
requiring stockholder approval, including election of our board of directors,
the adoption or extension of anti-takeover provisions, mergers, and other
business combinations. This concentration of ownership could limit the price
that some investors might be willing to pay in the future for shares of our
common stock, and could have the effect of making it more difficult, preventing
or delaying a change of control of P.A.M., which other stockholders may favor.
In addition, Mr. Moroun may resell these shares pursuant to Rule 144 of the
Securities Act. Sales of a large number of these shares could depress our stock
price.
Increased prices for new revenue equipment and decreases in the value
of used revenue equipment may adversely affect our earnings and cash flows.
In the past, we have acquired new tractors and trailers at favorable
prices and traded or disposed of them at prices significantly higher than
current market values. There is currently a large supply of used tractors and
trailers on the market, which has depressed the market value of used equipment
to levels significantly below the values we historically received. In addition,
some manufacturers have communicated their intention to raise the prices of new
equipment. If either or both of these events occur, we may increase our
depreciation expense or recognize less gain (or a loss) on the disposition of
our tractors and trailers. This could adversely affect our earnings and cash
flows.
We have significant ongoing capital requirements that could affect our
profitability if we are unable to generate sufficient cash from operations.
The trucking industry is very capital intensive. If we are unable to
generate sufficient cash from operations in the future, we may have to limit our
growth, enter into financing arrangements, or operate our revenue equipment for
longer periods, any of which could have a material adverse affect on our
profitability.
Our stock price is volatile, which could cause you to lose a
significant portion of your investment.
The market price of our common stock could be subject to significant
fluctuations in response to certain factors, such as variations in our
anticipated or actual results of operations, the operating results of other
companies in the transportation industry, changes in conditions affecting the
economy generally, including incidents of terrorism, analyst reports, general
trends in the industry, sales of common stock by insiders, as well as other
factors unrelated to our operating results. Volatility in the market price of
our common stock may prevent you from being able to sell your shares at or above
the price you paid for your shares.
Our operations are subject to various environmental laws and
regulations, the violation of which could result in substantial fines or
penalties.
We are subject to various environmental laws and regulations dealing
with the handling of hazardous materials, underground fuel storage tanks, and
discharge and retention of stormwater. We operate in industrial areas, where
truck terminals and other industrial activities are located, and where
groundwater or other forms of environmental contamination could occur. We also
maintain bulk fuel storage and fuel islands at three of our facilities. Our
operations involve the risks of fuel spillage or seepage, environmental damage,
and hazardous waste disposal, among others. If we are involved in a spill or
other accident involving hazardous substances, or if we are found to be in
violation of applicable laws or regulations, it could have a materially adverse
effect on our business and operating results. If we should fail to comply with
applicable environmental regulations, we could be subject to substantial fines
or penalties and to civil and criminal liability.
7
We operate in a highly regulated industry and increased costs of
compliance with, or liability for violation of, existing or future regulations
could have a material adverse effect on our business.
The U.S. Department of Transportation and various state agencies
exercise broad powers over our business, generally governing such activities as
authorization to engage in motor carrier operations, safety, and financial
reporting. We may also become subject to new or more restrictive regulations
relating to fuel emissions, drivers' hours in service, and ergonomics.
Compliance with such regulations could substantially impair equipment
productivity and increase our operating expenses.
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements, including
statements about our operating and growth strategies, our expected financial
position and operating results, industry trends, our capital expenditure and
financing plans and similar matters. Such forward-looking statements are found
under the headings "Management's Discussion and Analysis of Financial Condition
and Results of Operations - Liquidity and Capital Resources," "Business -
Business Strategy," "Business - Industry" and "Business - Revenue Equipment." In
those and other portions of this prospectus, the words "believe," "may," "will,"
"estimate," "continue," "anticipate," "intend," "expect," "project" and similar
expressions, as they relate to us, our management, and our industry are intended
to identify forward-looking statements. We have based these forward-looking
statements largely on our current expectations and projections about future
events and financial trends affecting our business. Actual results may differ
materially. Some of the risks, uncertainties and assumptions about P.A.M. that
may cause actual results to differ from these forward-looking statements are
described above in "Risk Factors" and below in "Management's Discussion and
Analysis of Financial Condition and Results of Operations."
All forward-looking statements attributable to us, or to persons acting
on our behalf, are expressly qualified in their entirety by this cautionary
statement.
We undertake no obligation to publicly update or revise any
forward-looking statements, whether as a result of new information, future
events or otherwise. In light of these risks and uncertainties, the
forward-looking events and circumstances discussed in this prospectus might not
transpire.
8
USE OF PROCEEDS
We estimate that the net proceeds to us in this offering, after
deducting underwriting discounts and other estimated expenses, will be
approximately $34.7 million (assuming a public offering price of $17.50 per
share). We expect to use approximately $33.0 million of our net proceeds to
repay installment notes we previously entered into for purchases of tractors and
trailers and approximately $1.7 million to reduce indebtedness outstanding under
a revolving line of credit with a bank.
Installment Notes. As of February 15, 2002, we had approximately $33.0
million of indebtedness outstanding under various installment notes we
previously entered into in connection with purchases of tractors and trailers.
These installment notes have terms ranging from 36 to 48 months with various
maturity dates through March 1, 2003. The installment notes bear interest at
rates ranging from 5.75% to 7.63%, with a weighted average interest rate of
6.32% at December 31, 2001.
Revolving Line of Credit. We maintain two revolving lines of credit
with separate financial institutions (Line A and Line B), each providing for
maximum borrowings of $20.0 million. Line B is fully utilized, with $20.0
million outstanding. Line A had $14.4 million outstanding at February 15, 2002.
We intend to use any net proceeds remaining after repayment of the installment
notes to reduce indebtedness outstanding under Line A. Funds borrowed under Line
A are secured by our accounts receivable and are subject to borrowing
limitations. Amounts outstanding under Line A bear interest at LIBOR (as of the
first day of each month) plus 1.40%. Amounts borrowed may be repaid and borrowed
over the life of the revolving line of credit, subject to the borrowing
restrictions, with a final maturity date of May 31, 2003.
We will not receive any proceeds from the sale of common stock by the
selling stockholders.
DIVIDEND POLICY
We have not paid any dividends on our common stock to date and we do
not anticipate paying any dividends on our common stock in the foreseeable
future. We currently intend to retain all of our earnings, if any, for use in
the expansion and development of our business.
9
COMMON STOCK PRICE RANGE
Our common stock is listed on the Nasdaq National Market under the
symbol "PTSI." The table below shows the range of reported sale prices on the
Nasdaq National Market for the periods indicated.
Common Stock Price
------------------
High Low
---- ---
Year ending December 31, 2002
First Quarter (through February 19, 2002) .............. $18.90 $12.75
Year ended December 31, 2001
Fourth Quarter ......................................... $12.85 $ 8.60
Third Quarter .......................................... 12.00 9.10
Second Quarter ......................................... 10.00 5.88
First Quarter .......................................... 9.84 7.00
Year ended December 31, 2000
Fourth Quarter ......................................... $10.00 $ 7.63
Third Quarter .......................................... 10.63 8.25
Second Quarter ......................................... 11.00 8.00
First Quarter .......................................... 11.44 8.50
On February 19, 2002, the last reported sale price for our common stock
was $17.50 per share. As of February 7, 2002, there were approximately 260
holders of record of our common stock.
10
CAPITALIZATION
The following table sets forth our capitalization as of September 30, 2001
on:
. an actual basis; and
. an adjusted basis, giving effect to:
. our sale of 2,100,000 shares of our common stock in this offering,
at an assumed public offering price of $17.50 per share, after
deducting underwriting discounts and estimated offering expenses,
and
. our repayment of approximately $33.0 million of installment debt
previously incurred for equipment purchases and $1.7 million of
indebtedness under a bank line of credit with the net proceeds from
this offering.
The information regarding stockholders' equity in the table below does not
include 112,000 shares issuable upon the exercise of options granted by us
outstanding on September 30, 2001. The following table should be read together
with the unaudited interim financial statements and the related notes included
elsewhere in this prospectus.
September 30, 2001
--------------------------------
As
Actual Adjusted
---------- ------------
(unaudited)
(in thousands)
Current maturities of long-term debt ................................. $ 15,550 $ --
============ ============
Long-term debt, less current portion ................................. $ 51,497 $ 32,343
Stockholders' equity:
Common stock, $0.01 par value: 20,000,000 shares
authorized; 8,605,957 shares issued and outstanding;
10,705,957 shares issued and outstanding, as adjusted .......... 86 107
Preferred stock, $0.01 par value: 10,000,000 shares
authorized; no shares issued and outstanding ................... -- --
Additional paid-in capital ....................................... 20,421 55,104
Accumulated other comprehensive income (loss) .................... (571) (571)
Retained earnings .................................................... 50,013 50,013
------------ ------------
Total stockholders' equity ........................................... 69,949 104,653
------------ ------------
Total capitalization ................................................. $ 121,446 $ 136,996
============ ============
11
SELECTED CONSOLIDATED FINANCIAL AND OPERATING DATA
The selected consolidated financial and operating data as of and for the
fiscal years ended December 31, 1996 through December 31, 2000 are derived from
our audited consolidated financial statements. The selected financial data as of
and for the nine months ended September 30, 2000 and 2001 are derived from our
unaudited interim consolidated financial statements and, in the opinion of our
management, include all adjustments, consisting of normal recurring accruals,
necessary for a fair presentation of the results of operations for the interim
period presented. The operating results for the nine months ended September 30,
2000 and 2001 are not necessarily indicative of the results that may be expected
for the entire fiscal year. Since the information presented below is only a
summary and does not provide all of the information in our financial statements,
including the related notes, you should read the "Management's Discussion and
Analysis of Financial Condition and Results of Operations" section of this
prospectus and our financial statements.
Nine Months Ended
Year Ended December 31, September 30,
------------------------------------------------------ --------------------
1996 1997 1998 1999 2000 2000 2001
------------------------------------------------------ --------------------
(in thousands, except per share amounts and ratios) (unaudited)
Statement of Operations Data:
Operating revenues ...................... $ 113,021 $ 127,211 $ 143,164 $ 207,381 $ 205,245 $ 154,282 $ 169,530
Operating expenses:
Salaries, wages and benefits ........ 52,444 57,662 65,169 90,248 90,680 68,187 74,960
Operating supplies .................. 21,909 24,666 26,511 35,246 37,728 28,327 33,317
Rent and purchased transportation ... 1,824 1,655 1,082 13,309 12,542 9,429 8,434
Depreciation and amortization ....... 11,999 12,995 14,003 18,392 18,806 14,253 14,989
Operating taxes and licenses ........ 6,734 7,581 8,388 11,334 11,140 8,324 8,878
Insurance and claims ................ 5,004 5,571 6,069 7,945 8,674 6,610 7,489
Communications and utilities ........ 1,090 1,001 1,583 2,365 2,234 1,685 1,662
Other/(1)/ .......................... 2,077 2,394 3,131 4,388 3,756 2,851 3,634
(Gain) loss on sale or disposal of
property ........................ 375 71 168 (301) 285 302 191
------------------------------------------------------ --------------------
Total operating expenses ................ 103,456 113,596 126,104 182,926 185,845 139,968 153,554
------------------------------------------------------ --------------------
Operating income ........................ 9,565 13,615 17,060 24,455 19,400 14,314 15,976
Interest expense ........................ (4,137) (3,423) (3,830) (5,650) (5,048) (3,906) (3,455)
Other ................................... 31 - 1 - - - -
------------------------------------------------------ --------------------
Income before income taxes .............. 5,459 10,192 13,231 18,805 14,352 10,408 12,521
Income taxes ............................ 2,147 3,892 5,158 7,536 5,694 4,116 4,995
------------------------------------------------------ --------------------
Net income .............................. $ 3,312 $ 6,300 $ 8,073 $ 11,269 $ 8,658 $ 6,292 $ 7,526
========= ========= ========= ========= ========== ========= =========
Earnings per common share:
Basic ............................... $ 0.66 $ 0.77 $ 0.97 $ 1.34 $ 1.02 $ 0.74 $ 0.88
========= ========= ========= ========= ========== ========= =========
Diluted ............................. $ 0.44 $ 0.76 $ 0.96 $ 1.33 $ 1.02 $ 0.74 $ 0.88
========= ========= ========= ========= ========== ========= =========
Average common shares outstanding -
Basic ............................... 5,035 8,192 8,306 8,393 8,455 8,450 8,525
Average common shares outstanding -
Diluted ............................. 7,578 8,290 8,444 8,488 8,518 8,518 8,559
Other Financial Data:
Operating ratio/(2)/..................... 91.5% 89.3% 88.1% 88.2% 90.5% 90.7% 90.6%
Return on equity/(3)/.................... 14.9% 21.2% 21.6% 23.8% 15.0% 14.8% 15.2%
EBITDA/(4)/.............................. $ 21,972 $ 27,050 $ 31,503 $ 43,274 $ 38,337 $ 28,665 $ 31,064
Capital expenditures, net ............... $ 17,901 $ 16,541 $ 38,273 $ 38,812 $ 17,890 $ 12,887 $ 30,710
Footnotes on following page
12
Nine Months
Ended September
Year Ended December 31, 30,
------------------------------------------------------------ -------------------
1996 1997 1998 1999 2000 2000 2001
------------------------------------------------------------ -------------------
(unaudited)
Operating Data:
Average number of truckloads per week .......... 2,437 2,874 3,425 4,885 5,169 5,113 5,298
Average miles per trip ......................... 845 786 767 734 713 707 773
Average miles per tractor ...................... 122,250 125,404 125,569 128,966 128,936 96,535 100,154
Average revenue per tractor per day ............ $ 537 $ 539 $ 543 $ 570 $ 579 $ 577 $ 593
Average revenue per loaded mile ................ $ 1.17 $ 1.17 $ 1.15 $ 1.18 $ 1.18 $ 1.19 $ 1.17
Empty mile factor .............................. 6.1% 5.8% 5.5% 5.4% 5.6% 5.8% 5.2%
At end of period:
Total company-owned/leased tractors/(5)/........ 912 975 1,127 1,468 1,413 1,387 1,590
Average age of all tractors (in years) ......... 1.85 1.94 1.74 1.64 1.72 1.62 1.73
Total trailers/(6)/............................. 2,398 2,678 2,784 3,846 3,759 3,700 3,941
Average age of trailers (in years) ............. 2.60 2.85 3.31 3.97 4.66 4.44 5.08
Number of employees ............................ 1,438 1,446 1,656 1,899 2,154 2,265 2,440
Ratio of drivers to non-driver
personnel ...................................... 4.0:1 4.7:1 5.1:1 4.0:1 5.1:1 5.4:1 5.8:1
At
At December 31, September 30,
------------------------------------------------------------ -------------------
1996 1997 1998 1999 2000 2000 2001
------------------------------------------------------------ -------------------
Balance Sheet Data: (in thousands) (unaudited)
$
Total assets ................................... $ 94,895 $100,688 $126,471 $168,961 164,518 $166,871 $186,517
Long-term debt, including current
portion ........................................ 51,787 43,770 58,178 77,888 59,826 60,763 67,047
Stockholders' equity ........................... 26,312 33,162 41,457 53,365 62,210 59,844 69,949
- ---------------------------------------
/(1)/ Includes amortization of non-competition agreements in the amounts of
$408,000, $440,000, $440,000, $427,000, and $131,000 for the years 1996
through 2000, respectively, and $98,000 and $99,000 for the nine months
ended September 30, 2000 and 2001, respectively.
/(2)/ Operating ratio is defined as total operating expenses as a percentage of
total operating revenues.
/(3)/ Return on equity for the nine-month periods ended September 30, 2000 and
2001 has been annualized. Return on equity is defined as net income
divided by average stockholders' equity.
/(4)/ EBITDA is defined as operating income plus depreciation and amortization.
We have included data with respect to EBITDA because it is commonly used
as a measurement of financial performance by investors to analyze and
compare companies on the basis of operating performance. EBITDA is not a
measure of financial performance under generally accepted accounting
principles (GAAP) and should not be considered an alternative to
operating income, as determined in accordance with GAAP, as an indicator
of our operating performance, or to cash flows from operating activities,
as determined in accordance with GAAP, as a measurement of our liquidity.
/(5)/ For years 1996 through 2000, includes 126, 94, 94, 148 and 117
owner-operator tractors, respectively. For the nine months ended
September 30, 2000 and 2001, includes 130 owner-operator tractors.
/(6)/ For the years 1996 through 1999, includes 74, 66, 46 and 21 trailers
leased from an affiliate of our majority stockholder.
13
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with
the accompanying financial statements and related notes included elsewhere and
incorporated by reference in this prospectus. The "Liquidity and Capital
Resources" section below contains forward-looking information. Our actual
results may differ significantly from the results suggested by these
forward-looking statements. Some factors that may cause our results to differ
from these statements are described in the "Risk Factors" section of this
prospectus.
Results of Operations
The following table sets forth the percentage relationship of revenue and
expense items to operating revenues for the periods indicated.
Nine Months Ended
Year Ended December 31, September 30,
------------------------------------ ----------------------
1998 1999 2000 2000 2001
---------- ---------- ---------- ---------- ---------
Operating revenues .................................... 100.0% 100.0% 100.0% 100.0% 100.0%
Operating expenses:
Salaries, wages and benefits ...................... 45.5 43.5 44.2 44.2 44.2
Operating supplies ................................ 18.5 17.0 18.4 18.4 19.7
Rent and purchased transportation ................. 0.8 6.4 6.1 6.1 5.0
Depreciation and amortization ..................... 9.8 8.9 9.2 9.2 8.8
Operating taxes and licenses ...................... 5.9 5.5 5.4 5.4 5.2
Insurance and claims .............................. 4.2 3.8 4.2 4.3 4.4
Communications and utilities ...................... 1.1 1.1 1.1 1.1 1.0
Other ............................................. 2.2 2.1 1.8 1.8 2.2
(Gain) loss on sale or disposal of property ....... 0.1 (0.1) 0.1 0.2 0.1
---------- ---------- ---------- ---------- ---------
Total operating expenses .............................. 88.1 88.2 90.5 90.7 90.6
---------- ---------- ---------- ---------- ---------
Operating income ...................................... 11.9 11.8 9.5 9.3 9.4
Interest expense ...................................... (2.7) (2.7) (2.5) (2.5) (2.0)
---------- ---------- ---------- ---------- ---------
Income before income taxes ............................ 9.2 9.1 7.0 6.8 7.4
Federal and state income taxes ........................ 3.6 3.6 2.8 2.7 2.9
---------- ---------- ---------- ---------- ---------
Net income ............................................ 5.6% 5.5% 4.2% 4.1% 4.4%
========== ========== ========== ========== =========
Nine Months Ended September 30, 2001 Compared to Nine Months Ended September 30,
2000
For the nine months ended September 30, 2001, revenues increased 9.9% to
$169.5 million as compared to $154.3 million for the nine months ended September
30, 2000. The increase was due to improved utilization of existing revenue
equipment and an increase in the average number of tractors from 1,418 in the
first nine months of 2000 to 1,540 in the first nine months of 2001. Improved
utilization of existing revenue equipment resulted in a 2.8% increase in average
revenue generated per tractor each work day from $577 in the first nine months
of 2000 to $593 in the first nine months of 2001.
Operating supplies and expenses increased from 18.4% of revenues in the
first nine months of 2000 to 19.7% of revenues in the first nine months of 2001.
The increase relates to increased equipment repair costs and to an increase in
fuel costs of 0.6%, net of fuel surcharges passed on to customers.
Rent and purchased transportation decreased from 6.1% of revenues in the
first nine months of 2000 to 5.0% of revenues in the first nine months of 2001.
The decrease relates primarily to a decrease in amounts paid to other
transportation companies in the form of brokerage fees.
Other expenses increased from 1.8% of revenues in the first nine months of
2000 to 2.1% of revenues in the first nine months of 2001. The increase is due
to an increase in our allowance for doubtful accounts.
14
Depreciation and amortization decreased from 9.2% of revenues in the first
nine months of 2000 to 8.8% of revenues in the first nine months of 2001. The
primary reason for the decrease was increased utilization of existing revenue
equipment.
Our operating ratio decreased to 90.6% for the first nine months of 2001
from 90.7% for the first nine months of 2000, as a result of the factors
described above.
Our effective tax rate increased from 39.5% in the first nine months of
2000 to 39.9% in the first nine months of 2001, which, combined with increased
revenues, resulted in an increase in the provision for income taxes from $4.1
million for the first nine months of 2000 to $5.0 million for the first nine
months of 2001.
Net income increased to $7.5 million, or 4.4% of revenues, in the first
nine months of 2001 from $6.3 million, or 4.1% of revenues in the first nine
months of 2000, representing an increase in diluted net income per share to $.88
in the first nine months of 2001 from $.74 in the first nine months of 2000.
2000 Compared to 1999
For the year ended December 31, 2000, revenues were $205.2 million as
compared to $207.4 million for the year ended December 31, 1999. The decrease
relates primarily to a decrease in the average number of tractors from 1,445 in
1999 to 1,423 in 2000. The decrease in revenue from fewer tractors was partially
offset by an increase in our utilization (revenue per tractor per work day),
which increased 1.6% from $570 in 1999 to $579 in 2000.
Our operating ratio increased from 88.2% in 1999 to 90.5% in 2000.
Salaries, wages and benefits increased from 43.5% of revenues in 1999 to
44.2% of revenues in 2000. The increase relates primarily to an increase in
driver pay packages early in the third quarter of 2000.
Operating supplies and expenses increased from 17.0% of revenues in 1999 to
18.4% of revenues in 2000. The increase relates primarily to an increase in fuel
costs of 1.3% of revenues net of a fuel surcharge passed to customers.
Insurance and claims increased from 3.8% of revenues in 1999 to 4.2% of
revenues in 2000. The increase relates primarily to an increase in rates for
auto liability insurance coverage.
Our effective tax rate decreased from 40.1% in 1999 to 39.7% in 2000.
Net income decreased to $8.6 million, or 4.2% of revenues, in 2000 from
$11.3 million, or 5.5% of revenues in 1999, representing a decrease in diluted
net income per share to $1.02 in 2000 from $1.33 in 1999.
1999 Compared to 1998
For the year ended December 31, 1999, revenues increased 44.9% to $207.4
million as compared to $143.2 million for the year ended December 31, 1998. Our
utilization (revenue per tractor per work day) increased 5.0% from $543 in 1998
to $570 in 1999.
Our operating ratio increased from 88.1% in 1998 to 88.2% in 1999.
Salaries, wages and benefits decreased from 45.5% of revenues in 1998 to
43.5% of revenues in 1999. The decrease relates primarily to the brokerage
operations of Decker Transport in which revenues are generated through the use
of outside transportation services and not our paid drivers.
Operating supplies and expenses decreased from 18.5% of revenues in 1998 to
17.0% of revenues in 1999. The decrease, which was partially offset by an
increase in fuel costs, relates primarily to costs associated with the Decker
brokerage operations being combined and paid to other transportation companies
in the form of purchased transportation.
15
Rent and purchased transportation increased from 0.8% of revenues in
1998 to 6.4% of revenues in 1999. The increase relates primarily to the purchase
of transportation services from other transportation companies in order to
support brokerage operations.
Depreciation and amortization decreased from 9.8% of revenues in 1998
to 8.9% of revenues in 1999. The decrease relates primarily to the utilization
of outside transportation companies' drivers and equipment in order to perform
brokerage activities.
Our effective tax rate increased from 39.0% in 1998 to 40.1% in 1999.
This increase is related to payments made to Decker drivers in the form of a per
diem, which is only partially deductible for federal and state income tax
purposes.
Net income increased to $11.3 million, or 5.5% of revenues, in 1999
from $8.1 million, or 5.6% of revenues in 1998, representing an increase in
diluted net income per share to $1.33 in 1999 from $.96 in 1998.
Quarterly Results of Operations
The following table presents selected consolidated financial
information for each of our last eight fiscal quarters through September 30,
2001. The information has been derived from unaudited consolidated financial
statements that, in the opinion of management, reflect all adjustments,
consisting of normal recurring adjustments, necessary for a fair presentation of
the quarterly information.
Quarter Ended
----------------------------------------------------------------------------------
Dec. 31, Mar. 31, June 30, Sept. 30, Dec. 31, Mar. 31, June 30, Sept. 30,
1999 2000 2000 2000 2000 2001 2001 2001
----------------------------------------------------------------------------------
(unaudited)
(in thousands, except earnings per share data)
Operating revenues .......... $51,032 $54,147 $53,034 $47,100 $50,964 $58,406 $57,462 $53,662
Total operating expenses .... 45,850 49,253 46,965 43,749 45,878 52,861 51,502 49,192
Operating income ............ 5,182 4,894 6,069 3,351 5,086 5,545 5,960 4,470
Net income .................. 2,373 2,128 2,820 1,344 2,366 2,639 2,885 2,002
Earnings per common share:
Basic ................... $ .28 $ .25 $ .33 $ .16 $ .28 $ .31 $ .34 $ .23
Diluted ................. .28 .25 .33 .16 .28 .31 .34 .23
Liquidity and Capital Resources
During the first nine months of 2001, we generated $23.4 million in
cash from operating activities. Investing activities used $30.6 million in cash
in the first nine months of 2001. Financing activities generated $8.0 million in
the first nine months of 2001, primarily from long-term borrowings.
During 2000, we generated $32.5 million in cash from operating
activities. Investing activities used $17.7 million in cash during 2000 compared
to $47.8 million and $38.3 million in 1999 and 1998, respectively. The cash used
in all three years related primarily to the purchase of revenue equipment used
in our operations. Financing activities used $17.9 million in cash during 2000
primarily for the payment of long-term debt originally incurred to finance the
purchase of revenue equipment used in our operations.
We maintain two $20.0 million revolving lines of credit (Line A and
Line B) with separate financial institutions. Amounts outstanding under Line A
bear interest at LIBOR (on the first day of the month) plus 1.40%, are secured
by our accounts receivable and mature on May 31, 2003. At December 31, 2001,
there was $11.9 million outstanding under Line A (including $2.9 million in
letters of credit), with availability to borrow $8.1 million. Amounts
outstanding under Line B bear interest at LIBOR (on the last day of the previous
month) plus 1.15%, are secured by revenue equipment and mature on June 30, 2003.
At December 31, 2001, there was $20.0 million outstanding under Line B. In an
effort to reduce interest rate risk associated with these floating rate
facilities, we have entered into interest rate swap agreements in an aggregate
notional amount of $20.0 million. See " - Market Risk."
16
In addition to cash flows from operations, we use our existing lines
of credit on an interim basis to finance capital expenditures and repay
long-term debt. Longer-term transactions, such as installment notes (generally
three to five year terms at fixed rates), are typically entered into for the
purchase of revenue equipment; however, we purchased additional revenue
equipment during 2000 and the first nine months of 2001 at a cost of
approximately $28.8 million and $32.1 million, respectively, using our existing
line of credit and cash on hand.
In addition, we entered into an installment obligation during 2000 in
the amount of approximately $4.2 million in order to finance revenue equipment
previously acquired utilizing its line of credit. This obligation is payable in
48 monthly installments at an interest rate of 7.25%. We entered into
installment obligations during 2001 for the purchase of revenue equipment in the
amount of approximately $4.5 million, payable in 48 monthly installments at an
interest rate of 7.43%. Our weighted average interest rates on all installment
borrowings were 6.73%, 6.75%, and 5.95% for 1999, 2000 and 2001, respectively.
During 2001, we sold or traded revenue equipment for approximately $10.5
million. During 2002, we plan to purchase approximately 465 new tractors and
approximately 280 trailers while continuing to sell or trade older equipment,
which we expect to result in net capital expenditures of approximately $23.9
million. We expect our working capital and our available lines of credit will be
sufficient to meet our capital commitments, to repay indebtedness, and to fund
our operating needs for the next twelve months.
Insurance
Auto liability and collision coverage are generally subject to a
$2,500 deductible per occurrence while cargo loss coverage generally has a
$5,000 deductible. We maintain a reserve for estimated losses for claims
incurred, and maintain a reserve for claims incurred but not reported (based on
our historical experience). We are insured for workers' compensation claims in
excess of $350,000. We have reserved for estimated losses to pay such claims as
incurred as well as claims incurred but not reported. We have not experienced
any adverse trends involving differences in claims experienced versus claims
estimates for workers' compensation reserves. Letters of credit are held by a
bank as security for workers' compensation claims in Arkansas, Oklahoma,
Mississippi, and Florida, and two letters of credit are held by a bank for auto
liability claims.
Insurance carriers have recently begun to raise premiums for most
trucking companies. We experienced an increase of approximately $1.0 million in
insurance premiums for 2002 and could experience additional increases after our
current coverage expires in December 2002.
Seasonality
Our revenues do not exhibit a significant seasonal pattern, due
primarily to our varied customer mix. Operating expenses can be somewhat higher
in the winter months, primarily due to decreased fuel efficiency and increased
maintenance costs associated with inclement weather. In addition, the automobile
plants for which we transport a large amount of freight typically utilize
scheduled shutdowns of two weeks in July and one week in December and the volume
of freight we ship is reduced during such scheduled plant shutdowns.
Inflation
Inflation has an impact on most of our operating costs. Recently, the
effect of inflation has been minimal.
Market Risk
We are exposed to market risks from changes in interest rates. Our two
lines of credit bear interest at a floating rate equal to LIBOR plus a fixed
percentage. Accordingly, changes in LIBOR, which are effected by changes in
interest rates generally, will affect the interest rate on, and therefore our
costs under, the lines of credit. In an effort to manage the risks associated
with changing interest rates, we entered into interest rate swap agreements
effective February 28, 2001 and May 31, 2001, on notional amounts of $15,000,000
and $5,000,000, respectively. The "pay fixed rates" under the $15,000,000 and
$5,000,000 swap agreements are 5.08% and 4.83%, respectively. The "receive
floating rate" for both swap agreements is "1-month" LIBOR. These interest rate
swap agreements terminate on March 2, 2006 and June 2, 2006, respectively. For
additional information with respect to the interest rate swap agreements, see
Note C to our condensed consolidated unaudited interim financial statements.
17
We may temporarily invest excess cash in money market funds. Changes in
interest rates would not significantly affect the fair value of these cash
investments.
New Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities" (SFAS No. 133), which was amended by Statement of
Financial Accounting Standards No. 138, "Accounting for Certain Derivative
Instruments and Certain Hedging Activities - an Amendment of FASB Statement No.
133" (SFAS No. 138). SFAS No. 133 establishes accounting and reporting standards
requiring that every derivative instrument (including certain derivative
instruments embedded in other contracts) be recorded in the balance sheet as
either an asset or liability measured at its fair value. SFAS No. 133 requires
that changes in the derivative's fair value be recognized currently in earnings
unless specific hedge accounting criteria are met. Companies must formally
document, designate, and assess the effectiveness of transactions that receive
hedge accounting. SFAS No. 138 amends the accounting and reporting standards for
certain derivative instruments and certain hedging activities, including the
normal purchases and normal sales exception.
SFAS No. 133 is effective for fiscal years beginning after June 15, 2000
and must be applied to (a) derivative instruments and (b) certain derivative
instruments embedded in hybrid contracts that were issued, acquired, or
substantively modified after December 31, 1997 (and, at the company's election,
before January 1, 1998).
On January 1, 2001, we adopted SFAS No. 133. We had no transition
adjustment as a result of adopting SFAS No. 133 on January 1, 2001 as our only
derivative instruments were entered into after January 1, 2001. See "Market
Risk."
SFAS No. 142 addresses the accounting for goodwill and other intangible
assets after an acquisition. Goodwill and other intangibles that have indefinite
lives will no longer be amortized, but will be subject to annual impairment
tests. All other intangible assets will continue to be amortized over their
estimated useful lives. We adopted this statement effective January 1, 2002, and
we no longer amortize existing goodwill on the unamortized portion of goodwill
associated with acquisitions. Goodwill amortization would have been
approximately $243,000, net of tax, based on the goodwill balances as of January
1, 2002. SFAS No. 142 also requires a new methodology for the testing of
impairment of goodwill and other intangibles that have indefinite lives. During
2002, we will begin testing goodwill for impairment under the new rules,
applying a fair-value-based test. At this time, we have not yet determined what
impact, if any, the change in the required approach to impairment testing will
have on either our financial position or results of operations.
SFAS No. 143 provides accounting requirements for retirement obligations
associated with tangible long-lived assets, including: (i) the timing of
liability recognition; (ii) initial measurement of the liability; (iii)
allocation of asset retirement cost to expense; (iv) subsequent measurement of
the liability; and (v) financial statement disclosures. SFAS No. 143 requires
that an asset retirement cost be capitalized as part of the cost of the related
long-lived asset and subsequently allocated to expense using a systematic and
rational method. This standard becomes effective for fiscal years beginning
after June 15, 2002. We will adopt the Statement effective January 1, 2003. At
this time, we have not yet determined what impact, if any, the adoption of this
Statement will have on either our financial position or results of operations.
In October 2001, the FASB issued SFAS No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets." SFAS No. 144 addresses financial
accounting and reporting for impairment or disposal of long-lived assets. This
Statement supersedes FASB Statement No. 121, "Accounting for the Impairment of
Long-Lived Assets to be Disposed Of," and the accounting and reporting
provisions of APB Opinion No. 30, "Reporting the Results of Operations-Reporting
the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual
and Infrequently Occurring Events and Transactions," for the disposal of a
segment of a business. This Statement also amends ARB No. 51, "Consolidated
Financial Statements," to eliminate the exception to consolidation for a
subsidiary for which control is likely to be temporary. SFAS No. 144 is
effective for fiscal years beginning after December 15, 2001. At present, we are
assessing but have not yet determined the complete impact, if any, that the
adoption of SFAS No. 144 will have on our financial position and results of
operations.
18
Business
Overview
We are a leading truckload dry van carrier transporting general commodities
throughout the continental United States, as well as in the Canadian provinces
of Ontario and Quebec. We also provide transportation services in Mexico through
our gateways in Laredo and El Paso, Texas under agreements with Mexican
carriers.
Through our executive officers, who together have over 50 years experience
managing our company, we focus on providing a high level of service and on
becoming a preferred provider, or "core carrier," for our customers, while
strictly controlling costs. As a result, we have consistently had one of the
lowest operating ratios among publicly held truckload carriers.
Business Strategy
Our business strategy is designed to achieve long-term profitable growth.
Since 1996, we have achieved substantial growth in revenues and net income. We
increased our operating revenues at a compound annual growth rate of 14.8%, from
$113.0 million in 1996 to $225.8 million in 2001. During the same period, we
increased our net income at a compound annual growth rate of 24.9%, from $3.3
million to $10.1 million. The key elements of our strategy for achieving
long-term profitable growth include:
Maintaining Dedicated Fleets and High Density Lanes. We continually strive
to maximize utilization and increase revenue per tractor while minimizing our
time and empty miles between loads. In this regard, we seek to provide dedicated
equipment to our customers where possible and to concentrate our equipment in
defined regions and disciplined traffic lanes. Dedicated fleets and high density
lanes enable us to:
. maintain consistent equipment capacity;
. provide a high level of service to our customers, including time-sensitive
delivery schedules;
. attract and retain drivers; and
. maintain a sound safety record as drivers travel familiar routes.
During 2001, approximately 61% of our operating revenues were generated through
dedicated equipment and we maintained an empty mile factor of 5.5%, figures
which management believes are among the best among publicly traded truckload
carriers.
Providing Superior and Flexible Customer Service. We believe our
service-oriented operation provides a base for long-term customer retention and
sources of recurring revenue. In addition, we believe that as consolidation
continues to be a trend in our industry, shippers will seek higher quality
providers. Our wide range of services includes dedicated fleet services,
just-in-time delivery, two-man driving teams, cross-docking and consolidation
programs, specialized trailers, and Internet-based customer access to delivery
status. These services combined with a decentralized regional operating strategy
allow us to quickly and reliably respond to the diverse needs of our customers,
and provide an advantage in securing new business. We also maintain ISO 9002
certification, which is required by many of our larger customers to ensure that
their truckload carriers operate in accordance with approved quality assurance
standards.
Many of our customers depend on us to make delivery on a "just-in-time"
basis, meaning that parts or raw materials are scheduled for delivery as they
are needed on the manufacturer's production line. The need for this service is a
product of modern manufacturing and assembly methods that are designed to
drastically decrease inventory levels and handling costs. Such requirements
place a premium on the freight carrier's delivery performance and reliability.
Approximately 61% of our deliveries to customers during 2001 were made on a
just-in-time basis.
19
Employing Stringent Cost Controls. We believe that we operate with the
lowest cost per mile among publicly held truckload carriers. We focus intently
on controlling our costs while not sacrificing customer service. We maintain
this balance by scrutinizing all expenditures, minimizing non-driver personnel
(we had a driver to non-driver personnel ratio of 5.2:1 at December 31, 2001),
operating a late-model fleet of tractors and trailers to minimize maintenance
costs and enhance fuel efficiency, and adopting proven technology only when cost
justified.
Strategic Acquisitions. We continually evaluate strategic acquisition
opportunities, focusing on those that complement our existing business or that
could profitably expand our business or services. Since 1995, 48% of our revenue
growth has been attributable to acquisitions, while 52% has been attributable to
internal growth. We believe economic trends are driving further consolidation in
our industry.
We have successfully integrated three acquisitions since 1995. Our
operational integration strategy is to centralize administrative functions of
acquired business at our headquarters, while maintaining the localized
operations of acquired businesses. We believe that allowing acquired businesses
to continue to operate under their pre-acquisition names and in their original
regions allows such businesses to maintain driver loyalty and customer
relationships. The following table provides information regarding our historical
acquisitions.
Target's Annual
Acquisition Date Acquired Business Revenue Prior to Acquisition
- -------------------- --------------------------------------------------- --------------------------------
February 1995 Choctaw Express, Inc. and Choctaw Brokerage, Inc. $ 8 million
March 1996 Allen Freight Services, Inc. $16 million
January 1999 Decker Transport Co. Inc. and Van Houten Ltd. $48 million
On January 18, 2002, we announced that we had entered into a non-binding
letter of intent to purchase for cash certain assets of East Coast Transport,
Inc., a freight brokerage operation based in Paulsboro, New Jersey. East Coast
has represented to us that, during the year ended December 31, 2001, it had
revenues of approximately $32 million. Consummation of the transaction is
subject to satisfactory completion of a due diligence investigation, negotiation
of a definitive agreement, and receipt of various regulatory approvals.
Industry
According to the American Trucking Association, the U.S. market for
truck-based transportation services approximates $600 billion in annual revenue.
We believe that truckload services, such as those we provide, account for
approximately 45% of that market, or $270 billion, and that the remaining 55% of
the truck-based transportation market is made up of private fleet and small
package transportation services. The truckload industry is highly fragmented,
with the nine largest publicly traded truckload carriers, as measured by market
capitalization, accounting for approximately $7.9 billion in revenue, or 2.9% of
the truckload market. We also believe that the size of the private fleet
services market provides us an opportunity to expand our dedicated services
business.
The truckload industry is impacted by several economic and business
factors, many of which are beyond the control of individual carriers. The state
of the economy coupled with equipment capacity levels can impact freight rates.
Volatility of various operating expenses, such as fuel and insurance, make the
predictability of profit levels unclear. Availability, attraction, retention and
compensation for drivers affect operating costs, as well as equipment
utilization. In addition, the capital requirements for equipment, coupled with
potential uncertainty of used equipment values, impact the ability of many
carriers to expand their operations.
The current operating environment is characterized by the following:
. Freight rates have remained relatively stable despite the slowing
economy, and the low level of truck orders may keep equipment capacity
at a favorable position. According to ACT Research, it is estimated
that Class 8 retail truck sales approximated 156,000 trucks in 2001,
as compared to an average of approximately 246,000 trucks during the
1997 - 2000 period.
20
. Trends in diesel fuel prices have shown significant declines relative
to the price spikes experienced in 2000 and 2001. According to the
U.S. Department of Energy, average fuel prices were $1.153 per gallon
as of February 11, 2002, compared to $1.518 per gallon as of February
12, 2001.
. Rising unemployment has benefited the trucking industry by making it
easier to recruit new drivers.
. Price increases by insurance companies and erosion of equipment values
in the used truck market offset these positive industry trends.
In response to the industry forces described above, many less profitable or
undercapitalized carriers have been forced to consolidate or exit the industry.
During the last two years, there have been a significant number of carrier
failures and we believe this creates an opportunity for well-capitalized and
efficiently operated companies, like P.A.M., to enhance market share through
internal expansion and selective acquisitions.
Marketing and Major Customers
Our marketing emphasis is directed to that segment of the truckload market
which is generally service-sensitive, as opposed to being solely price
competitive. We seek to become a core carrier for our customers in order to
maintain high utilization and capitalize on recurring revenue opportunities. Our
marketing efforts are diversified and designed to gain access to dedicated fleet
services (including in Mexico and Canada), domestic regional freight traffic,
and cross-docking and consolidation programs.
Our marketing efforts are conducted by a sales staff of eight employees who
are located in our major markets. These individuals are supervised from our
headquarters, emphasizing profitability by maintaining an even flow of freight
traffic (taking into account the balance between originations and destinations
in a given geographical area) and high utilization, and minimizing movement of
empty equipment.
Our five largest customers, for which we provide carrier services covering
a number of geographic locations, accounted for approximately 52%, 55% and 59%
of our total revenues in 1999, 2000 and 2001, respectively. General Motors
Corporation accounted for approximately 30%, 33% and 40% of our revenues in
1999, 2000 and 2001, respectively.
We also provide transportation services to other manufacturers who are
suppliers for automobile manufacturers. Approximately 46%, 50% and 55% of our
revenues were derived from transportation services provided to the automobile
industry during 1999, 2000 and 2001, respectively. This portion of our business,
however, is spread over 18 assembly plants and 50 supplier/vendors located
throughout North America, which reduces the risk of a material loss of business.
Revenue Equipment
At December 31, 2001, we operated a fleet of 1,660 tractors and 3,932
trailers. We operate late-model, well-maintained premium tractors to help
attract and retain drivers, promote safe operations, minimize maintenance and
repair costs, and improve customer service by minimizing service interruptions
caused by breakdowns. We evaluate our equipment decisions based on factors such
as initial cost, useful life, warranty terms, expected maintenance costs, fuel
economy, driver comfort, customer needs, manufacturer support, and resale value.
Our current policy is to replace most of our tractors within 500,000 miles,
which normally occurs 30 to 48 months after purchase. As of December 31, 2001,
all of our tractors had guaranteed residual buy-back or trade-in values.
Maintaining a relatively new fleet allows us to operate the tractors while under
warranty to minimize repair and maintenance costs. The following table provides
information regarding our tractor and trailer turnover and the age of our fleet
over the past three years:
21
1999 2000 2001
---- ---- ----
Tractors
- --------
Purchased .................................... 748 304 505
Disposed ..................................... 407 359 258
End of year total ............................ 1,468 1,413 1,660
Average age at end of year (in years) ........ 1.6 1.7 1.8
Trailers
- --------
Purchased .................................... 1,191 51 228
Disposed ..................................... 129 138 55
End of year total ............................ 3,846 3,759 3,932
Average age at end of year (in years) ........ 4.0 4.7 5.3
We historically have contracted with owner-operators to provide and
operate a small portion of our tractor fleet. Owner-operators provide their own
tractors and are responsible for all associated expenses, including financing
costs, fuel, maintenance, insurance, and taxes. We believe that a combined fleet
complements our recruiting efforts and offers greater flexibility in responding
to fluctuations in shipper demand.
Technology
We have installed Qualcomm Omnitracs(TM) display units in all of our
tractors. The Omnitracs system is a satellite-based global positioning and
communications system that allows fleet managers to communicate directly with
drivers. Drivers can provide location status and updates directly to our
computer, saving telephone usage cost and increasing productivity and
convenience. The Omnitracs system provides us with accurate estimated time of
arrival information, which optimizes load selection and service levels to our
customers. In order to lower our tractor-to-trailer ratio, we have also
installed Qualcomm TrailerTracs(TM) tracking units in all of our trailers. The
TrailerTracs system is a tethered trailer tracking product that enables us to
more efficiently track the location of all trailers in our inventory as they
connect to and disconnect from Qualcomm-equipped tractors.
Our computer system manages the information provided by the Qualcomm
devices to provide us real-time information regarding the location, status and
load assignment of all of our equipment, which permits us to better meet
delivery schedules, respond to customer inquiries and match equipment with the
next available load. Our system also provides electronically to our customers
real-time information regarding the status of freight shipments and anticipated
arrival times. This system provides our customers flexibility and convenience by
extending supply chain visibility through electronic data interchange, the
Internet and e-mail.
Maintenance
We have a strictly enforced comprehensive preventive maintenance
program for our tractors and trailers. Inspections and various levels of
preventive maintenance are performed at set mileage intervals on both tractors
and trailers. Although a significant portion of maintenance is performed at our
primary maintenance facility in Tontitown, Arkansas, we have additional
maintenance facilities in Jacksonville, Florida; Effingham, Illinois; Columbia,
Mississippi; Springfield, Missouri; Riverdale, New Jersey; Warren and Willard,
Ohio; Oklahoma City, Oklahoma; and El Paso, Irving and Laredo, Texas. These
facilities enhance our preventive and routine maintenance operations and are
strategically located on major transportation routes where a majority of our
freight originates and terminates. A maintenance and safety inspection is
performed on all vehicles each time they return to a terminal.
Our tractors carry full warranty coverage for at least three years or
350,000 miles. Extended warranties are negotiated with the tractor manufacturer
and manufacturers of major components, such as engine, transmission and
differential, for up to four years or 500,000 miles. Trailers are also warranted
by the manufacturer and major component manufacturers for up to five years.
Drivers
At December 31, 2001, we utilized 2,012 company drivers in our
operations. We also had 135 owner-operators under contract compensated on a per
mile basis. All of our drivers are recruited, screened, drug tested and
22
trained and are subject to the control and supervision of our operations and
safety departments. Our driver training program stresses the importance of
safety and reliable, on-time delivery. Drivers are required to report to their
driver managers daily and at the earliest possible moment when any condition en
route occurs that might delay their scheduled delivery time.
In addition to strict application screening and drug testing, before
being permitted to operate a vehicle our drivers must undergo classroom
instruction on our policies and procedures, safety techniques as taught by the
Smith System of Defensive Driving, and the proper operation of equipment, and
must pass both written and road tests. Instruction in defensive driving and
safety techniques continues after hiring, with seminars at our terminals in
Tontitown, Arkansas; Jacksonville, Florida; Riverdale, New Jersey; Warren, Ohio;
Oklahoma City, Oklahoma; and Irving, Texas. At December 31, 2001, we employed 56
persons on a full-time basis in our driver recruiting, training and safety
instruction programs.
Our drivers are compensated on the basis of miles driven, loading and
unloading, extra stops and layovers in transit. Drivers can earn bonuses by
recruiting other qualified drivers who become employed by us and both cash and
non-cash prizes are awarded for consecutive periods of safe, accident-free
driving.
Intense competition in the trucking industry for qualified drivers
over the last several years, along with difficulties and added expense in
recruiting and retaining qualified drivers, has had a negative impact on the
industry. Our operations have also been impacted and from time to time we have
experienced under-utilization and increased expenses due to a shortage of
qualified drivers. However, due to the significant number of trucking company
failures, drivers' wages have stabilized and availability has increased somewhat
in recent months. We place a high priority on the recruitment and retention of
an adequate supply of qualified drivers.
Facilities
We are headquartered and maintain our primary terminal, maintenance
facilities and corporate and administrative offices in Tontitown, Arkansas,
which is located in northwest Arkansas, a major center for the trucking industry
and where support services, including warranty repair services, for most major
tractor and trailer equipment manufacturers are readily available. We also
maintain dispatch offices at our headquarters in Tontitown, Arkansas, as well as
at our offices in Jacksonville, Florida; Breese, Illinois; Columbia,
Mississippi; Warren and Willard, Ohio; Oklahoma City, Oklahoma; Riverdale, New
Jersey; and Irving and Laredo, Texas. These regional dispatch offices facilitate
communications with both our customers and drivers.
Employees
At December 31, 2001, we employed 2,424 persons, of whom 2,012 were
drivers, 127 were maintenance personnel, 126 were employed in operations, 31
were employed in marketing, 56 were employed in safety and personnel, and 72
were employed in general administration and accounting. None of our employees is
represented by a collective bargaining unit and we believe that our employee
relations are good.
23
Management
Our directors and executive officers and their positions, ages and
years of service with P.A.M., at February 1, 2002, are set forth in the
following table.
Years of Service
Name Age Position with P.A.M.
- ---- --- -------- -----------
Robert W. Weaver ................. 52 President and Chief Executive Officer 19
W. Clif Lawson ................... 48 Executive Vice President and Chief Operating 17
Officer
Larry J. Goddard ................. 43 Vice President - Finance, Chief Financial 14
Officer, Secretary and Treasurer
Daniel C. Sullivan ............... 61 Director 15
Matthew T. Moroun ................ 29 Director 9
Charles F. Wilkins ............... 63 Director 6
Frederick P. Calderone ........... 51 Director 3
24
PRINCIPAL AND SELLING STOCKHOLDERS
The following table sets forth, as of February 15, 2002, information
concerning shares of our common stock beneficially owned by:
. our directors;
. all of our executive officers and directors as a group; and
. each stockholder known by us to be the beneficial owner of more than
5% of our outstanding common stock.
The table also sets forth information as to the shares of common stock to
be sold in this offering by the selling stockholders. The percentage ownership
after the offering is based upon the sale by us of 2,100,000 shares and the sale
by the selling stockholders of 1,375,000 shares.
Unless otherwise indicated, each person has sole voting and investment
power with respect to shares shown as beneficially owned by such person. The
number of shares of our common stock beneficially owned by a person includes
shares of common stock issuable with respect to options held by the person that
are exercisable within 60 days. The percentage of our common stock beneficially
owned by a person has been calculated assuming that the person has exercised all
options the person holds which are exercisable within 60 days and that no other
persons exercised any options.
Shares Beneficially Owned Shares to be Beneficially
Prior to this Offering Shares Owned After this Offering
---------------------- -------------------------
Name Number Percentage Being Sold Number Percentage
- ---- ------ ---------- ---------- ------ ----------
Matthew T. Moroun .......................... 5,641,713(1) 65.3% 1,200,000(2) 4,441,713 41.4%
Robert W. Weaver ........................... 340,428(3) 3.9% 50,000 290,428(3) 2.7%
W. Clif Lawson ............................. 80,000 * 30,000 50,000 *
Larry J. Goddard ........................... 82,313 1.0% 20,000 62,313 *
Paula Weaver ............................... 188,022 2.2% 75,000 113,022 1.1%
FMR Corporation ............................ 846,600(4) 9.8% - 846,600(4) 7.9%
Daniel C. Sullivan ......................... 20,000(5) * - 20,000(5) *
Charles F. Wilkins ......................... 9,000(5) * - 9,000(5) *
Frederick P. Calderone ..................... 6,000(6) * - 6,000(6) *
Directors and executive officers
as a group (7 persons) ................. 6,179,454(7) 71.2% 1,300,000 4,879,454(7) 45.2%
- -----------------------------
* Less than 1%.
/(1)/ Represents 32,000 shares owned directly, 7,000 shares subject to
presently exercisable stock options, 3,092,000 shares held in a trust
of which Mr. Moroun is a co-trustee and a beneficiary (the "Moroun
Trust"), and 2,510,713 shares held by a limited partnership, the
general partner of which is controlled by Mr. Moroun. Norman E. Harned
is co-trustee with Matthew T. Moroun of the Moroun Trust and may
therefore be deemed to beneficially own the shares held by the Moroun
Trust. The business address of each of Messrs. Moroun and Harned is
12225 Stephens Road, Warren, Michigan 48091.
/(2)/ Shares to be sold by the Moroun Trust.
/(3)/ Includes 30,000 shares subject to presently exercisable stock options.
/(4)/ Based upon a Schedule 13G dated February 14, 2002 filed by FMR Corp.
which indicates that it has the sole power to dispose of the shares.
The Schedule 13G indicates that shares are held by the Fidelity Low
Price Stock Fund, a registered investment company, for which FMR acts
as investment adviser. We make no representation as to the accuracy or
completeness of the information reported. FMR's address is 82
Devonshire Street, Boston, Massachusetts 02109.
/(5)/ Includes 7,000 shares subject to presently exercisable stock options.
/(6)/ Represents shares subject to presently exercisable stock options.
/(7)/ Includes 57,000 shares subject to presently exercisable stock options.
25
DESCRIPTION OF CAPITAL STOCK
The following description summarizes the most important terms of our
capital stock. Because it is only a summary, it does not contain all of the
information that may be important to you. For a complete description, you should
refer to our Certificate of Incorporation and Bylaws. Our authorized capital
stock consists of 20,000,000 shares of common stock, par value $.01 per share,
and 10,000,000 shares of preferred stock, par value $.01 per share. At February
7, 2002, there were 8,626,957 shares of our common stock and no shares of our
preferred stock issued and outstanding.
Common Stock
The holders of our common stock, subject to such rights as may be granted
to any preferred stockholders, elect all directors and are entitled to one vote
per share. All shares of common stock participate equally in dividends when and
as declared by the Board of Directors and in net assets on liquidation. The
shares of common stock have no preference, conversion, exchange, preemptive or
cumulative voting rights.
Preferred Stock
Preferred stock may be issued from time to time by our Board of
Directors, without stockholder approval, in such series and with such
preferences, conversion or other rights, voting powers, restrictions,
limitations as to dividends, qualifications or other provisions, as may be fixed
by the Board of Directors in the resolution authorizing their issuance. The
issuance of preferred stock by the Board of Directors could adversely affect the
rights of holders of shares of common stock; for example, the issuance of
preferred stock could result in a class of securities outstanding that would
have certain preferences with respect to dividends and in liquidation over the
common stock, and that could result in a dilution of the voting rights, net
income per share and net book value of the common stock. We have no agreements
or understandings for the issuance of any shares of preferred stock.
Anti-Takeover Provisions of Delaware Law and Charter Provisions
We are subject to Section 203 of the Delaware General Corporation Law. In
general, the statute prohibits a publicly held Delaware corporation from
engaging in any business combination with any interested stockholder for a
period of three years following the date that the stockholder became an
interested stockholder unless:
. prior to that date, the board of directors of the corporation
approved either the business combination or the transaction that
resulted in the stockholder becoming an interested stockholder;
. upon consummation of the transaction that resulted in the
stockholder becoming an interested stockholder, the interested
stockholder owned at least 85% of the voting stock of the
corporation outstanding at the time the transaction commenced,
excluding those shares owned by persons who are directors and also
officers, and employee stock plans in which employee participants
do not have the right to determine confidentially whether shares
held subject to the plan will be tendered in a tender or exchange
offer; or
. on or subsequent to that date, the business combination is
approved by the board of directors and authorized at an annual or
special meeting of stockholders by the affirmative vote of at
least two-thirds of the outstanding voting stock not held by the
interested stockholder.
Section 203 defines "business combination" to include:
. any merger or consolidation involving the corporation and the
interested stockholder;
. any sale, transfer, pledge or other disposition involving the
interested stockholder of 10% or more of the assets of the
corporation;
. subject to exceptions, any transaction that results in the
issuance or transfer by the corporation of any stock of the
corporation to the interested stockholder; or
26
. the receipt by the interested stockholder of the benefit of any
loans, advances, guarantees, pledges or other financial benefits
provided by or through the corporation.
In general, Section 203 defines an interested stockholder as any person
beneficially owning 15% or more of the outstanding voting stock of the
corporation and or person affiliated with or controlling or controlled by that
person.
Our Certificate of Incorporation also contains anti-takeover provisions.
Under Article XII of our Certificate of Incorporation, the affirmative vote or
consent of the holders of 75% of the shares of stock entitled to elect directors
is required to authorize, adopt or approve a "business combination" (defined
similarly to the definition under Delaware law, as described above), with any
interested person (defined generally as any person owning 5% or more of the
outstanding shares of any class of our stock) unless:
. our board of directors approved a memorandum of understanding with
such interested person with respect to such transaction prior to
the time that the interested person became a beneficial owner of
5% or more of the shares of any class of stock entitled to vote in
elections of directors; or
. such business combination is otherwise approved by our board of
directors, provided that a majority of the members of our board of
directors voting for approval of the transaction were duly elected
and acting members of the board of directors prior to the time
that such interested person became a beneficial owner of 5% or
more of the shares of any class of stock entitled to vote in
elections of directors.
In addition, under Article XIII of our Certificate of Incorporation, the
approval of a business combination also generally requires the affirmative vote
or consent of a majority of the shares entitled to be voted and not held by the
interested person.
Limitation of Liability and Indemnification Agreements
Our Certificate of Incorporation provides that to the fullest extent
permitted by Delaware law, our directors will not be liable to us or our
stockholders for monetary damages for breach of fiduciary duty as a director.
Under Delaware law, liability of a director may not be limited:
. for any breach of the director's duty of loyalty to us or our
stockholders;
. for acts or omissions not in good faith or involving intentional
misconduct or a knowing violation of law;
. in respect of certain unlawful dividend payments or stock
redemptions or repurchases; and
. for any transaction from which the director derives an improper
personal benefit.
The effect of the provisions of our Certificate of Incorporation is to
eliminate the rights of P.A.M. and its stockholders (through stockholders'
derivative suits on behalf of P.A.M.) to recover monetary damages against a
director for breach of the fiduciary duty of care as a director (including
breaches resulting from negligent or grossly negligent behavior), except in the
situations described above. This provision does not limit or eliminate the
rights of P.A.M. or any stockholder to seek nonmonetary relief, such as an
injunction or rescission, in the event of a breach of a director's duty of care.
Our Certificate of Incorporation and Bylaws provide that P.A.M. shall indemnify
its directors, officers, employees and agents against claims, liabilities,
damages, expenses, losses, costs, penalties or amounts paid in settlement
incurred by such director or officer in or arising out of his or her capacity as
a director, officer, employee and/or agent of P.A.M. to the extent the person
acted in good faith and in a manner reasonably believed to be in or not opposed
to the best interest of P.A.M.
Transfer Agent and Registrar
The Transfer agent and Registrar for our common stock is Securities
Transfer Corporation.
27
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of this offering, we will have outstanding 10,726,957
shares of our common stock assuming no exercise of the underwriters'
over-allotment option or any other options or warrants. Of these shares,
4,822,454 will be "restricted securities" held by our directors and executive
officers, and the rest (including the 2,100,000 shares issued and sold in this
offering) will be freely transferable without restriction or further
registration under the Securities Act of 1933. In addition, upon completion of
this offering, we will also have 88,000 shares of common stock available for
issuance upon exercise of outstanding options, not including the 521,250 shares
of common stock subject to the underwriters' over-allotment option.
The "restricted securities" as defined in Rule 144 under the Securities
Act, in the absence of an effective registration statement, may only be sold
pursuant to an exemption from registration, including Rule 144 or Regulation S.
In general, under Rule 144 as currently in effect, beginning 90 days after the
effective date of the registration statement of which this prospectus is a part,
a stockholder who has beneficially owned restricted securities for at least one
year from the later of the date such securities were acquired from either us or
one of our affiliates, as applicable, is entitled to sell, within any
three-month period, a number of shares that does not exceed the greater of one
percent of the then outstanding common shares (approximately 107,000 shares
after the offering) or the average weekly trading volume of the shares during
the four calendar weeks proceeding the date on which notice of such sale was
filed under Rule 144, provided that certain procedural and information
requirements are also met. In addition, if a period of at least two years has
elapsed between the later of the date that the restricted securities were
acquired from us or one of our affiliates, a stockholder who is not an affiliate
of us and has not been an affiliate of us for at least three months prior to the
sale of the securities is entitled to sell the securities immediately without
compliance with the foregoing requirements under Rule 144.
We have filed a registration statement on Form S-8 with respect to our 1995
Stock Option Plan. Shares issued upon the exercise of stock options contemplated
by the Form S-8 are eligible for resale in the public market without
restriction, except that sales by our affiliates will be subject to the Rule 144
limitations described above.
No prediction can be made as to the effect, if any, that market sales of
our common stock, or the availability of the shares for sale, will have on the
market price of the shares prevailing from time to time. Nevertheless, sales of
a significant number of shares in the public market, or the perception that such
sales could occur, could adversely affect the market price of the shares and
impair our future ability to raise capital through an offering of our equity
securities.
28
UNDERWRITING
Subject to the terms and conditions of an underwriting agreement dated
_________, 2002, the underwriters named below, through their representatives,
Stephens Inc., BB&T Capital Markets, a division of Scott & Stringfellow, Inc.
and A.G. Edwards & Sons, Inc., have severally agreed to purchase from us and the
selling stockholders the respective number of shares of common stock set forth
opposite their names below:
Number of
Underwriters Shares
- ------------ ---------
Stephens Inc. ..........................................
BB&T Capital Markets, a division of Scott
& Stringfellow, Inc .....................................
A.G. Edwards & Sons, Inc. ..............................
------------
Total ............................................. 3,475,000
============
The underwriting agreement provides that the obligations of the
underwriters are subject to certain conditions, including the absence of any
materially adverse change in our business and the receipt of certain
certificates, opinions and letters from us and our attorneys and independent
auditors. The nature of the underwriters' obligation is such that they are
committed to purchase all shares of common stock offered hereby if any of the
shares are purchased.
We have granted an option to the underwriters, exercisable for 30 days
after the date of this prospectus, to purchase an additional 521,250 shares of
our common stock at the public offering price, less the underwriting discounts
and commissions set forth on the cover page of this prospectus. The underwriters
may exercise this option solely to cover over-allotments, if any, in connection
with the sale of our common stock. If the underwriters exercise this option,
each underwriter will be obligated, subject to certain conditions, to purchase a
number of additional shares of our common stock proportionate to the
underwriter's initial amount set forth in the table above.
The following table summarizes the underwriting discounts to be paid by us
and the selling stockholders to the underwriters and the expenses payable by us
for each share of our common stock and in total. This information is presented
assuming either no exercise or full exercise of the underwriters' option to
purchase additional shares of common stock.
Aggregate Aggregate
Without With
Per Share Option Option
--------- --------- ---------
Underwriting discounts payable by us ................... $ $ $
Underwriting discounts payable by the
selling stockholders ............................. $ $ $
Expenses payable by us ................................. $ $ $
We have been advised that the underwriters propose to offer the shares of
our common stock to the public at the public offering price set forth on the
cover page of this prospectus and to certain dealers at that price less a
concession not in excess of $____ per share. The underwriters may allow, and
such dealers may re-allow, a concession not in excess of $____ per share to
certain other dealers. The offering of the shares of common stock is made for
delivery when, as and if accepted by the underwriters and subject to prior sale
and to withdrawal, cancellation or modification of this offering without notice.
The underwriters reserve the right to reject an order for the purchase of
shares, in whole or in part.
We, along with our directors, officers and the selling stockholders have
agreed under lock-up agreements not to, directly or indirectly, offer, sell or
dispose of any shares of common stock or any securities which may be converted
into or exchanged for shares of common stock without the prior written consent
of Stephens Inc. for a period of 90 days from the date of this prospectus.
29
We and the selling stockholders have agreed to indemnify the underwriters
against certain liabilities, including liabilities under the Securities Act, and
to contribute to payments which the underwriters may be required to make in
respect thereof.
The underwriters may engage in over-allotment, stabilizing transactions,
syndicate covering transactions, and penalty bids or purchases for the purpose
of pegging, fixing or maintaining the price of the common stock, in accordance
with Regulation M under the Securities Exchange Act of 1934:
. Over-allotment involves sales by the underwriters of shares in
excess of the number of shares the underwriters are obligated to
purchase, which creates a syndicate short position. The short
position may be either a covered short position or a naked short
position. In a covered short position, the number of shares
over-allotted by the underwriters is not greater than the number
of shares that they may purchase in the over-allotment option. In
a naked short position, the number of shares involved is greater
than the number of shares in the over-allotment option. The
underwriters may close out any short position by either exercising
their over-allotment option and/or purchasing shares in the open
market.
. Stabilizing transactions permit bids to purchase the underlying
security so long as the stabilizing bids do not exceed a specified
maximum.
. Syndicate covering transactions involve purchases of the common
stock in the open market after the distribution has been completed
in order to cover syndicate short positions. In determining the
source of shares to close out the short position, the underwriters
will consider, among other things, the price of shares available
for purchase in the open market as compared to the price at which
they may purchase shares through the over-allotment option. If the
underwriters sell more shares than could be covered by the over-
allotment option, a naked short position, the position can only be
closed out by buying shares in the open market. A naked short
position is more likely to be created if the underwriters are
concerned that there could be downward pressure on the price of
the shares in the open market after pricing that could adversely
affect investors who purchase in the offering.
. Penalty bids permit the underwriters to reclaim a selling
concession from a syndicate member when the common stock
originally sold by the syndicate member is purchased in a
stabilizing or syndicate covering transaction to cover syndicate
short positions.
These stabilizing transactions, syndicate covering transactions and penalty
bids may have the effect of raising or maintaining the market price of the
common stock or preventing or retarding a decline in the market price of the
common stock. As a result, the price of the common stock may be higher than the
price that might otherwise exist in the open market. These transactions may be
effected on the Nasdaq National Market or otherwise and, if commenced, may be
discontinued at any time.
Neither we nor any of the underwriters make any representation or
prediction as to the direction or magnitude of any effect that the transactions
described above may have on the price of the common stock. In addition, neither
we nor any of the underwriters make any representation that the underwriters
will engage in these stabilizing transactions or that any transaction, once
commenced, will not be discontinued without notice.
In connection with the offering, the underwriters and selling group members
may engage in passive market making transactions in the common stock on the
Nasdaq National Market in accordance with Rule 103 of Regulation M under the
Securities Exchange Act of 1934 during the period before the commencement of
offers or sales of common stock and extending through the completion of the
distribution. A passive market maker must display its bids at a price not in
excess of the highest independent bid of the security. However, if all
independent bids are lowered below the passive market maker's bid, that bid must
be lowered when specified purchase limits are exceeded.
A prospectus in electronic format may be made available on Internet sites
or through other online services maintained by one or more of the underwriters
and/or selling group members participating in this offering, or by their
affiliates. In those cases, prospective investors may view offering terms online
and, depending upon the particular underwriter or selling group member,
prospective investors may be allowed to place orders online. The underwriters
may agree with us to allocate a specific number of shares for sale to online
brokerage account holders. Any such allocation for online distributions will be
made by the representatives on the same basis as other allocations.
30
Other than the prospectus in electronic format, information contained in
any other web site maintained by an underwriter or selling group member is not
part of this prospectus or the registration statement of which this prospectus
forms a part, has not been endorsed by us or the underwriters or any selling
group member in its capacity as underwriter or selling group member and should
not be relied on by investors in deciding whether to purchase any shares of
common stock. The underwriters and selling group members are not responsible for
information contained in web sites that they do not maintain.
LEGAL MATTERS
The legality of the shares of common stock offered by this prospectus will
be passed upon for us by Smith, Gambrell & Russell, LLP, Atlanta, Georgia. Legal
matters will be passed upon for the underwriters by Wright, Lindsey & Jennings
LLP, Little Rock, Arkansas.
EXPERTS
The financial statements included in this prospectus, to the extent and for
the periods indicated in their report, have been audited by Arthur Andersen LLP,
independent public accountants, as indicated in their report with respect
thereto, and are included herein in reliance upon the authority of said firm as
experts in giving said report.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and other
information with the Commission. The file number under the Securities Exchange
Act of 1934 for our Commission filings is No. 0-15057. You may read and copy
materials that we have filed with the Commission, including the registration
statement of which this prospectus is a part, at the Commission's public
reference room located at:
450 Fifth Street, N.W.
Room 1024
Washington, D.C. 20549
Please call the Commission at 1-800-SEC-0330 for further information on the
public reference room. Our Commission filings also are available to the public
on the Commission's web site at www.sec.gov, which contains reports, proxy and
information statements and other information regarding issuers that file
electronically.
The Commission allows us to "incorporate by reference" the information we
file with them, which means that we can disclose important information to you by
referring you to those documents. The information incorporated by reference is
an important part of this prospectus, and information that we file later with
the Commission will automatically update and supersede this information. We
incorporate by reference into this prospectus the documents and information we
filed with the Commission that are identified below and any future filings made
with the Commission under Sections 13(a), 13(c), 14 or 15(d) of the Securities
Exchange Act of 1934 (except, with respect to Current Reports on Form 8-K, any
information furnished solely under Item 9) until we have sold all of the common
stock to which this prospectus relates or the offering is otherwise terminated.
1. Our Annual Report on Form 10-K for the year ended December 31,
2000.
2. Our Quarterly Reports on Form 10-Q for the quarters ended March
31, 2001, June 30, 2001 and September 30, 2001.
3. Our Current Report on Form 8-K filed October 23, 2001.
4. The description of our common stock included in our Registration
Statement on Form 8-A (filed with the Commission on October 7, 1986).
You may request a copy of these filings, at no cost, by writing us at the
following address or telephoning us at (479) 361-9111 between the hours of 9:00
a.m. and 5:00 p.m., Central Time: Corporate Secretary, P.A.M. Transportation
Services, Inc., Highway 412 West, Tontitown, Arkansas 72770.
31
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Interim Financial Statements Page
- ---------------------------- ----
Condensed Consolidated Balance Sheets as of September 30, 2001 (Unaudited) and December 31, 2000 ........... F-2
Condensed Consolidated Statements of Operations for the Three and Nine Months Ended September
30, 2001 and 2000 (Unaudited) ....................................................................... F-3
Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2001
and 2000 (Unaudited) ................................................................................ F-4
Notes to Condensed Consolidated Financial Statements (Unaudited) ........................................... F-5
Audited Financial Statements
- ----------------------------
Report of Arthur Andersen, LLP, Independent Public Accountants ............................................. F-7
Consolidated Balance Sheets as of December 31, 2000 and 1999 ............................................... F-8
Consolidated Statements of Income for the Years Ended December 31, 2000, 1999 and 1998 ..................... F-10
Consolidated Statements of Shareholders' Equity for the Years Ended
December 31, 2000, 1999, 1998 and 1997 .............................................................. F-11
Consolidated Statements of Cash Flows for the Years Ended December 31, 2000, 1999 and 1998 ................. F-12
Notes to Consolidated Financial Statements ................................................................. F-13
F-1
P.A.M. TRANSPORTATION SERVICES, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
September 30, December 31,
2001 2000
---- ----
(unaudited) (note)
ASSETS
Current assets:
Cash and cash equivalents $ 1,354 $ 485
Receivables:
Trade, net of allowance 28,032 23,291
Other 572 640
Operating supplies and inventories 245 71
Deferred income taxes 581 401
Prepaid expenses and deposits 4,417 3,426
Income taxes refundable 173 628
--------- ---------
Total current assets 35,374 28,942
Property and equipment, at cost 208,115 184,636
Less: accumulated depreciation (66,954) (59,308)
--------- ---------
Net property and equipment 141,161 125,328
Other assets:
Excess of cost over net assets acquired 8,203 8,506
Non compete agreement 31 131
Other 1,748 1,611
--------- ---------
Total other assets 9,982 10,248
--------- ---------
Total assets $ 186,517 $ 164,518
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt $ 15,550 $ 17,753
Trade accounts payable 12,662 10,610
Other current liabilities 9,430 8,074
--------- ---------
Total current liabilities 37,642 36,437
Long-term debt, less current portion 51,497 42,073
Deferred income taxes 27,429 23,798
Shareholders' equity:
Common stock 86 85
Additional paid-in capital 20,421 19,638
Accumulated other comprehensive income (loss) (571) -
Retained earnings 50,013 42,487
--------- ---------
Total shareholders' equity 69,949 62,210
--------- ---------
Total liabilities and shareholders' equity $ 186,517 $ 164,518
========= =========
Note: The balance sheet at December 31, 2000 has been derived from the audited
financial statements at that date but does not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements. See notes to condensed consolidated financial statements.
F-2
P.A.M. TRANSPORTATION SERVICES, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
(in thousands, except per share data)
Three Months Ended Nine Months Ended
September 30, September 30,
2001 2000 2001 2000
---- ---- ---- ----
Operating revenues $ 53,662 $ 47,100 $ 169,530 $ 154,282
Operating expenses:
Salaries, wages and benefits 24,097 21,137 74,960 68,187
Operating supplies 10,990 9,228 33,317 28,327
Rent/purchased transport 2,015 2,498 8,434 9,429
Depreciation and amortization 5,139 4,629 14,989 14,253
Operating taxes and licenses 2,940 2,453 8,878 8,324
Insurance and claims 2,407 2,032 7,489 6,610
Communications and utilities 567 500 1,662 1,685
Other 892 874 3,634 2,851
(Gain) loss on sale of
equipment 145 398 191 302
---------- ---------- ---------- ----------
49,192 43,749 153,554 139,968
---------- ---------- ---------- ----------
Operating income 4,470 3,351 15,976 14,314
Other income (expense)
Interest expense (1,148) (1,184) (3,455) (3,906)
---------- ---------- ---------- ----------
(1,148) (1,184) (3,455) (3,906)
Income before income taxes 3,322 2,167 12,521 10,408
Income taxes --current 35 618 895 923
--deferred 1,285 205 4,100 3,193
---------- ---------- ---------- ----------
1,320 823 4,995 4,116
Net income $ 2,002 $ 1,344 $ 7,526 $ 6,292
========== ========== ========== ==========
Net income per common share:
Basic $ 0.23 $ 0.16 $ 0.88 $ 0.74
========== ========== ========== ==========
Diluted $ 0.23 $ 0.16 $ 0.88 $ 0.74
========== ========== ========== ==========
Average common shares
outstanding-Basic 8,525,334 8,465,309 8,524,546 8,449,861
========== ========== ========== ==========
Average common shares
outstanding-Diluted 8,537,286 8,525,269 8,559,263 8,518,227
========== ========== ========== ==========
See notes to condensed consolidated financial statements.
F-3
P.A.M. TRANSPORTATION SERVICES, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
(in thousands)
Nine Months Ended
September 30,
2001 2000
---- ----
OPERATING ACTIVITIES
Net income $ 7,526 $ 6,292
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 14,989 14,253
Non compete agreement amortization 99 98
Provision for deferred income taxes 4,100 3,193
Loss /(gain) on retirement of property and equipment 191 302
Changes in operating assets and liabilities:
Accounts receivable (4,804) (1,392)
Prepaid expenses and other current assets (847) (1,467)
Accounts payable 830 3,697
Accrued expenses 1,356 1,422
--------- ---------
Net cash provided by operating activities 23,440 26,398
INVESTING ACTIVITIES
Purchases of property and equipment (39,940) (24,354)
Proceeds from sales of assets 9,230 11,467
Lease payments received on direct financing leases 133 192
--------- ---------
Net cash used in investing activities (30,577) (12,695)
FINANCING ACTIVITIES
Borrowings under lines of credit 211,506 141,199
Repayments under lines of credit (194,417) (139,999)
Borrowings of long-term debt 7,112 4,204
Repayments of long-term debt (16,979) (22,538)
Proceeds from exercise of stock options 784 186
--------- ---------
Net cash provided by (used in) financing activities 8,006 (16,948)
--------- ---------
Net increase (decrease) in cash and cash equivalents 869 (3,245)
Cash and cash equivalents at beginning of period $ 485 $ 3,557
--------- ---------
Cash and cash equivalents at end of period $ 1,354 $ 312
========= =========
See notes to condensed consolidated financial statements.
F-4
P.A.M. TRANSPORTATION SERVICES, INC.
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
SEPTEMBER 30, 2001
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 nine-month period ended September 30, 2001 are not
necessarily indicative of the results that may be expected for the year ending
December 31, 2001. 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, 2000.
NOTE B: NOTES PAYABLE AND LONG-TERM DEBT
- ----------------------------------------------
In the first nine months of 2001, the Company's subsidiary, P.A.M. Transport,
Inc., entered into installment obligations for the purchase of revenue equipment
in the amount of approximately $4.5 million. These obligations are payable in 48
monthly installments at an interest rate of 7.43%.
NOTE C: DERIVATIVE FINANCIAL INSTRUMENTS
- ------------------------------------------
On January 1, 2001, the Company adopted Statement of Financial Accounting
Standards No. 133, "Accounting for Derivative Instruments and Hedging
Activities," issued by the Financial Accounting Standards Board in 1998.
Statement No. 133, as amended, establishes accounting and reporting standards
requiring the recording of each derivative instrument in the balance sheet as
either an asset or liability measured at fair value. Changes in the derivative
instrument's fair value must be recognized currently in earnings unless specific
hedge accounting criteria are met. For hedges which meet the criteria, the
derivative instrument's gains and losses, to the extent effective, may be
recognized in accumulated other comprehensive income (loss) rather than current
earnings.
The Company had no transition adjustment as a result of adopting SFAS 133 on
January 1, 2001 as the Company's only derivative instruments were entered into
after January 1, 2001. Effective February 28, 2001 the Company entered into an
interest rate swap agreement on a notional amount of $15,000,000. The pay fixed
rate under the swap is 5.08%, while the receive floating rate is "1-month"
LIBOR. This interest rate swap agreement terminates on March 2, 2006. Effective
May 31, 2001 the Company entered into an interest rate swap agreement on a
notional amount of $5,000,000. The pay fixed rate under the swap is 4.83%, while
the receive floating rate is "1-month" LIBOR. This interest rate swap agreement
terminates on June 2, 2006.
The Company designates both of these interest rate swaps as cash flow hedges of
its exposure to variability in future cash flows resulting from interest
payments indexed to "1-month" LIBOR. Changes in future cash flows from the
interest rate swaps will offset changes in interest rate payments on the first
$20,000,000 of the Company's current revolving credit facility or future
"1-month" LIBOR based borrowings that reset on the second London Business Day
prior to the start of the next interest period. The hedge locks the interest
rate at 5.08% or 4.83% plus the pricing spread (currently 1.15%) for the
notional amounts of $15,000,000 and $5,000,000, respectively.
These interest rate swap agreements meet the specific hedge accounting criteria.
The effective portion of the cumulative gain or loss has been reported as a
component of accumulated other comprehensive loss in shareholders' equity and
will be reclassified into current earnings by June 2, 2006, the latest
termination date for all current swap agreements. The Company records all
derivatives at fair value as assets or liabilities in the condensed consolidated
balance sheet, with classification as current or long-term depending on the
duration of the instrument. At September 30, 2001, the net deferred hedging loss
in accumulated other comprehensive loss was approximately $571,000.
F-5
The measurement of hedge effectiveness is based upon a comparison of the
floating-rate leg of the swap and the hedged floating-rate cash flows on the
underlying liability. This method is based upon the premise that only the
floating-rate component of the swap provides the cash flow hedge, and any
changes in the swap's fair value attributable to the fixed-rate leg is not
relevant to the variability of the hedged interest payments on the floating-rate
liability. The calculation of ineffectiveness involves a comparison of the
present value of the cumulative change in the expected future cash flows on the
variable leg of the swap and the present value of the cumulative change in the
expected future interest cash flows on the floating-rate liability.
F-6
Report of Independent Public Accountants
To the Board of Directors and Shareholders of
P.A.M. Transportation Services, Inc.:
We have audited the accompanying consolidated balance sheets of P.A.M.
Transportation Services, Inc. (a Delaware corporation) and subsidiaries as of
December 31, 2000 and 1999, and the related consolidated statements of income,
shareholders' equity, and cash flows for each of the three years in the period
ended December 31, 2000. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of P.A.M.
Transportation Services, Inc. and subsidiaries as of December 31, 2000 and 1999,
and the results of their operations and their cash flows for each of the three
years in the period ended December 31, 2000, in conformity with accounting
principles generally accepted in the United States.
/s/ Arthur Andersen LLP
Fayetteville, Arkansas
February 9, 2001
F-7
P.A.M. Transportation Services, Inc.
Consolidated Balance Sheets
(thousands, except shares and par value)
December 31,
2000 1999
-------------------------
Assets
Current assets:
Cash and cash equivalents $ 485 $ 3,557
Accounts receivable:
Trade 23,291 22,890
Other 640 1,032
Operating supplies and inventories 71 60
Prepaid expenses and deposits 3,426 4,408
Deferred income taxes 401 378
Income taxes refundable 628 113
--------------------------
Total current assets 28,942 32,438
Property and equipment:
Land 1,337 1,224
Structures and improvements 3,158 3,021
Revenue equipment 173,512 167,012
Service vehicles 583 667
Office furniture and equipment 6,046 5,578
--------------------------
184,636 177,502
Accumulated depreciation (59,308) (51,382)
--------------------------
125,328 126,120
Other assets:
Excess of cost over net assets acquired, net of
accumulated amortization (2000--$1,378; 1999--$973) 8,506 8,911
Non-competition agreements, net of accumulated
amortization (2000--$261; 1999--$131) 131 261
Other 1,611 1,231
--------------------------
10,248 10,403
--------------------------
Total assets $ 164,518 $ 168,961
==========================
F-8
December 31,
2000 1999
---------------------------------------
Liabilities and Shareholders' equity
Current liabilities:
Trade accounts payable $ 10,610 $ 11,210
Accrued expenses 8,074 7,674
Current portion of long-term debt 17,753 22,271
---------------------------------------
Total current liabilities 36,437 41,155
Long-term debt, less current portion 42,073 55,617
Deferred income taxes 23,798 18,693
Non-competition agreements - 131
Shareholders' equity:
Common stock, $.01 par value:
Authorized shares--20,000,000
Issued and outstanding shares: 2000--8,469,657;
1999--8,439,957
85 84
Additional paid-in capital 19,638 19,452
Retained earnings 42,487 33,829
---------------------------------------
Total shareholders' equity 62,210 53,365
---------------------------------------
Total liabilities and shareholders' equity $ 164,518 $ 168,961
=======================================
See accompanying notes.
F-9
P.A.M. Transportation Services, Inc.
Consolidated Statements of Income
(thousands, except per share data)
Year ended December 31,
2000 1999 1998
---------------------------------------------
Operating revenues $ 205,245 $ 207,381 $ 143,164
Operating expenses and costs:
Salaries, wages and benefits 90,680 90,248 65,169
Operating supplies and expenses 37,728 35,246 26,511
Rents and purchased transportation 12,542 13,309 1,082
Depreciation and amortization 18,806 18,392 14,003
Operating taxes and licenses 11,140 11,334 8,388
Insurance and claims 8,674 7,945 6,069
Communications and utilities 2,234 2,365 1,583
Other 3,756 4,388 3,131
(Gain) loss on sale or disposal of equipment 285 (301) 168
---------------------------------------------
185,845 182,926 126,104
---------------------------------------------
Operating income 19,400 24,455 17,060
Interest expense (5,048) (5,650) (3,829)
---------------------------------------------
Income before income taxes 14,352 18,805 13,231
Federal and state income taxes:
Current 1,056 2,107 1,323
Deferred 4,638 5,429 3,835
---------------------------------------------
5,694 7,536 5,158
---------------------------------------------
Net income $ 8,658 $ 11,269 $ 8,073
=============================================
Earnings per common share:
Basic $1.02 $1.34 $.97
=============================================
Diluted $1.02 $1.33 $.96
=============================================
Average common shares outstanding:
Basic 8,455 8,393 8,306
=============================================
Diluted 8,518 8,488 8,444
=============================================
See accompanying notes.
F-10
P.A.M. Transportation Services, Inc.
Consolidated Statements of Shareholders' Equity
(thousands)
- -----------------------------------------------------------------------------------------------------------------------
Additional
Common Paid-In Retained
Stock Capital Earnings Total
- -----------------------------------------------------------------------------------------------------------------------
Balances at December 31, 1997 $ 83 $ 18,592 $ 14,487 $ 33,162
Net income - - 8,073 8,073
Exercise of stock options--shares
issued - 175 - 175
Tax benefits of stock options - 47 - 47
- -----------------------------------------------------------------------------------------------------------------------
Balances at December 31, 1998 83 18,814 22,560 41,457
Net income - - 11,269 11,269
Exercise of stock options--shares
issued 1 488 - 489
Tax benefits of stock options - 150 - 150
- -----------------------------------------------------------------------------------------------------------------------
Balances at December 31, 1999 84 19,452 33,829 53,365
Net income - - 8,658 8,658
Exercise of stock options-- shares
issued 1 186 - 187
- -----------------------------------------------------------------------------------------------------------------------
Balances at December 31, 2000 $ 85 $ 19,638 $ 42,487 $ 62,210
=======================================================================================================================
See accompanying notes.
F-11
P.A.M. Transportation Services, Inc.
Consolidated Statements of Cash Flows
(thousands)
Year ended December 31,
2000 1999 1998
-----------------------------------------------
Operating activities
Net income $ 8,658 $ 11,269 $ 8,073
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 18,806 18,392 14,003
Non-competition agreement amortization 131 427 440
Provision for deferred income taxes 4,638 5,429 3,835
(Gain) loss on sale or disposal of equipment 285 (301) 168
Changes in operating assets and liabilities, net of
acquisition:
Accounts receivable (242) 2,322 (2,261)
Prepaid expenses and other assets 592 563 (724)
Income taxes refundable (516) (75) 377
Trade accounts payable (295) 920 (739)
Accrued expenses 400 609 343
-----------------------------------------------
Net cash provided by operating activities 32,457 39,555 23,515
-----------------------------------------------
Investing activities
Purchases of property and equipment (30,732) (51,480) (46,119)
Proceeds from sale or disposal of equipment 12,842 12,668 7,846
Lease payments received on direct financing lease 231 670 -
Acquisition of business, net of cash acquired - (9,642) -
-----------------------------------------------
Net cash used in investing activities (17,659) (47,784) (38,273)
-----------------------------------------------
Financing activities
Borrowings under line of credit 196,472 199,508 173,227
Repayments under line of credit (191,295) (195,559) (178,449)
Borrowings of long-term debt 4,384 24,179 43,785
Repayments of long-term debt (27,158) (22,589) (24,017)
Other (273) 284 (226)
-----------------------------------------------
Net cash provided by (used in) financing activities (17,870) 5,823 14,320
-----------------------------------------------
Net decrease in cash and cash equivalents (3,072) (2,406) (438)
Cash and cash equivalents at beginning of year 3,557 5,963 6,401
-----------------------------------------------
Cash and cash equivalents at end of year $ 485 $ 3,557 $ 5,963
===============================================
See accompanying notes.
F-12
P.A.M. Transportation Services, Inc.
Notes to Consolidated Financial Statements
December 31, 2000
1. ACCOUNTING POLICIES
Description of Business and Consolidation
P.A.M. Transportation Services, Inc. (the Company), through its subsidiaries,
operates as a truckload motor carrier.
The consolidated financial statements include the accounts of the Company and
its wholly owned subsidiaries: P.A.M. Transport, Inc., P.A.M. Dedicated
Services, Inc., Choctaw Express, Inc., Allen Freight Services, Inc., T.T.X.,
Inc., and Decker Transport Co., Inc. All significant intercompany accounts and
transactions have been eliminated.
Majority ownership of the Company is held by an affiliate of another
transportation company.
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. Amounts paid for the recapping of tires are
expensed when incurred.
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. No
reduction of goodwill was required in 2000, 1999, or 1998.
Claims Liabilities
With respect to cargo loss, physical damage and auto liability, the Company
maintains adequate insurance coverage to protect it from certain business risks.
These policies are with various carriers and have deductibles ranging from $0 to
$2,500 per occurrence.
F-13
P.A.M. Transportation Services, Inc.
Notes to Consolidated Financial Statements
December 31, 2000
1. ACCOUNTING POLICIES (continued)
During 1998, the Company changed from being self-insured for workers'
compensation coverage in Arkansas, Oklahoma, Mississippi and Florida with excess
coverage maintained for claims exceeding $250,000, to being fully-insured for
workers' compensation coverage in those states. The Company continues to be
self-insured for workers' compensation coverage in Ohio with excess coverage
maintained for claims exceeding $350,000. The Company has reserved for estimated
losses to pay such claims as incurred as well as claims incurred but not
reported. The Company has not experienced any adverse trends involving
differences in claims experienced versus claims estimates for workers'
compensation reserves. Letters of credit in the amounts of $100,000, $200,000,
$250,000, and $100,000 are held by a bank as security for workers' compensation
claims in Arkansas, Oklahoma, Mississippi, and Florida, respectively, and
letters of credit aggregating $704,500 are 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.
Repairs and Maintenance
Repairs and maintenance costs are expensed 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. The following is a table reflecting estimated ranges of asset lives by
major class of depreciable assets:
Asset Class Estimated Asset Life
----------- --------------------
Revenue Equipment 3-7 years
Service Vehicles 3-5 years
Office Furniture & Equipment 3-7 years
Structures & Improvements 5-30 years
F-14
P.A.M. Transportation Services, Inc.
Notes to Consolidated Financial Statements
December 31, 2000
1. ACCOUNTING POLICIES (continued)
Income Taxes
The Company applies the provisions of Statement of Financial Accounting
Standards No. 109, Accounting for Income Taxes (SFAS No. 109). SFAS No. 109
requires recognition of deferred tax liabilities and assets for expected future
consequences of events that have been included in a company's financial
statements or tax return. Under this method, deferred tax liabilities and assets
are determined based on the difference between the financial statements and the
tax basis of assets and liabilities using enacted tax rates.
Business Segment and Concentrations of Credit Risk
The Company operates in one business segment, motor carrier operations. The
Company provides transportation services to customers throughout the United
States and portions of Canada and Mexico. The Company performs ongoing credit
evaluations and generally does not require collateral. The Company maintains
reserves for potential credit losses and such losses have been within
management's expectations.
In 2000, 1999 and 1998, one customer accounted for 33%, 30% and 35% of revenues,
respectively. A second customer accounted for 10%, 9% and 12% of revenues in
2000, 1999 and 1998, respectively. 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 2000, 1999 and 1998, 50%, 46% and 53%,
respectively, 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.
F-15
P.A.M. Transportation Services, Inc.
Notes to Consolidated Financial Statements
December 31, 2000
1. ACCOUNTING POLICIES (continued)
Recent Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, Accounting for Derivative Instruments
and Hedging Activities, (SFAS No. 133), which was amended by Statement of
Financial Accounting Standards No. 138, Accounting for Certain Derivative
Instruments and Certain Hedging Activities - an Amendment of FASB Statement No.
133 (SFAS No. 138). SFAS No. 133 establishes accounting and reporting standards
requiring that every derivative instrument (including certain derivative
instruments embedded in other contracts) be recorded in the balance sheet as
either an asset or liability measured at its fair value. SFAS No. 133 requires
that changes in the derivative's fair value be recognized currently in earnings
unless specific hedge accounting criteria are met. Companies must formally
document, designate, and assess the effectiveness of transactions that receive
hedge accounting. SFAS No. 138 amends the accounting and reporting standards for
certain derivative instruments and certain hedging activities, including the
normal purchases and normal sales exception.
SFAS No. 133 is effective for fiscal years beginning after June 15, 2000 and
must be applied to (a) derivative instruments and (b) certain derivative
instruments embedded in hybrid contracts that were issued, acquired, or
substantively modified after December 31, 1997 (and, at the company's election,
before January 1, 1998). The Company adopted SFAS No. 133 on January 1, 2001,
however, as of December 31, 2000, the Company had no outstanding derivative
instruments or embedded derivatives that were subject to the requirements of
SFAS No. 133.
Reclassifications
Certain reclassifications have been made to prior years' consolidated financial
statements to conform to the current year presentation.
Use of Estimates
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires management to make estimates
and assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
F-16
P.A.M. Transportation Services, Inc.
Notes to Consolidated Financial Statements
December 31, 2000
2. ACCRUED EXPENSES
December 31,
2000 1999
--------------------
(thousands)
Payroll $1,266 $1,019
Accrued vacation 784 793
Taxes 1,654 1,645
Interest 195 256
Driver escrows 818 925
Insurance 1,652 1,330
Current portion of non-competition agreements 131 131
Self-insurance claims reserves 1,574 1,575
--------------------
$8,074 $7,674
====================
3. LONG-TERM DEBT
Long-term debt consists of the following:
December 31,
2000 1999
----------------------------
(thousands)
Equipment financings (1) $ 47,496 $ 69,728
Line of credit with a bank, due May 31, 2002 and
collateralized by accounts receivable (2) 4,127 3,949
Line of credit with a bank, due November 30, 2002 and
collateralized by revenue equipment (3) 5,000 -
Note payable (4) 2,602 3,348
Other (5) 601 863
-----------------------------
59,826 77,888
Less current maturities 17,753 22,271
-----------------------------
$ 42,073 $ 55,617
=============================
(1) Equipment financings consist of installment obligations for revenue and
service equipment purchases, payable in various monthly installments
through 2004, at a weighted average interest rate of 6.75% and
collateralized by equipment with a net book value of approximately $54.9
million at December 31, 2000.
F-17
P.A.M. Transportation Services, Inc.
Notes to Consolidated Financial Statements
December 31, 2000
3. LONG-TERM DEBT (continued)
(2) The line of credit agreement with a bank provides for maximum borrowings
of $15.0 million and contains certain restrictive covenants that must be
maintained by the Company on a consolidated basis. Borrowings on the line
of credit are at an interest rate of LIBOR as of the first day of the
month plus 1.40%. The Company was in compliance with all provisions of the
agreement at December 31, 2000.
(3) The line of credit agreement with a bank provides for maximum borrowings
of $15.0 million and contains certain restrictive covenants that must be
maintained by the Company on a consolidated basis. Borrowings on the line
of credit are at an interest rate of LIBOR as of the first day of the
month plus 1.15%. The Company was in compliance with all provisions of the
agreement at December 31, 2000.
(4) 6.0% note to the former owner of Decker Transport Company, Inc., payable
in monthly installments of $77,216 through January 2004 and secured by a
letter of credit from a bank in the amount of $1,300,000.
(5) Various notes with interest rates ranging from 6.0% to 8.0% payable in
monthly installments through December 2005.
Scheduled annual maturities on long-term debt outstanding at December 31, 2000
are:
(thousands)
2001 $ 17,753
2002 27,744
2003 10,724
2004 3,562
2005 43
----------
$ 59,826
==========
Interest payments of approximately $5.1 million, $5.5 million, and $3.8 million
were made during 2000, 1999 and 1998, respectively.
F-18
P.A.M. Transportation Services, Inc.
Notes to Consolidated Financial Statements
December 31, 2000
4. INCOME TAXES
Under SFAS No. 109, deferred income taxes reflect the net tax effects of
temporary differences between the carrying amounts of assets and liabilities for
financial reporting purposes and the carrying amounts for income tax purposes.
Significant components of the Company's deferred tax liabilities and assets are
as follows:
December 31,
2000 1999
-------------------
Deferred tax liabilities: (thousands)
Property and equipment $29,301 $25,107
Prepaid expenses 1,722 1,558
-------------------
Total deferred tax liabilities 31,023 26,665
Deferred tax assets:
Alternative minimum tax credit 4,785 4,659
Investment credit carryovers 355 1,096
Allowance for doubtful accounts 249 249
Vacation reserves 297 278
Self-insurance reserves 1,225 1,105
Non-competition agreement 515 691
Other 200 272
-------------------
Total deferred tax assets 7,626 8,350
-------------------
Net deferred tax liabilities $23,397 $18,315
===================
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,
2000 1999 1998
-------------------------------
(thousands)
Income tax at the statutory Federal rate of 34% $ 4,879 $ 6,394 $ 4,499
Nondeductible expenses 311 330 60
State income taxes (195) (82) (85)
Other (336) (255) (329)
------------------------------
Federal income taxes 4,659 6,387 4,145
State income taxes 1,035 1,149 1,013
------------------------------
Total income taxes $ 5,694 $ 7,536 $ 5,158
==============================
Effective tax rate 39.7% 40.1% 39.0%
==============================
F-19
P.A.M. Transportation Services, Inc.
Notes to Consolidated Financial Statements
December 31, 2000
4. INCOME TAXES (continued)
The current income tax provision consists of the following:
2000 1999 1998
-----------------------------------------
(thousands)
Federal $ 656 $ 1,866 $ 1,073
State 400 241 250
-----------------------------------------
$ 1,056 $ 2,107 $ 1,323
=========================================
As of December 31, 2000, the Company has investment tax credit carryovers of
approximately $355,000, which begin expiring in 2001. The current taxes provided
in 2000, 1999 and 1998 result from alternative minimum taxable income. The
Company has alternative minimum tax credits of approximately $4.8 million at
December 31, 2000, which carryover indefinitely.
Income taxes paid totaled approximately $1,100,000, $2,200,000 and $1,200,000
for the years ended December 31, 2000, 1999 and 1998, respectively.
5. SHAREHOLDERS' EQUITY
The Company maintains an incentive stock option plan and a nonqualified stock
option plan for the issuance of options to directors, officers, key employees
and others. During 1998, the incentive stock option plan was amended to include
an additional 400,000 shares available for future granting. The option price
under these plans is the fair market value of the stock at the date the options
were granted, ranging from $5.75 to $10.63 as of December 31, 2000. At December
31, 2000, approximately 630,000 shares were available for granting future
options.
Outstanding incentive stock options at December 31, 2000, 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, 2000 must be exercised
within five to six years and certain nonqualified options may not be exercised
within one year of the date of grant.
F-20
P.A.M. Transportation Services, Inc.
Notes to Consolidated Financial Statements
December 31, 2000
5. SHAREHOLDERS' EQUITY (continued)
Transactions in stock options under these plans are summarized as follows:
Shares
Under
Option Price Range
-------------------------
Outstanding at December 31, 1997 342,850 $2.38-$ 7.38
Granted 33,000 $9.25-$10.63
Exercised (49,800) $2.38-$ 5.75
-----------------------
Outstanding at December 31, 1998 326,050 $2.38-$10.63
Granted 55,000 $8.63-$10.25
Exercised (115,000) $2.38-$ 6.00
Canceled (1,050) $ 2.38
-----------------------
Outstanding at December 31, 1999 265,000 $5.75-$10.63
Granted 10,000 $ 9.13
Exercised (29,700) $5.75-$ 6.75
Canceled (5,000) $7.38-$ 9.13
-----------------------
Outstanding at December 31, 2000 240,300 $5.75-$10.63
=======================
Options exercisable at December 31, 2000 201,300
========
The following is a summary of stock options outstanding as of December 31, 2000:
Weighted
Option Average
Options Exercise Remaining Options
Outstanding Price Years Exercisable
----------------------------------------------------
130,000 $ 5.75 .5 130,000
3,000 $ 7.38 1.2 3,000
5,000 $ 6.50 1.4 5,000
6,300 $ 5.75 1.5 6,300
2,000 $ 6.00 2.2 2,000
3,000 $ 10.63 3.2 3,000
30,000 $ 9.25 3.6 18,000
8,000 $ 8.63 4.2 8,000
45,000 $ 10.25 4.6 18,000
8,000 $ 9.13 5.2 8,000
----------- -----------
240,300 201,300
=========== ===========
F-21
P.A.M. Transportation Services, Inc.
Notes to Consolidated Financial Statements
December 31, 2000
5. SHAREHOLDERS' EQUITY (continued)
The Company adopted the disclosure-only provisions of Statement of Financial
Accounting Standards No. 123, Accounting for Stock-Based Compensation ("SFAS No.
123"). Accordingly, no compensation cost has been recognized for the stock
option plans. Had compensation cost for the Company's stock option plans been
determined consistent with the provisions of SFAS No. 123, the Company's net
income and earnings per share would have been reduced to the pro forma amounts
indicated below:
2000 1999
-------------------------
Net income: (thousands)
As reported $8,658 $ 11,269
Pro forma $8,542 $ 11,076
Earnings per share as reported:
Basic $ 1.02 $ 1.34
Diluted $ 1.02 $ 1.33
Pro forma earnings per share:
Basic $ 1.01 $ 1.32
Diluted $ 1.00 $ 1.31
The fair value of each option grant is estimated on the date of grant using the
Black-Scholes option pricing model with the following weighted average
assumptions: dividend yield of 0%; expected volatility of 31.63% to 76.64%;
risk-free interest rate of 5.25% to 7.02%; and expected lives of five years.
6. EARNINGS PER SHARE
The Company applies Financial Accounting Standards Board Statement No. 128,
Earnings Per Share, for computing and presenting earnings per share. Basic
earnings per common share were computed by dividing net income by the weighted
average number of shares outstanding during the period. Diluted earnings per
common share were calculated as follows:
F-22
P.A.M. Transportation Services, Inc.
Notes to Consolidated Financial Statements
December 31, 2000
6. EARNINGS PER SHARE (continued)
2000 1999 1998
------------------------------------------
(thousands, except per share data)
Actual net income (A) $8,658 $11,269 $ 8,073
============== ============== ============
Assumed exercise of options 209 262 317
Application of assumed proceeds ($1,375,
$1,621 and $1,606, respectively)
toward repurchase of stock at an average
market price of $9.430, $9.719 and
$8.958 per share, respectively. (146) (167) (179)
-------------- -------------- ------------
Net additional shares issuable 63 95 138
============== ============== ============
Adjustment of shares outstanding:
Weighted average common shares outstanding 8,455 8,393 8,306
Net additional shares issuable 63 95 138
-------------- -------------- ------------
Adjusted shares outstanding (B) 8,518 8,488 8,444
============== ============== ============
Diluted earnings per common share
(A) divided by (B) $ 1.02 $ 1.33 $ .96
============== ============== ============
7. PROFIT SHARING PLAN
P.A.M. Transport, Inc. sponsors a profit sharing plan for the benefit of all
eligible employees. The plan qualifies under Section 401(k) of the Internal
Revenue Code thereby allowing eligible employees to make tax deductible
contributions to the plan. The plan provides for employer matching contributions
of 50% of each participant's voluntary contribution up to 3% of the
participant's compensation. Total contributions to the plan totaled
approximately $255,000, $200,000 and $133,000 in 2000, 1999 and 1998,
respectively.
8. LITIGATION
The Company is not a party to any pending legal proceedings which management
believes to be material to the financial position or results of operations of
the Company. The Company maintains liability insurance against risks arising out
of the normal course of its business.
F-23
P.A.M. Transportation Services, Inc.
Notes to Consolidated Financial Statements
December 31, 2000
9. QUARTERLY RESULTS OF OPERATIONS (Unaudited)
The tables below present quarterly financial information for 2000 and 1999:
2000
Three Months Ended
March 31 June 30 September 30 December 31
-----------------------------------------------------------------
(thousands, except per share data)
Operating revenues $ 54,147 $ 53,034 $ 47,100 $ 50,964
Operating expenses 49,253 46,965 43,749 45,878
---------------------------------------------------------------
Operating income 4,894 6,069 3,351 5,086
Other expenses - net 1,354 1,368 1,184 1,142
Income taxes 1,412 1,881 823 1,578
---------------------------------------------------------------
Net income $ 2,128 $ 2,820 $ 1,344 $ 2,366
===============================================================
Net income per common share:
Basic $ .25 $ .33 $ .16 $ .28
===============================================================
Diluted $ .25 $ .33 $ .16 $ .28
===============================================================
Average common shares outstanding:
Basic 8,440 8,444 8,465 8,470
===============================================================
Diluted 8,515 8,515 8,525 8,520
===============================================================
1999
Three Months Ended
March 31 June 30 September 30 December 31
----------------------------------------------------------------
(thousands, except per share data)
Operating revenues $ 51,391 $ 53,675 $ 51,284 $ 51,032
Operating expenses 45,241 46,608 45,228 45,850
---------------------------------------------------------------
Operating income 6,150 7,067 6,056 5,182
Other expenses - net 1,404 1,479 1,413 1,354
Income taxes 1,938 2,294 1,849 1,455
---------------------------------------------------------------
Net income $ 2,808 $ 3,294 $ 2,794 $ 2,373
===============================================================
Net income per common share:
Basic $ .34 $ .39 $ .33 $ .28
===============================================================
Diluted $ .33 $ .39 $ .33 $ .28
===============================================================
Average common shares outstanding:
Basic 8,342 8,378 8,421 8,445
===============================================================
Diluted 8,441 8,458 8,527 8,535
===============================================================
F-24
P.A.M. Transportation Services, Inc.
Notes to Consolidated Financial Statements
December 31, 2000
10. FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used by the Company in 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.
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.
Lines of credit - The carrying amount for the line of credit approximates fair
value.
The carrying amounts and fair values of the Company's financial instruments at
December 31 are as follows (in thousands):
2000 1999
- -------------------------------------------------------------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
- -------------------------------------------------------------------------
Cash and cash equivalents $ 485 $ 485 $ 3,557 $ 3,557
Long-term debt 50,699 50,305 73,939 73,705
Lines of credit 9,127 9,127 3,949 3,949
=========================================================================
11. ACQUISITION
On January 11, 1999, the Company closed the purchase of substantially all of the
assets and assumed certain liabilities of Decker Transport Co., Inc., a
truckload carrier located in New Jersey. The Company acquired assets, which
consisted primarily of revenue equipment and trade accounts receivable, totaling
approximately $21.0 million and assumed liabilities, which consisted primarily
of installment note obligations and trade accounts payable, totaling
approximately $14.1 million. In connection with this acquisition, the Company
issued to the seller an installment note in the amount of $4.0 million at an
interest rate of 6% and paid cash of approximately $9.8 million utilizing
existing cash and its line of credit.
The purchase price has been allocated to assets and liabilities based on their
estimated fair values as of the date of acquisition. Goodwill was recorded as a
result of the purchase allocation and it is being amortized over a 25-year
period. The Company also entered into three-year Non-competition Agreements with
eight shareholders or officers/employees of Decker Transport Co., Inc.
F-25
P.A.M. Transportation Services, Inc.
Notes to Consolidated Financial Statements
December 31, 2000
11. ACQUISITION (continued)
The acquisition has been accounted for under the purchase method, effective
January 11, 1999, with the operations of Decker included in the Company's
financial statements since that date. Actual fiscal 1999 operating results are
representative of 1999 pro forma amounts. The following fiscal 1998 pro forma
financial information is based on the audited consolidated financial statements
of P.A.M. Transportation Services, Inc. for the year ended December 31, 1998 and
from the audited combined financial statements of Decker Transport Co., Inc. and
Van Houten Ltd. for the year ended December 31, 1998 and adjusted as if the
acquisition had occurred on January 1, 1998, with certain assumptions made that
management believes to be reasonable. This information is for comparative
purposes only and does not purport to be indicative of the results of operations
that would have occurred had the transaction been completed at the beginning of
the period or indicative of the results that may occur in the future.
1998
(unaudited)
---------------------
(thousands, except
per share data)
Operating revenue $ 191,616
Income from operations 17,402
Income before income tax provision 11,813
Net income 7,239
Earnings per share -basic .87
Earnings per share -diluted .86
Weighted average shares -basic 8,306
Weighted average shares -diluted 8,444
F-26
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution
The following table sets forth the costs and expenses, other than
underwriting discounts and commissions, payable by us in connection with the
sale and distribution of the securities being registered. All amounts except the
SEC registration fee and the NASD filing fee are estimated.
SEC Registration Fee ..................... $ 6,101
NASD Filing Fee .......................... $ 7,132
Accounting Fees and Expenses ............. $ 40,000
Legal Fees and Expenses .................. $ 175,000
Printing Expenses ........................ $ 60,000
Miscellaneous ............................ $ 11,767
----------
Total .................. $ 300,000
==========
Item 15. Indemnification of Directors and Officers
Under Section 145 of the Delaware General Corporation Law (the
"Delaware Law"), a corporation may indemnify its directors, officers, employees
and agents and its former directors, officers, employees and agents and those
who serve, at the corporation's request, in such capacities with another
enterprise, against expenses (including attorneys' fees), as well as judgments,
fines and settlements in nonderivative lawsuits, actually and reasonably
incurred in connection with the defense of any action, suit or proceeding in
which they or any of them were or are made parties or are threatened to be made
parties by reason of their serving or having served in such capacity. The
Delaware Law provides, however, that such person must have acted in good faith
and in a manner such person reasonably believed to be in (or not opposed to) the
best interest of the corporation and, in the case of a criminal action, such
person must have had no reasonable cause to believe his or her conduct was
unlawful. In addition, the Delaware Law does not permit indemnification in an
action or suit by or in the right of the corporation, where such person has been
adjudged liable to the corporation, unless, and only to the extent that, a court
determines that such person fairly and reasonably is entitled to indemnity for
costs the court deems proper in light of liability adjudication. Indemnity is
mandatory to the extent a claim, issue or matter has been successfully defended.
P.A.M.'s Bylaws provide for indemnification of P.A.M.'s directors and
officers to the full extent permitted by the Delaware Law. In addition, P.A.M.'s
Certificate of Incorporation eliminates the monetary liability of directors to
the fullest extent permitted by the Delaware Law. P.A.M. has purchased
directors' and officers' liability insurance covering certain liabilities that
may be incurred by its directors and officers in connection with the performance
of their duties.
Item 16. Exhibits
The Exhibit Index filed herewith and appearing immediately before the
exhibits hereto is incorporated by reference in response to this Item.
Item 17. Undertakings
The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 that is incorporated by reference in this registration
statement shall be deemed to be a new registration statement related to
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has
II-1
been advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act of
1933 and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act of 1933 and will be governed by the final adjudication of such issue.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part of
this registration statement in reliance upon Rule 430A and contained in a form
of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of this registration
statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of prospectus
shall be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
II-2
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-2 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized in the City of Tontitown, State of Arkansas, on February 19, 2002.
P.A.M. TRANSPORTATION SERVICES, INC.
By: /s/ Robert W. Weaver
---------------------------------------------------
Robert W. Weaver
President and Chief Executive Officer
(principal executive officer)
By: /s/ Larry J. Goddard
---------------------------------------------------
Larry J. Goddard
Vice President - Finance, Chief Financial Officer,
Secretary and Treasurer
(principal financial and accounting officer)
KNOWN ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Robert W. Weaver and Larry J. Goddard,
and each of them, his attorney-in-fact, with power of substitution, for him in
any and all capacities, to sign any amendments or supplements to this
Registration Statement or any other instruments he deems necessary or
appropriate, to file the same, with exhibits thereto and other documents in
connection therewith, with the Securities and Exchange Commission, hereby
ratifying and confirming all that said attorney-in-fact or his substitute or
substitutes may do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934,
this Registration Statement has been signed below by the following persons on
behalf of the Registrant in the capacities and on the dates indicated:
Signature Title Date
--------- ----- ----
/s/ Robert W. Weaver President, Chief Executive February 19, 2002
- ------------------------------------
Robert W. Weaver Officer and Director
/s/ Larry J. Goddard
- ------------------------------------
Larry J. Goddard Vice President - Finance, Chief February 19, 2002
Financial Officer, Secretary and
Treasurer
/s/ Daniel C. Sullivan
- ------------------------------------
Daniel C. Sullivan Director February 18, 2002
/s/ Matthew T. Moroun
- ------------------------------------
Matthew T. Moroun Director February 19, 2002
/s/ Charles F. Wilkins
- ------------------------------------
Charles F. Wilkins Director February 18, 2002
/s/ Frederick P. Calderone
- ------------------------------------
Frederick P. Calderone Director February 19, 2002
EXHIBIT INDEX
The following exhibits are filed with or incorporated by reference into
this report. The exhibits 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 ("S-1");
(ii) the Annual Report on Form 10-K for the year ended December 31, 1987
("1987 10-K");
(iii) the Annual Report on Form 10-K for the year ended December 31, 1992
("1992 10-K");
(iv) the Annual Report on Form 10-K for the year ended December 31, 1996
("1996 10-K"); or
(v) the Quarterly Report on Form 10-Q for the quarter ended June 30,
1998 ("6/30/98 10-Q").
Exhibit # Description of Exhibit
- ----------- ---------------------------------------------------------------
1 --- Form of Underwriting Agreement (to be filed by amendment)
*4.1 --- Specimen Stock Certificate (Ex. 4.1, S-1)
*4.2 --- Amended and Restated Certificate of Incorporation of the
Registrant (Exh. 3.1, S-1)
*4.2.1 --- Amendment to Certificate of Incorporation dated June 24, 1987
(Exh. 3.1.1, 1987 10-K)
*4.3 --- Amended and Restated By-Laws of the Registrant (Exh. 3.2, S-1)
*4.3.1 --- Amendment to Article I, Section 3 of Bylaws of Registrant (Exh.
3.2.1, S-1)
*4.3.2 --- Amendments to Bylaws of Registrant adopted May 7, 1987 (Exh.
3.2.2, 1987 10-K)
*4.3.3 --- Amendments to Bylaws of Registrant adopted January 4, 1993
(Exh. 3.2.3, 1992 10-K)
5.1 --- Opinion of Smith, Gambrell & Russell, LLP regarding legality of
securities being registered (to be filed by amendment)
*10.1 --- Employment Agreement between the Registrant and Robert W.
Weaver dated July 1, 1998 (Ex. 10.1, 6/30/98 10-Q)
*10.2 --- 1995 Stock Option Plan, effective June 29, 1995 (Ex. 10.6, 1996
10-K)
23.1 --- Consent of Arthur Andersen LLP
23.2 --- Consent of Smith, Gambrell & Russell, LLP (contained in their
opinion at Exhibit 5.1)
24.1 --- Powers of Attorney (included on the signature page of this
registration statement)