10-K 1 form10k_2012.htm PTSI 2012 FORM 10-K
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ý
Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
o Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the Fiscal Year Ended December 31, 2012
or
For the transition period from ________to________
Commission File No. 0-15057
P.A.M. TRANSPORTATION SERVICES, INC.
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of
incorporation or organization)
71-0633135
(I.R.S. Employer
Identification No.)
297 West Henri De Tonti Blvd, Tontitown, Arkansas 72770
(Address of principal executive offices) (Zip Code)
(479) 361-9111
Registrant's telephone number, including area code
Securities registered pursuant to section 12(b) of the Act:
Title of each class
Common Stock, $.01 par value
Name of each exchange on which registered
NASDAQ Global Market
Securities registered pursuant to section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes o
No þ
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
Yes o
No þ
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes þ
No o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any,
every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post
such files).
Yes þ
No o
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is
not contained herein, and will not be contained, to the best of the registrant’s knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. þ
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a
smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting
company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer o
Accelerated filer þ
Non-accelerated filer o
Smaller reporting company o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).
Yes o
No þ
The aggregate market value of the common stock of the registrant held by non-affiliates of the registrant computed by
reference to the average of the closing bid and ask prices of the common stock as of the last business day of the
registrant's most recently completed second quarter was $38,671,942. Solely for the purposes of this response, executive
officers, directors and beneficial owners of more than five percent of the registrant’s common stock are considered the
affiliates of the registrant at that date.
The number of shares outstanding of the registrant’s common stock, as of February 15, 2013: 8,701,607 shares of $.01 par
value common stock.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant’s definitive Proxy Statement for its Annual Meeting of Stockholders to be held on May 23, 2013,
are incorporated by reference in answer to Part III of this report. Such proxy statement will be filed with the Securities and
Exchange Commission within 120 days of the Registrant’s fiscal year ended December 31, 2012.
FORWARD-LOOKING STATEMENTS
This Annual Report on Form 10-K (this “Report”) contains forward-looking statements, including statements about our
operating and growth strategies, our expected financial position and operating results, industry trends, our capital
expenditure and financing plans and similar matters. Such forward-looking statements are found throughout this Report,
including under Item 1, Business, Item 1A, Risk Factors, Item 7, Management’s Discussion and Analysis of Financial
Condition and Results of Operations, and Item 7A, Quantitative and Qualitative Disclosures About Market Risk. In those
and other portions of this Report, the words “believe,” “may,” “will,” “estimate,” “continue,” “anticipate,” “intend,” “expect,”
“project” and similar expressions, as they relate to us, our management, and our industry are intended to identify forward-
looking statements. We have based these forward-looking statements largely on our current expectations and projections
about future events and financial trends affecting our business. Actual results may differ materially. Some of the risks,
uncertainties and assumptions that may cause actual results to differ from these forward-looking statements are described
under the headings “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of
Operations,” and “Quantitative and Qualitative Disclosures About Market Risk.”
All forward-looking statements attributable to us, or to persons acting on our behalf, are expressly qualified in their entirety
by this cautionary statement.
We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new
information, future events or otherwise. In light of these risks and uncertainties, the forward-looking events and
circumstances discussed in this Report might not transpire.
P.A.M. TRANSPORTATION SERVICES, INC.
FORM 10-K
For the fiscal year ended December 31, 2012
TABLE OF CONTENTS
Item 1
Item 1A
Item 1B
Item 2
Item 3
Item 4
Item 5
Item 6
Item 7
Item 7A
Item 8
Item 9
Item 9A
Item 9B
Item 10
Item 11
Item 12
Item 13
Item 14
Business
Risk Factors
Unresolved Staff Comments
Properties
Legal Proceedings
Mine Safety Disclosures
PART I
PART II
Market for Registrant's Common Equity, Related Stockholder Matters
and Issuer Purchases of Equity Securities
Selected Financial Data
Management's Discussion and Analysis of Financial Condition
and Results of Operations
Quantitative and Qualitative Disclosures About Market Risk
Financial Statements and Supplementary Data
Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure
Controls and Procedures
Other Information
PART III
Directors, Executive Officers and Corporate Governance
Executive Compensation
Security Ownership of Certain Beneficial Owners and Management
and Related Stockholder Matters
Certain Relationships and Related Transactions, and Director Independence
Principal Accounting Fees and Services
Item 15
Exhibits, Financial Statement Schedules
PART IV
SIGNATURES
EXHIBIT INDEX
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Item 1. Business.
PART I
Unless the context otherwise requires, all references in this Annual Report on Form 10-K to “P.A.M.,” the “Company,” “we,”
“our,” or “us” mean P.A.M. Transportation Services, Inc. and its subsidiaries.
We are a truckload dry van carrier transporting general commodities throughout the continental United States, as well as in
certain Canadian provinces. We also provide transportation services in Mexico under agreements with Mexican carriers.
Our freight consists primarily of automotive parts, expedited goods, consumer goods, such as general retail store
merchandise, and manufactured goods, such as heating and air conditioning units.
P.A.M. Transportation Services, Inc. is a holding company incorporated under the laws of the State of Delaware in June
1986. We conduct operations through the following wholly owned subsidiaries: P.A.M. Transport, Inc., T.T.X., LLC, P.A.M.
Cartage Carriers, LLC, P.A.M. Logistics Services, Inc., Choctaw Express, LLC, Choctaw Brokerage, Inc., Transcend
Logistics, Inc., Decker Transport Co., LLC, East Coast Transport and Logistics, LLC, S & L Logistics, Inc., P.A.M.
International, Inc. and P.A.M. Canada, Inc. Our operating authorities are held by P.A.M. Transport, Inc., P.A.M. Cartage
Carriers, LLC, Choctaw Express, LLC, Choctaw Brokerage, Inc., T.T.X., LLC, Decker Transport Co., LLC, and East Coast
Transport and Logistics, LLC. Effective on January 1, 2010, the operations of most of the Company’s operating
subsidiaries were consolidated under the P.A.M. Transport, Inc. name in a effort to more clearly reflect the Company’s
scope and available service offerings. Effective September 30, 2010, the Company sold the assets of East Coast Transport
and Logistics, LLC which effectively closed the Company’s New Jersey based brokerage office.
We are headquartered and maintain our primary terminal and maintenance facilities and our corporate and administrative
offices in Tontitown, Arkansas, which is located in northwest Arkansas, a major center for the trucking industry and where
the support services (including warranty repair services) for most major truck and trailer equipment manufacturers are
readily available.
Segment Financial Information
The Company's operations are all in the motor carrier segment and are aggregated into a single reporting segment in
accordance with the aggregation criteria under Generally Accepted Accounting Principles (“GAAP”).
Operations
Our operations can generally be classified into truckload services or brokerage and logistics services. Truckload services
include those transportation services in which we utilize company owned trucks or owner-operator owned trucks for the
pickup and delivery of freight. The brokerage and logistics services consists of services such as transportation scheduling,
routing, mode selection, transloading and other value added services related to the transportation of freight which may or
may not involve the use of company owned or owner-operator owned equipment. Both our truckload operations and our
brokerage and logistics operations have similar economic characteristics and are impacted by virtually the same economic
factors as discussed elsewhere in this Report. Truckload services operating revenues, before fuel surcharges represented
91.8%, 93.5% and 85.9% of total operating revenues for the years ended December 31, 2012, 2011 and 2010,
respectively. The remaining operating revenues, before fuel surcharge for the same periods were generated by brokerage
and logistics services, representing 8.2%, 6.5%, and 14.1%, respectively.
Approximately 60% of the Company's revenues are derived from domestic shipments while approximately 40% of our
revenues are derived from freight originating from or destined to locations in Mexico or Canada.
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Business and Growth Strategy
Our strategy focuses on the following elements:
Providing a Full Suite of Complimentary Truckload Transportation Solutions. Our objective is to provide our customers with
a comprehensive solution to their truckload transportation needs. Our asset-based service offerings consist of dedicated,
expedited, regional, automotive, and long-haul truckload services with non-asset based supply chain management,
logistics and brokerage solutions rounding out our service offerings. Our range of service offerings also include our
complete range of asset-based and non-asset based services to Mexico and Canada.
Developing Customer Relationships within High Density Traffic Lanes. We strive to maximize utilization and increase
revenue per truck while minimizing our time and empty miles between loads. In this regard, we seek to provide equipment
to our customers in defined regions and disciplined traffic lanes. This strategy enables us to:
· maintain more consistent equipment capacity;
·
provide a high level of service to our customers, including time-sensitive delivery schedules;
·
attract and retain drivers; and
· maintain a sound safety record as drivers travel familiar routes.
Providing Superior and Flexible Customer Service . Our wide range of services includes expedited services, dedicated fleet
services, logistics services, time-definite delivery, two-person driving teams, cross-docking and consolidation programs,
specialized trailers, international services to Mexico and Canada, and Internet-based customer access to delivery status.
These services allow us to quickly and reliably respond to the diverse needs of our customers, and provide an advantage in
securing new business.
Many of our customers depend on us to make delivery on a time-definite basis, meaning that parts or raw materials are
scheduled for delivery as they are needed on a manufacturer’s production line. The need for this service is a product of
modern manufacturing and assembly methods that are designed to decrease inventory levels and handling costs. Such
requirements place a premium on the freight carrier’s delivery performance and reliability.
Employing Stringent Cost Controls . Throughout our organization, emphasis is placed on gaining efficiency in our processes
with the primary goals of decreasing costs and improving customer satisfaction. Maintaining a high level of efficiency and
prioritizing our focus on improvements allows us to minimize the number of non-driving personnel we employ and positively
influence other overhead costs. Expenses are intensely scrutinized for opportunities for elimination, reduction or to further
leverage our purchasing power to achieve more favorable pricing.
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Industry
According to the American Trucking Association’s “American Trucking Trends 2012” report, the trucking industry
transported approximately 67% of the total volume of freight transported in the United States during 2011, which equates to
9.2 billion tons and approximately $604 billion in revenue. The truckload industry is highly fragmented and is impacted by
several economic and business factors, many of which are beyond the control of individual carriers. The state of the
economy, coupled with equipment capacity levels, can impact freight rates. Volatility of various operating expenses, such
as fuel and insurance, make the predictability of profit levels uncertain. Availability, attraction, retention and compensation
of drivers also 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:
·
·
·
·
Intense competition for freight
Price increases by truck and trailer equipment manufacturers
Volatile fuel costs, generally trending higher
In recent years, many less profitable or undercapitalized carriers have been forced to consolidate or to exit the industry
Competition
The trucking industry is highly competitive and includes thousands of carriers, none of which dominates the market in
which the Company operates. The Company's market share is less than 1% and we compete primarily with other irregular
route medium- to long-haul truckload carriers, with private carriage conducted by our existing and potential customers,
and, to a lesser extent, with the railroads. We compete on the basis of quality of service and delivery performance, as well
as price. Many of the other irregular route long-haul truckload carriers have substantially greater financial resources, own
more equipment or carry a larger total volume of freight as compared to the Company.
Marketing and Significant Customers
Our marketing emphasis is directed to that portion 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, expedited, regional, automotive, and long-haul opportunities (including those in Mexico and Canada) and to
expand supply chain solutions offerings.
Our marketing efforts are conducted by a sales staff of twelve employees who are located in our major markets and
supervised from our headquarters. These individuals work to improve profitability by maintaining an even flow of freight
traffic (taking into account the balance between originations and destinations in a given geographical area), 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 39%, 47% and 52% of our total revenues in 2012, 2011 and 2010, respectively. General Motors Corporation
accounted for approximately 17%, 26% and 34% of our revenues in 2012, 2011 and 2010, respectively.
We also provide transportation services to other manufacturers who are suppliers for automobile manufacturers.
Approximately 37%, 38% and 40% of our revenues were derived from transportation services provided to the automobile
industry during 2012, 2011 and 2010, respectively.
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Revenue Equipment
At December 31, 2012, we operated a fleet of 1,800 trucks, which includes 220 owner-operator trucks, and 4,943 trailers,
which includes 36 leased trailers. Our company-owned trucks are late model, well-maintained, premium trucks, which we
believe help to attract and retain drivers, maximize fuel efficiency, promote safe operations, minimize maintenance and
repair costs, and improve customer service by minimizing service interruptions caused by breakdowns. We evaluate our
equipment purchasing 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.
We contract with owner-operators to provide greater flexibility in responding to fluctuations in consumer demand. Owner-
operators provide their own trucks and are contractually responsible for all associated expenses, including financing costs,
fuel, maintenance, insurance, and taxes, among other things. They are also responsible for maintaining compliance with
the Federal Motor Carrier Safety Administration regulations.
During 1999, the U.S. Environmental Protection Agency (“EPA”) mandated a three-phase strategy to reduce engine
emissions from heavy-duty vehicles through a combination of advanced emissions control technologies and diesel fuel
with a reduced sulfur content. The first phase (Phase I) mandated new engine emission standards for all model year 2004
heavy-duty trucks; however, through agreements with heavy-duty diesel engine manufacturers, the effective date was
accelerated to October 1, 2002. Since October 1, 2002, all newly manufactured truck engines had to comply with the new
engine emission standards. As of December 31, 2012, the Company-owned truck fleet does not contain any trucks with
the older Phase I engines.
In the second phase (Phase II), effective January 1, 2007, the EPA mandated a new set of more stringent emission
standards for vehicles powered by diesel fuel engines manufactured in 2007 through 2009. As of December 31, 2012,
approximately 20% of our Company-owned truck fleet consisted of trucks with engines that comply with the Phase II
emission standards (Phase II trucks). As compared to trucks powered by the Phase I engines, the trucks powered by the
Phase II compliant diesel engines had a significantly higher purchase price and as a result, our depreciation expense
increased over time as we replaced Phase I trucks with Phase II trucks.
During the third phase (Phase III), which was effective in 2010, final emission standards became effective. During 2012,
the Company took delivery of approximately 675 trucks, all of which contained engines compliant with the Phase III
emission standards. As of December 31, 2012, approximately 80% of our Company-owned truck fleet consisted of trucks
with engines that comply with the Phase III emission standards (Phase III trucks). During 2013, the Company expects to
take delivery of 550 additional Phase III trucks. To date, the Company-owned Phase III trucks have shown increased fuel
efficiency as compared to either the Phase I or Phase II truck fuel efficiency, however, Phase III trucks have a significant
purchase price premium as compared to the purchase price of the Phase I and Phase II trucks and as a result, our
depreciation expense has increased and will continue to increase over time as we replace Phase II trucks with Phase III
trucks. We also expect that the Phase III diesel engines will cost more to maintain compared to Phase I and Phase II trucks
of a similar age. To the extent we are unable to offset these anticipated increased costs with rate increases charged to
customers or offsetting cost savings in other areas, our results of operations will be adversely affected.
Technology
We have installed Qualcomm display units in all of our trucks. The Qualcomm 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 system which increases productivity and convenience. This system provides us
with accurate estimated time of arrival information, which optimizes load selection and service levels to our customers.
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Our information systems manage the data provided by the Qualcomm devices to provide us with real-time information
regarding the location, status and load assignment of our trucks, which permits us to better meet delivery schedules,
respond to customer inquiries and match equipment with the next available load. Our system also provides real-time
information electronically to our customers 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 trucks and trailers. Inspections and
various levels of preventive maintenance are performed at set intervals on both trucks and trailers. A maintenance and
safety inspection is performed on all vehicles each time they return to a terminal.
Our trucks carry full warranty coverage for at least three years or 375,000 miles. Extended warranties are negotiated with
the truck manufacturer and manufacturers of major components, such as engine, transmission and differential
manufacturers, for up to four years or 500,000 miles. Our trailers carry full warranties by the manufacturer for up to 5 years
with certain components covered for up to ten years.
Employees
At December 31, 2012, we employed 3,031 persons, of whom 2,507 were drivers, 178 were maintenance personnel, 149
were employed in operations, 41 were employed in marketing, 80 were employed in safety and personnel, and 76 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.
Drivers
At December 31, 2012, we utilized 2,507 company drivers in our operations. We also had 220 owner-operators under
contract compensated on a per mile basis. 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. All
of our drivers are recruited, screened, drug tested and trained and are subject to the control and supervision of our
operations and safety departments. Our driver training program stresses the importance of safety and reliable, on-time
delivery. Drivers are required to report to their driver managers daily and at the earliest possible moment when any
condition en route occurs that might delay their scheduled delivery time.
In addition to strict application screening and drug testing, before being permitted to operate a vehicle our drivers must
undergo classroom instruction on our policies and procedures, safety techniques as taught by the Smith System of
Defensive Driving, and the proper operation of equipment, and must pass both written and road tests. Instruction in
defensive driving and safety techniques continues after hiring, with seminars at several of our terminals. At December 31,
2012, we employed 38 persons on a full-time basis in our driver recruiting, training and safety instruction programs.
Intense competition in the trucking industry for qualified drivers has resulted in additional expense to recruit and retain an
adequate supply of drivers, and has had a negative impact on the industry. Our operations have also been impacted and
from time to time we have experienced under-utilization and increased expenses due to a shortage of qualified drivers. We
place a high priority on the recruitment and retention of an adequate supply of qualified drivers.
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Available Information
The Company maintains a website where additional information concerning its business can be found. The address of that
website is www.pamtransport.com. The Company makes available free of charge on its Internet website its Annual Report
on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed or
furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (the “Exchange Act”) as soon as
reasonably practicable after it electronically files or furnishes such materials to the Securities and Exchange Commission.
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 in July and December and the volume of automotive freight we ship is reduced during
such scheduled plant shutdowns.
Regulation
We are a common and contract motor carrier regulated by various United States federal and state, Canadian provincial, and
Mexican federal agencies. These regulatory agencies have broad powers, generally governing matters such as authority to
engage in motor carrier operations, motor carrier registration, driver hours-of-service (“HOS”), drug and alcohol testing of
drivers, and safety, weight and dimensions of transportation equipment. The primary regulatory agencies affecting the
Company’s operations include the Federal Motor Carrier Safety Administration (“FMCSA”), the Pipeline and Hazardous
Materials Safety Agency, and the Surface Transportation Board, which are all agencies within the U.S. Department of
Transportation (“DOT”). We believe that we are in compliance in all material respects with applicable regulatory
requirements relating to our business and operate with a “satisfactory” rating (the highest of three grading categories) from
the DOT. In addition, we are subject to compliance with cargo-security and transportation regulations issued by the
Transportation Security Administration, a component department within the U.S. Department of Homeland Security. To the
extent that we conduct operations outside the United States, we are subject to the Foreign Corrupt Practices Act, which
generally prohibits U.S. companies and their intermediaries from offering bribes to foreign officials for the purpose of
obtaining or retaining favorable treatment.
In 2004, the FMCSA issued updated rules related to driver HOS limits that became effective October 1, 2005 (the "2005
Rules"). In July 2007, a federal appeals court vacated certain provisions of the 2005 Rules relating to the expansion of the
daily driving limit from 10 hours to 11 hours, and the "34-hour restart," which allowed drivers to restart calculations of the
weekly on-duty time limits after the driver had at least 34 consecutive hours off duty. The court indicated that, in addition to
other reasons, it vacated these two provisions because the FMCSA failed to provide adequate data supporting its decision
to increase the daily driving limit and provide for the 34-hour restart provision. In November 2008, following the submission
of additional data by FMCSA and a series of appeals and related court rulings, the FMCSA published its final rule, which
retained the 11 hour daily driving limit and the 34-hour restart provision. Safety advocacy groups continued to challenge the
final rule and in an effort to end litigation by these groups, the FMCSA agreed to propose new rules by July 26, 2011.
During December 2010, the FMCSA released the proposed new rules for public comment which included provisions that
would shorten allowable daily driving time from 11 hours to 10 hours and also require that drivers take two nights of rest
during the 34-hour restart provision. The proposed rules, which were generally not well received by either safety advocacy
groups or by the trucking industry, were finalized and published by the FMCSA in December 2011. The final rule, effective
July 1, 2013, retained the 11 hour daily driving limit but placed restrictions on the use of the 34-hour restart provision and
requires drivers to take a break during the day. During 2012, both the American Trucking Association and safety advocacy
groups had filed petitions with the D.C. U.S. Circuit Court of Appeals requesting the court to review the FMCSA’s final rule.
Oral arguments are set to begin on March 15, 2013. We are unable to predict the final outcome of any particular HOS rule
proposals or how a court may rule on any challenges related to the proposals but expect that any significant changes to the
driver HOS rules that, in effect, reduce available driving time or restrict scheduling flexibility would have a negative impact
our current operations.
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During February 2012, the FMCSA announced its intent to continue to pursue a rule that would require all interstate motor
carriers to install electronic on-board recorders (“EOBRs”) to monitor compliance with HOS regulations. The FMCSA’s
previous efforts to implement a rule requiring EOBRs was successfully challenged in court and was later vacated during
August 2011 as the court ruled that the FMCSA failed to directly address the potential for harassment of vehicle operators.
The vacated rule applied to phase one of a two-phase rule implementation process whereby implementation of phase one
would require EOBR use only by habitual HOS regulation violators while phase two would require EOBR use by all motor
carriers. The FMCSA refers to these two-phases as EOBR 1 and EOBR 2, respectively. Under EOBR 1, any motor carrier
found to have a HOS regulation violation rate of 10% or greater would be required to install EOBRs on all of its commercial
motor vehicles for a period of two years. The final rule related to EOBR 1 was published in April 2010 and, prior to being
vacated, was to be effective for any single compliance review completed on or after June 4, 2012. Under EOBR 2, all
motor carriers required to maintain HOS record keeping would be required to use EOBRs to monitor their drivers'
compliance with HOS requirements. Motor carriers would have three years after the effective date of the EOBR 2 final rule
to comply with these requirements. As of December 31, 2012, the Company is not subject to any requirement that EOBRs
be installed on any it’s trucks, however all the Company’s trucks currently have EOBRs installed.
During 2010, the FMCSA also implemented its “Compliance, Safety, Accountability” program (“CSA”), formerly known as
“Comprehensive Safety Analysis 2010” or “CSA 2010”. The stated goal under CSA is to achieve a greater reduction in
large truck and bus crashes, injuries and fatalities, while maximizing the resources of the FMCSA and its state partners.
Since the 1970s, federal and state enforcement agencies, in partnership with the motor carrier industry, have progressively
reduced the commercial vehicle related fatality crash rate. Under CSA, the FMCSA will use a comprehensive
measurement system of all safety-based violations found during roadside inspections, weighing such violations by their
relationship to crash risk. CSA data analysis expands on the previous system utilized by the FMCSA and covers more
behavioral areas specifically linked to crash risk such as unsafe or fatigued driving, driver fitness, controlled substances,
crash history, vehicle maintenance, and improper loading. Safety performance information will be accumulated to assess
the safety performance of both carriers and drivers. This expanded methodology for determining a carrier's DOT safety
rating may have an adverse effect on our DOT safety rating. We currently have a satisfactory DOT rating, which is the
highest available rating. A conditional or unsatisfactory DOT safety rating could adversely affect our business because
some of our customer contracts may require a satisfactory DOT safety rating, and a conditional or unsatisfactory rating
could negatively impact or restrict our operations.
Our motor carrier operations are also subject to environmental laws and regulations, including laws and regulations dealing
with underground fuel storage tanks, the transportation of hazardous materials and other environmental matters, and our
operations involve certain inherent environmental risks. We maintain two bulk fuel storage and fuel islands. Our operations
involve the risks of fuel spillage or seepage, environmental damage, and hazardous waste disposal, among others. We
have instituted programs to monitor and control environmental risks and assure compliance with applicable environmental
laws. As part of our safety and risk management program, we periodically perform internal environmental reviews so that
we can achieve environmental compliance and avoid environmental risk. We transport a minimum amount of
environmentally hazardous substances and, to date, have experienced no significant claims for hazardous materials
shipments. If we should fail to comply with applicable regulations, we could be subject to substantial fines or penalties and
to civil and criminal liability.
Company operations conducted in industrial areas, where truck terminals and other industrial activities are conducted, and
where groundwater or other forms of environmental contamination have occurred, potentially expose us to claims that we
contributed to the environmental contamination.
We believe we are currently in material compliance with applicable laws and regulations and that the cost of compliance
has not materially affected results of operations.
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In addition to environmental regulations directly affecting our business, we are also subject to the effects of the new truck
engine design requirements implemented by the EPA. See "Revenue Equipment" above.
Item 1A. Risk Factors.
Set forth below, and elsewhere in this Report and in other documents we file with the SEC, are risks and uncertainties that
could cause our actual results to differ materially from the results contemplated by the forward-looking statements
contained in this Report.
Our business is subject to general economic and business factors that are largely beyond our control, any of which could
have a material adverse effect on our operating results.
Our business is dependent upon a number of general economic and business factors that may adversely affect our results
of operations. These factors include significant increases or rapid fluctuations in fuel prices, excess capacity in the trucking
industry, surpluses in the market for used equipment, interest rates, fuel taxes, license and registration fees, insurance
premiums, self-insurance levels, and difficulty in attracting and retaining qualified drivers and independent contractors.
We operate in a highly competitive and fragmented industry, and our business may suffer if we are unable to adequately
address any downward pricing pressures or other factors that may adversely affect our ability to compete with other
carriers.
Further, we are 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 also adversely affect our customers and their ability to pay for our services.
Deterioration in the United States and world economies could exacerbate any difficulties experienced by our customers
and suppliers in obtaining financing, which, in turn, could materially and adversely impact our business, financial condition,
results of operations and cash flows.
Numerous competitive factors could impair our ability to operate at an acceptable profit. These factors include, but are not
limited to, 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;
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·
·
·
advances in technology require increased investments to remain competitive, and our customers may not be willing to
accept higher freight rates to cover the cost of these investments;
competition from Internet-based and other logistics and freight brokerage companies may adversely affect our
customer relationships and freight rates; and
economies of scale that may be passed on to smaller carriers by procurement aggregation providers may improve their
ability to compete with us.
We are highly dependent on our major customers, the loss of one or more of which could have a material adverse effect on
our business.
A significant portion of our revenue is generated from our major customers. For 2012, our top five customers, based on
revenue, accounted for approximately 39% of our revenue, and our largest customer, General Motors Corporation,
accounted for approximately 17% of our revenue. We also provide transportation services to other manufacturers who are
suppliers for automobile manufacturers. As a result, the concentration of our business within the automobile industry is
greater than the concentration in a single customer. Approximately 37% of our revenues for 2012 were derived from
transportation services provided to the automobile industry.
Generally, we do not have long-term contractual relationships with our major customers, and we cannot assure that our
customer relationships will continue as presently in effect. A reduction in or termination of our services by our major
customers could have a material adverse effect on our business and operating results.
We may be adversely impacted by fluctuations in the price and availability of diesel fuel.
Diesel fuel represents a significant operating expense for the Company and we do not currently hedge against the risk of
diesel fuel price increases. An increase in diesel fuel prices or diesel fuel taxes, or any change in federal or state
regulations that results in such an increase, could have a material adverse effect on our operating results to the extent we
are unable to recoup such increases from customers in the form of increased freight rates or through fuel surcharges.
Historically, we have been able to offset, to a certain extent, diesel fuel price increases through fuel surcharges to our
customers but we cannot be certain that we will be able to do so in the future. We continuously monitor the components of
our pricing, including base freight rates and fuel surcharges, and address individual account profitability issues with our
customers when necessary. While we have historically been able to adjust our pricing to help offset changes to the cost of
diesel fuel, through changes to base rates and/or fuel surcharges, we cannot be certain that we will be able to do so in the
future.
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 attract drivers when needed or
contract with independent contractors when needed, we could be required to further adjust our driver compensation
packages 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 our key employees and executive officers. The loss of any of their services
could have a material adverse effect on our operations and future profitability. We must continue to develop and retain a
core group of managers if we are to realize our goal of expanding our operations and continuing our growth. We cannot
assure that we will be able to do so.
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Ongoing insurance and claims expenses could significantly reduce our earnings.
Our future insurance and claims expenses might exceed historical levels, which could reduce our earnings. The Company
is self insured for health and workers’ compensation insurance coverage up to certain limits. If medical costs continue to
increase, or if the severity or number of claims increase, and if we are unable to offset the resulting increases in expenses
with higher freight rates, our earnings could be materially and adversely affected.
Purchase price increases for new revenue equipment and/or decreases in the value of used revenue equipment could
have an adverse effect on our results of operations, cash flows and financial condition.
During the last decade, the purchase price of new revenue equipment has increased significantly as equipment
manufacturers recover increased materials costs and engine design costs resulting from compliance with increasingly
stringent EPA engine emission standards. The final phase of the new EPA engine design requirements were effective in
2010, however, additional EPA emission mandates in the future could result in higher purchase prices of revenue
equipment which could result in higher than anticipated depreciation expenses. If we were unable to offset any such
increase in expenses with freight rate increases, our cash flows and results of operations could be adversely affected. If the
market prices for used revenue equipment declines, we could incur substantial losses upon disposition of our revenue
equipment which could adversely affect our results of operations and financial condition.
We have significant ongoing capital requirements that could affect our liquidity and profitability if we are unable to generate
sufficient cash from operations or obtain sufficient financing on favorable terms.
The trucking industry is capital intensive. If we are unable to generate sufficient cash from operations in the future, we may
have to limit our growth, enter into unfavorable financing arrangements, or operate our revenue equipment for longer
periods, any of which could have a material adverse effect on our profitability.
We have a substantial amount of debt, which could restrict our growth, place us at a competitive disadvantage or otherwise
materially adversely affect our financial health. Our substantial debt levels could have important consequences such as the
following:
·
·
·
impair our ability to obtain additional future financing for working capital, capital expenditures, acquisitions or general
corporate expenses;
limit our ability to use operating cash flow in other areas of our business due to the necessity of dedicating a
substantial portion of these funds for payments on our indebtedness;
limit our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate;
· make it more difficult for us to satisfy our obligations;
·
·
increase our vulnerability to general adverse economic and industry conditions; and
place us at a competitive disadvantage compared to our competitors.
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Our ability to make scheduled payments on, or to refinance, our debt and other obligations will depend on our financial and
operating performance, which, in turn, is subject to our ability to implement our strategic initiatives, prevailing economic
conditions and certain financial, business and other factors beyond our control. If our cash flow and capital resources are
insufficient to fund our debt service and other obligations, we may be forced to reduce or delay expansion plans and capital
expenditures, sell material assets or operations, obtain additional capital or restructure our debt. We cannot provide any
assurance that our operating performance, cash flow and capital resources will be sufficient to pay our debt obligations
when they become due. We also cannot provide assurance that we would be able to dispose of material assets or
operations or restructure our debt or other obligations if necessary or, even if we were able to take such actions, that we
could do so on terms that are acceptable to us.
Disruptions in the credit markets may adversely affect our business, including the availability and cost of short-term funds
for liquidity requirements and our ability to meet long-term commitments, which could adversely affect our results of
operations, cash flows and financial condition.
If cash from operations is not sufficient, we may be required to rely on the capital and credit markets to meet our financial
commitments and short-term liquidity needs. Disruptions in the capital and credit markets, as have been experienced
during recent years, could adversely affect our ability to draw on our bank revolving credit facility. Our access to funds
under the credit facility is dependent on the ability of banks to meet their funding commitments. A bank may not be able to
meet their funding commitments if they experience shortages of capital and liquidity or if they experience excessive
volumes of borrowing requests from other borrowers within a short period of time.
Longer term disruptions in the capital and credit markets as a result of uncertainty, changing or increased regulation,
reduced alternatives, or failures of significant financial institutions could adversely affect our access to liquidity needed for
our business. Any disruption could require us to take measures to conserve cash until the markets stabilize or until
alternative credit arrangements or other funding for our business needs can be arranged, which could adversely affect our
growth and profitability.
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 DOT 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.
The EPA adopted new emission control regulations, which required progressive reductions in exhaust emissions from
diesel engines through 2010. In order to partially offset the costs of compliance with the new EPA engine design
requirements, manufacturers have increased new equipment prices and eliminated or sharply reduced the price of
repurchase or trade-in commitments. If new equipment prices continue to increase, or if the price of repurchase
commitments by equipment manufacturers were to decrease more than anticipated, we may be required to increase our
depreciation and financing costs and/or retain some of our equipment longer, which may result in an increase in
maintenance expenses. To the extent we are unable to offset any such increases in expenses with rate increases or cost
savings, our results of operations would be adversely affected. If our fuel or maintenance expenses were to increase as a
result of our use of the new, EPA-compliant engines, and we are unable to offset such increases with fuel surcharges or
higher freight rates, our results of operations would be adversely affected. Further, our business and operations could be
adversely impacted if we experience problems with the reliability of the new engines. Although we have not experienced
any significant reliability issues with these engines to date, the expenses associated with the trucks containing these
engines have been slightly elevated, primarily as a result of higher depreciation expense due to increased purchase prices.
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During 2010, the FMCSA implemented its “Compliance, Safety, Accountability” program (“CSA”), formerly known as
“Comprehensive Safety Analysis 2010” or “CSA 2010”. CSA is an enforcement and compliance initiative that provides for
driver standards in addition to the carrier standards previously in place. Under CSA, the methodology for determining a
carrier's DOT safety rating will be expanded to include the on-road safety performance of the carrier's drivers. As a result of
these new regulations, including the expanded methodology for determining a carrier's DOT safety rating, there may be an
adverse effect on our DOT safety rating. We currently have a satisfactory DOT rating, which is the highest available
rating. A conditional or unsatisfactory DOT safety rating could adversely affect our business because some of our customer
contracts may require a satisfactory DOT safety rating, and a conditional or unsatisfactory rating could negatively impact or
restrict our operations.
During December 2011, the FMCSA published final HOS rules which could have a material adverse effect on our
profitability. The final HOS rules include changes that place limits on the 34-hour restart provision and add required driver
breaks. The changes could have an adverse effect on the Company’s productivity and could add complexity to load
scheduling.
The enacted legislation on healthcare reform and proposed amendments thereto could affect the healthcare benefits
required to be provided by the Company and cause our compensation costs to increase, adversely affecting our results and
cash flows.
The Patient Protection and Affordable Care Act and proposed amendments thereto contain provisions which could
materially impact the future healthcare costs of the Company. While the legislation’s ultimate impact is not yet known, it is
possible that these changes could significantly increase our compensation costs which would adversely affect our results
and cash flows.
We are subject to certain risks arising from doing business in Mexico.
As we continue to grow our business in Mexico, we are subject to greater risks of doing business internationally, including
fluctuations in foreign currencies, changes in the economic strength of Mexico, difficulties in enforcing contractual
obligations and intellectual property rights, burdens of complying with a wide variety of international and U.S. export and
import laws, and social, political, and economic instability. We also face additional risks associated with our Mexico
business, including potential restrictive trade policies and imposition of duties, taxes, or government royalties imposed by
the Mexican government. If we are unable to address business concerns related to our international operations in a timely
and cost efficient manner, our financial position, results of operations or cash flows could be adversely affected.
A determination by regulators that owner-operators are employees, rather than independent contractors, could expose us
to various liabilities and additional costs.
Tax and other regulatory authorities have sometimes sought to assert that independent contractors in the transportation
service industry, such as our owner-operators, are employees rather than independent contractors. There can be no
assurance that these interpretations and tax laws that consider these persons independent contractors will not change or
that these authorities will not successfully assert this position. If our owner-operators are determined to be our employees,
that determination could materially increase our exposure under a variety of federal and state tax, workers’ compensation,
unemployment benefits, labor, employment and tort laws, as well as our potential liability for employee benefits. In addition,
such changes may be applied retroactively, and if so, we may be required to pay additional amounts to compensate for
prior periods. Any of the above increased costs would adversely affect our business and operating results.
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Our results of operations may be affected by seasonal factors and severe weather conditions.
Our productivity may decrease during the winter season when severe winter weather impedes operations. Also, some
shippers may reduce their shipments after the winter holiday season. At the same time, operating expenses may increase
and fuel efficiency may decline due to engine idling during periods of inclement weather. Harsh weather conditions
generally also result in higher accident frequency, increased freight claims, and higher equipment repair expenditures. Our
operations may be adversely impacted from weather-related events such as tornadoes, hurricanes, blizzards, ice storms,
floods, fires, earthquakes, and other natural disasters. These events may also disrupt fuel supplies, increase fuel costs,
disrupt freight shipments or routes, affect regional economies, destroy our assets, or adversely affect the business or
financial condition of our customers, any of which could harm our results or make our results more volatile.
Our business may be disrupted by natural disasters causing supply chain disruptions.
Natural disasters such as earthquakes, tsunamis, hurricanes, tornadoes, floods or other adverse weather and climate
conditions, whether occurring in the United States or abroad, could disrupt our operations or the operations of our
customers or could damage or destroy infrastructure necessary to transport products as part of the supply chain. These
events could make it difficult or impossible for us to provide logistics and transportation services; disrupt or prevent our
ability to perform functions at the corporate level; and/or otherwise impede our ability to continue business operations in a
continuous manner consistent with the level and extent of business activities prior to the occurrence of the unexpected
event, which could adversely affect our business and results of operations.
We may incur additional operating expenses or liabilities as a result of potential future requirements to address climate
change issues.
Regulations or legislation related to climate change that potentially imposes restrictions, caps, taxes, or other controls on
emissions of greenhouse gases such as carbon dioxide, a by-product of burning fossil fuels such as those used in the
Company’s trucks, could adversely affect our operations and financial results. More specifically, legislative or regulatory
actions related to climate change could adversely impact the Company by increasing our fuel costs and reducing fuel
efficiency and could result in the creation of substantial additional capital expenditures and operating costs in the form of
taxes, emissions allowances, or required equipment upgrades. Any of these factors could impair our operating efficiency
and productivity and result in higher operating costs.
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 storm-water. 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. In prior years, we also maintained bulk fuel storage and fuel islands at two of our facilities. Our operations may
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.
In addition, as global warming issues become more prevalent, federal, state and local governments as well as some of our
customers, are beginning to respond to these issues. This increased focus on sustainability may result in new regulations
and customer requirements that could negatively affect us as we may incur additional costs or be required to make
changes to our operations in order to comply with any new regulations or customer requirements. Revenues could
decrease if we are unable to meet regulatory or customer sustainability requirements. These additional costs, changes in
operations, or loss of revenues could have a material adverse effect on our business, financial condition and results of
operations.
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If our employees were to unionize, our operating costs would increase and our ability to compete would be impaired.
None of our employees are currently represented by a collective bargaining agreement. However, we can offer no
assurance that our employees will not unionize in the future, particularly if legislation is passed that facilitates unionization.
If our employees were to unionize, our operating costs would increase and our profitability could be adversely affected.
Our information technology systems are subject to certain risks that are beyond our control.
We depend on the proper functioning and availability of our information systems, including communications and data
processing systems, in operating our business. Although we have implemented redundant systems and network security
measures, our information technology remains susceptible to outages, computer viruses, break-ins and similar disruptions
that may inhibit our ability to provide services to our customers and the ability of our customers to access our systems. This
may result in the loss of customers or a reduction in demand for our services, which could adversely affect our growth and
profitability.
We have substantial fixed costs and, as a result, our operating income fluctuates disproportionately with changes in our net
sales.
A significant portion of our expenses are fixed costs that that neither increase nor decrease proportionately with sales.
There can be no assurance that we would be able to reduce our fixed costs proportionately in response to a decline in our
sales and therefore our competitiveness could be significantly impacted. As a result, a decline in our sales would result in a
higher percentage decline in our income from operations and net income.
Our financial results may be adversely impacted by potential future changes in accounting practices.
Future changes in accounting standards or practices, and related legal and regulatory interpretations of those changes,
may adversely impact public companies in general, the transportation industry or our operations specifically. New
accounting standards or requirements, such as a conversion from U.S. Generally Accepted Accounting Principles to
International Financial Reporting Standards, could change the way we account for, disclose and present various aspects of
our financial position, results of operations or cash flows and could be costly to implement.
Our business may be harmed by terrorist attacks, future war or anti-terrorism measures.
In the aftermath of the terrorist attacks of September 11, 2001, federal, state and municipal authorities have implemented
and continue to follow various security measures, including checkpoints and travel restrictions on large trucks. Our
international operations in Canada and Mexico may be affected significantly if there are any disruptions or closures of
border traffic due to security measures. Such measures may have costs associated with them, which, in connection with
the transportation services we provide, we or our owner-operators could be forced to bear. In addition, war or risk of war
also may have an adverse effect on the economy. A decline in economic activity could adversely affect our revenue or
restrict our future growth. Instability in the financial markets as a result of terrorism or war also could affect our ability to
raise capital. In addition, the insurance premiums charged for some or all of the coverage currently maintained by us could
increase dramatically or such coverage could be unavailable in the future.
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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.
We currently do not intend to pay future dividends on our common stock.
We currently do not anticipate paying future cash dividends on our common stock. We anticipate that we will retain all of
our future earnings, if any, for use in the development and expansion of our business and for general corporate purposes.
Any determination to pay future dividends and other distributions in cash, stock, or property by the Company in the future
will be at the discretion of our board of directors and will be dependent on then-existing conditions, including our financial
condition and results of operations and contractual restrictions. Therefore, you should not rely on future dividend income
from shares of our common stock.
We have a recent history of net losses.
We incurred net losses during each of the two years preceding the most recently completed year. Our net losses for the
years ended December 31, 2011 and 2010 were $2.9 million and $655,000, respectively. Sustaining profitability depends
upon numerous factors, including our ability to increase our trucking revenue per tractor, expand our overall volume, and
control expenses.
Item 1B. Unresolved Staff Comments.
None.
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Item 2. Properties.
Our executive offices and primary terminal facilities, which we own, are located in Tontitown, Arkansas. These facilities are
located on approximately 49.3 acres and consist of 114,403 square feet of office space and maintenance and storage
facilities.
Our subsidiaries lease facilities in Indianapolis, Indiana; Romulus, Michigan; Brandon, Mississippi; North Jackson, Ohio;
Tahlequah, Oklahoma; Bath, Pennsylvania; El Paso, Texas; and Monterrey, Mexico. Our terminal facilities in Columbia,
Mississippi; Irving and Laredo, Texas; North Little Rock, Arkansas; and Willard, Ohio are owned. The leased facilities are
leased primarily on contractual terms typically ranging from one to five years. As of December 31, 2012, the following table
provides a summary of the ownership and types of activities conducted at each location:
Location
Tontitown, Arkansas
North Little Rock, Arkansas
Indianapolis, Indiana
Romulus, Michigan
Brandon, Mississippi
Columbia, Mississippi
North Jackson, Ohio
Willard, Ohio
Tahlequah, Oklahoma
Bath, Pennsylvania
El Paso, Texas
Irving, Texas
Laredo, Texas
Monterrey, Mexico
Own/
Lease
Own
Own
Lease
Lease
Lease
Own
Lease
Own
Lease
Lease
Lease
Own
Own
Lease
Dispatch
Office
Yes
No
No
No
No
No
Yes
Yes
No
No
No
Yes
Yes
No
Maintenance
Facility
Yes
Yes
Yes
Yes
No
No
Yes
Yes
No
Yes
No
Yes
Yes
No
Safety
Training
Yes
Yes
No
No
No
No
Yes
No
No
No
No
Yes
Yes
No
We also have access to trailer drop and relay stations in various other locations across the country. We lease certain of
these facilities on a month-to-month basis from affiliates of our largest stockholder.
We believe that all of the properties that we own or lease are suitable for their purposes and adequate to meet our needs.
Item 3. Legal Proceedings.
The nature of our business routinely results in litigation, primarily involving claims for personal injuries and property
damage incurred in the transportation of freight. We believe that all such routine litigation is adequately covered by
insurance and that adverse results in one or more of those cases would not have a material adverse effect on our financial
statements.
Item 4. Mine Safety Disclosures.
Not applicable.
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PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
Securities.
Our common stock is traded on the NASDAQ Global Market under the symbol PTSI. The following table sets forth, for the
quarters indicated, the range of the high and low sales prices per share for our common stock as reported on the NASDAQ
Global Market and our dividends declared per common share.
Fiscal Year Ended December 31, 2012
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
Fiscal Year Ended December 31, 2011
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
Dividends
Declared
Per
Common
Share
High
Low
$
12.58 $
11.75
10.18
10.89
9.45 $
9.32
8.95
8.81
1.00
-
-
1.00
High
Low
$
12.44 $
13.14
11.50
10.85
10.47 $
9.40
9.03
9.25
Dividends
Declared Per
Common Share
-
-
-
-
As of February 20, 2013, there were approximately 119 holders of record of our common stock.
Dividends
The Company paid cash dividends of $1.00 per common share during each of the months of April 2012 and December
2012. No other dividends have been paid during any year prior to 2012. Future dividend policy and the payment of
dividends, if any, will be determined by the Board of Directors in light of circumstances then existing, including our
earnings, financial condition and other factors deemed relevant by the Board of Directors. Currently, the Company does not
intend to pay dividends in the foreseeable future.
Repurchases of Equity Securities by the Issuer
The Company’s stock repurchase program has been extended and expanded several times, most recently in September
2011, when the Board of Directors announced that it had authorized the Company to repurchase up to 500,000 additional
shares of its common stock. The Company repurchased 224,000 shares of its common stock during the fourth quarter of
2011 under the program and did not repurchase any additional shares during 2012.
Securities Authorized for Issuance Under Equity Compensation Plans
See Part III, Item 12, “Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters”
of this Annual Report for a presentation of compensation plans under which equity securities of the Company are
authorized for issuance.
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Performance Graph
Set forth below is a line graph comparing the yearly percentage change in the cumulative total stockholder return on our
common stock against the cumulative total return of the CRSP Total Return Index for the NASDAQ Stock Market (U.S.
companies) and the CRSP Total Return Index for the NASDAQ Trucking and Transportation Stocks for the period of five
years commencing December 31, 2007 and ending December 31, 2012. The graph assumes that the value of the
investment in our common stock and in each index was $100 on December 31, 2007 and that all dividends were
reinvested.
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Item 6. Selected Financial Data.
The following selected financial and operating data should be read in conjunction with the Consolidated Financial
Statements and notes thereto included elsewhere in this Report.
2012
Year Ended December 31,
2010
(in thousands, except per share amounts)
2009
2011
2008
Statement of Operations Data:
Operating revenues:
Operating revenues, before fuel surcharge
Fuel surcharge
Total operating revenues
Operating expenses:
Salaries, wages and benefits
Fuel expense
Rent and purchased transportation
Depreciation and amortization
Goodwill impairment charge
Operating supplies
Operating taxes and licenses
Insurance and claims
Communications and utilities
Other
(Gain) loss on sale or disposal of property
Total operating expenses
Operating income (loss)
Non-operating income (loss)
Interest expense
Income (loss) income before income taxes
Income tax expense (benefit)
Net income (loss)
Earnings (loss) per common share:
Basic
Diluted
$
297,698 $
82,935
380,633
284,178 $
75,065
359,243
282,524 $
49,470
331,994
260,774 $
31,136
291,910
323,272
83,451
406,723
139,062
111,378
23,815
38,298
-
39,011
5,003
13,744
2,235
5,350
(166)
377,730
2,903
3,288
(2,596)
3,595
1,416
2,179 $
118,321
124,956
21,842
34,163
-
38,659
4,952
13,070
2,496
6,029
98
364,586
(5,343)
1,551
(1,798)
(5,590)
(2,733)
(2,857) $
109,728
97,523
42,469
27,035
-
30,105
4,954
12,820
2,731
5,169
(337)
332,197
(203)
852
(2,252)
(1,603)
(948)
(655) $
101,833
73,562
40,713
37,742
-
26,572
5,020
12,579
2,644
4,967
931
306,563
(14,653)
(745)
(2,373)
(17,771)
(6,924)
(10,847) $
123,961
150,776
39,887
37,477
15,413
30,514
5,692
16,018
2,869
5,119
952
428,678
(21,955)
(4,996)
(2,429)
(29,380)
(10,615)
(18,765)
0.25 $
0.25 $
(0.32) $
(0.32) $
(0.07) $
(0.07) $
(1.15) $
(1.15) $
(1.94)
(1.94)
$
$
$
Average common shares outstanding – Basic
8,700
9,056
9,415
9,411
9,683
Average common shares outstanding –
Diluted(1)
8,702
9,056
9,415
9,411
9,683
Cash dividends declared per common share
$
2.00 $
- $
- $
- $
-
__________
(1) Diluted income per share for 2012 assumes the exercise of stock options to purchase an aggregate of 4,454 shares of
common stock.
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19
Balance Sheet Data:
Total assets
$
Long-term debt, excluding current portion
Stockholders' equity
317,669
78,583
122,195
$
279,093
44,135
137,477
2012
2011
At December 31,
2010
(in thousands)
264,340
$
17,201
147,948
2009
2008
$
260,656
27,202
147,127
$
290,361
35,492
155,477
2012
Year Ended December 31,
2010
2011
2009
2008
Operating Data:
Operating ratio (1)
Average number of truckloads per week
Average miles per trip
Total miles traveled (in thousands)
Average miles per truck
Average revenue, before fuel surcharge
per truck per day
Average revenue, before fuel surcharge
per loaded mile
Empty mile factor
$
$
99.0%
5,704
693
200,765
114,071
101.9%
5,586
687
195,081
110,215
100.1%
6,054
625
192,139
110,236
105.6%
6,275
556
177,872
102,816
106.8%
7,559
598
221,450
111,114
666
$
632
$
639
$
591
$
662
1.49
$
8.7%
1.49
$
8.3%
1.35
$
6.3%
1.36
$
7.7%
1.41
7.3%
1.70
1,768(4)
1,770(3)
1,800(2)
At end of period:
Total company-owned/leased trucks
Average age of company-owned trucks (in
years)
Total company-owned/leased trailers
Average age of company-owned trailers (in
years)
Number of employees
__________
(1) Total operating expenses, net of fuel surcharge as a percentage of operating revenues, before fuel surcharge.
(2) Includes 220 owner operator trucks; (3) Includes 79 owner operator trucks; (4) Includes 28 owner operator trucks;
(5) Includes 34 owner operator trucks; (6) Includes 33 owner operator trucks; (7) Includes 36 leased trailers;
(8) Includes 53 leased trailers; (9) Includes 50 leased trailers.
6.21
2,658
5.22
2,591
6.99
3,031
7.09
2,764
2.60
4,630
1,731(5)
4,696(8)
4,943(7)
4,632(9)
3.24
2.62
1,839(6)
1.90
4,809
4.43
2,931
The Company paid cash dividends of $1.00 per common share during each of the months of April 2012 and December
2012.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Business Overview
The Company's administrative headquarters are in Tontitown, Arkansas. From this location we manage operations
conducted through our wholly owned subsidiaries based in various locations around the United States, Mexico, and
Canada. The operations of these subsidiaries can generally be classified into either truckload services or brokerage and
logistics services. Truckload services include those transportation services in which we utilize company owned trucks or
owner-operator owned trucks. Brokerage and logistics services consist of services such as transportation scheduling,
routing, mode selection, transloading and other value added services related to the transportation of freight which may or
may not involve the usage of company owned or owner-operator owned equipment. Both our truckload operations and our
brokerage/logistics operations have similar economic characteristics and are impacted by virtually the same economic
factors as discussed elsewhere in this Report. All of the Company's operations are in the motor carrier segment.
For both operations, substantially all of our revenue is generated by transporting freight for customers and is predominantly
affected by the rates per mile received from our customers, equipment utilization, and our percentage of non-compensated
miles. These aspects of our business are carefully managed and efforts are continuously underway to achieve favorable
results. Truckload services revenues, excluding fuel surcharges, represented 91.8%, 93.5% and 85.9% of total revenues,
excluding fuel surcharges for the twelve months ended December 31, 2012, 2011 and 2010, respectively.
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20
The main factors that impact our profitability on the expense side are costs incurred in transporting freight for our
customers. Currently, our most challenging costs include fuel, driver recruitment, training, wage and benefit costs,
independent broker costs (which we record as purchased transportation), insurance, and maintenance and capital
equipment costs.
In discussing our results of operations we use revenue, before fuel surcharge, (and fuel expense, net of surcharge),
because management believes that eliminating the impact of this sometimes volatile source of revenue allows a more
consistent basis for comparing our results of operations from period to period. During 2012, 2011 and 2010, approximately
$82.9 million, $75.1 million and $49.5 million, respectively, of the Company's total revenue was generated from fuel
surcharges. We also discuss certain changes in our expenses as a percentage of revenue, before fuel surcharge, rather
than absolute dollar changes. We do this because we believe the high variable cost nature of certain expenses makes a
comparison of changes in expenses as a percentage of revenue more meaningful than absolute dollar changes.
Results of Operations - Truckload Services
The following table sets forth, for truckload services, the percentage relationship of expense items to operating revenues,
before fuel surcharges, for the periods indicated. Fuel costs are shown net of fuel surcharges.
Operating revenues, before fuel surcharge
Operating expenses:
Salaries, wages and benefits
Fuel expense, net of fuel surcharge
Rent and purchased transportation
Depreciation and amortization
Operating supplies and expenses
Operating taxes and licenses
Insurance and claims
Communications and utilities
Other
Loss on sale or disposal of property
Total operating expenses
Operating income (loss)
Non-operating income
Interest expense
Income (loss) before income taxes
2012 Compared to 2011
Years Ended December 31,
2012
2011
2010
100.0%
100.0%
100.0%
50.7
10.4
0.3
14.0
14.3
1.8
5.0
0.8
1.9
0.0
99.2
0.8
1.2
(0.9)
1.1%
44.4
18.8
1.6
12.8
14.5
1.9
4.9
0.9
2.3
0.0
102.1
(2.1)
0.6
(0.7)
(2.2)%
44.4
19.8
2.3
11.1
12.4
2.0
5.3
1.1
2.0
0.1
100.5
(0.5)
0.3
(0.8)
(1.0)%
For the year ended December 31, 2012, truckload services revenue, before fuel surcharges, increased 2.9% to $273.4
million as compared to $265.8 million for the year ended December 31, 2011. The increase relates primarily an increase in
the average number of miles traveled per unit each work day from 434 miles during 2011 to 449 miles during 2012.
Salaries, wages and benefits increased from 44.4% of revenues, before fuel surcharges, during 2011 to 50.7% of
revenues, before fuel surcharges, during 2012. The increase relates primarily to an increase in driver lease expense, which
is a component of salaries, wages and benefits. The increase in driver lease expense is the result of an increase in the
average number of owner operators under contract from 48 during 2011 to 149 during 2012. The increase in costs in this
category, as they relate to the increase in owner operators, are partially offset by a decrease in other expense categories,
such as repairs and fuel, which are generally borne by the owner operator. Partially offsetting the increase related to owner
operator expenses was a decrease in expenses associated with employee workers’ compensation benefits.
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21
Fuel expense, net of fuel surcharge, decreased from 18.8% of revenues, before fuel surcharges, during 2011 to 10.4% of
revenues, before fuel surcharges, during 2012. The decrease relates primarily to a decrease in the average surcharge-
adjusted fuel price paid per gallon of diesel fuel and to an increase in the average miles-per-gallon (“mpg”) experienced.
The average surcharge-adjusted fuel price paid per gallon of diesel fuel decreased from $1.43 during 2011 to $0.91 during
2012 as a result of more favorable fuel surcharge arrangements made with customers and to an increase in the number of
owner operators in our fleet. Fuel surcharge collections can fluctuate significantly from period to period as they are
generally based on changes in fuel prices from period to period so that during periods of rising fuel prices fuel surcharge
collections increase while fuel surcharge collections decrease during periods of falling fuel prices. Fuel surcharge revenue
generated from transportation services performed by owner operators is reflected as a reduction in net fuel expense, while
fuel surcharges paid to owner operators for their services is reported along with their base rate of pay in the Salaries,
wages and benefits category. These categorizations have the effect of reducing our net fuel expense while increasing
Salaries, wages and benefits category, as discussed above. The average mpg experienced increased during 2012 as
compared to the mpg experienced during 2011 as a result of replacing older trucks with newer trucks, which are more fuel
efficient and to the implementation of driver bonus programs which are tied directly to fuel efficiency.
Rent and purchased transportation decreased from 1.6% of revenues, before fuel surcharges, during 2011 to 0.3% of
revenues, before fuel surcharges, during 2012. The decrease relates primarily to a decrease in amounts paid for third-party
equipment rentals and to third-party transportation service providers as well as a decrease in amounts reserved for excess
mileage fees paid to certain equipment manufacturers upon the trade of older trucks for new trucks.
Depreciation and amortization increased from 12.8% of revenues, before fuel surcharges, during 2011 to 14.0% of
revenues, before fuel surcharges, during 2012. The increase relates primarily to purchases of new trucks made during
2012 which replaced older trucks within the fleet. These new truck replacements have a significantly higher purchase price
than those trucks that are being replaced and are also being depreciated over a shorter period of time as the Company
accelerates its truck replacement cycle from every five years to a replacement cycle of every three years. This reduction in
replacement cycle, combined with a higher purchase price, results in higher depreciation expense over a shorter period of
time. The decrease in the truck replacement cycle time is intended to reduce fuel costs, improve driver and customer
satisfaction, and to reduce long-term maintenance costs as well as increase fleet efficiency by reducing maintenance down-
time.
Operating supplies and expenses decreased from 14.5% of revenues, before fuel surcharges, during 2011 to 14.3% of
revenues, before fuel surcharges, during 2012. The decrease relates primarily to a decrease in amounts paid for
equipment maintenance costs during 2012 as compared to amounts paid during 2011 as a result of replacing older
equipment with new equipment. Partially offsetting this decrease was an increase in amounts paid for driver training
schools during 2012 as compared to amounts paid during 2011. The increase in driver training and recruiting costs are a
result of heightened competition for qualified drivers as industry demand has increased and increased regulations have
forced some drivers to exit the profession.
Operating taxes and licenses decreased from 1.9% of revenues, before fuel surcharges, during 2011 to 1.8% of revenues,
before fuel surcharges, during 2012. The decrease, as a percentage of revenue, resulted from the interaction of expenses
with fixed-cost characteristics, such as registration fees, with an increase in revenues for the periods compared. On a
dollar basis, operating taxes and licenses, which consists primarily of equipment registration fees, increased from $4.9
million during 2011 to $5.0 million during 2012.
Insurance and claims expense increased from 4.9% of revenues, before fuel surcharges, during 2011 to 5.0% of revenues,
before fuel surcharges, during 2012. The increase relates primarily to an increase in auto liability and cargo related claims
expenses incurred during 2012 as compared to 2011.
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22
Other expenses decreased from 2.3% of revenues, before fuel surcharges, during 2011 to 1.9% of revenues, before fuel
surcharges, during 2012. The decrease relates primarily to a decrease in amounts expensed for uncollectible revenue,
professional services, and for other supplies and expenses.
The truckload services division operating ratio, which measures the ratio of operating expenses, net of fuel surcharges, to
operating revenues, before fuel surcharges, decreased to 99.2% for 2012 from 102.1% for 2011.
Non-operating income increased from 0.6% of revenues, before fuel surcharges, during 2011 to 1.2% of revenues, before
fuel surcharges, during 2012. The components of this category consist primarily of dividends earned and gains or losses on
the Company’s investments in marketable equity securities. The increase relates primarily to an increase in the amount of
dividends and capital gains recognized between the periods on the Company’s investments in marketable equity
securities.
2011 Compared to 2010
For the year ended December 31, 2011, truckload services revenue, before fuel surcharges, increased 9.5% to $265.8
million as compared to $242.8 million for the year ended December 31, 2010. The increase related primarily to an increase
in the average rate charged to customers per total mile during 2011 as compared to 2010. During 2011, the average rate
charged to customers per total mile increased by $0.10 as compared to the average rate charged during 2010.
Salaries, wages and benefits remained at 44.4% of revenues, before fuel surcharges, for both 2010 and 2011. Using a
dollar-based comparison, salaries, wages and benefits increased from $107.9 million during 2010 to $118.0 million during
2011. The dollar-based increase related primarily to the rescission of a pay rate reduction plan, an increase in driver
wages, and an increase in driver lease expense. Rescission of the 5% pay rate reduction plan, which had been in effect
during the first seven months of 2010 but not at anytime during 2011, had the effect of increasing comparative salaries and
wages by 5% following the rescission date in August 2010. Driver wages increased as the number of company driver
compensated miles increased from 192.1 million miles during 2010 to 195.1 million miles during 2011. Driver lease
expense, which is a component of salaries, wages and benefits, increased as the average number of owner-operators
under contract increased from 29 during 2010 to 48 during 2011. The Company also experienced an increase in expenses
associated with employee workers compensation benefits.
Fuel expense, net of fuel surcharge, decreased from 19.8% of revenues, before fuel surcharges, during 2010 to 18.8% of
revenues, before fuel surcharges, during 2011. The decrease, as a percentage of revenue, related to interaction of higher
revenues without a proportional increase in fuel costs as the increase in the average rate charged to customers on a per-
mile basis outpaced the per-mile increase in fuel costs. Using a dollar-based comparison, fuel expense increased from
$48.1 million during 2010 to $49.9 million during 2011. The dollar-based increase related primarily to an increase in the
average surcharge-adjusted price paid per gallon of fuel from $1.35 during 2010 to $1.43 paid per gallon during 2011. The
fuel surcharge collections vary from period to period as they are generally based on changes in fuel prices from period to
period so that during periods of rising fuel prices fuel surcharge collections increase while fuel surcharge collections
decrease during periods of declining fuel prices.
Rent and purchased transportation decreased from 2.3% of revenues, before fuel surcharges, in 2010 to 1.6% of revenues,
before fuel surcharges, in 2011. The decrease related primarily to a decrease in amounts paid to third party transportation
service providers.
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23
Depreciation and amortization increased from 11.1% of revenues, before fuel surcharges, in 2010 to 12.8% of revenues,
before fuel surcharges, in 2011. The increase related primarily to 2011 revenue equipment acquisitions placed in service
during 2011 and to revisions made during 2011 to the estimated useful lives and residual values of our trucks to facilitate
the acceleration of our planned truck replacement cycle from five years to three years. Using a dollar-based comparison,
depreciation and amortization increased from $26.9 million during 2010 to $34.1 million during 2011 as the revisions
generally resulted in higher monthly depreciation expense over a shorter period of time.
Operating supplies and expenses increased from 12.4% of revenues, before fuel surcharges, during 2010 to 14.5% of
revenues, before fuel surcharges, during 2011. The increase related primarily to an increase in equipment maintenance
and repair costs as the Company extended the life of its existing fleet of trucks and trailers during 2010. Also contributing to
the increase was an increase in amounts paid to driver training schools for the periods compared as competition for
qualified drivers increased during a period when increased regulations forced some drivers to exit the profession. On a
dollar basis, operating supplies and expenses increased from $30.1 million during 2010 to $38.7 million during 2011. The
primary components of the increase were an increase in maintenance and repair costs of $6.6 million and an increase in
driver recruiting costs of $1.5 million.
Operating taxes and licenses decreased from 2.0% of revenues, before fuel surcharges, during 2010 to 1.9% of revenues,
before fuel surcharges, during 2011. The decrease, as a percentage of revenue, resulted from the interaction of expenses
with fixed-cost characteristics, such as registration fees, with an increase in revenues for the periods compared. On a
dollar basis, operating taxes and licenses, which consists primarily of equipment registration fees, remained constant at
$4.9 million during each of the periods compared.
Insurance and claims expense decreased from 5.3% of revenues, before fuel surcharges, during 2010 to 4.9% of revenues,
before fuel surcharges, during 2011. The decrease, as a percentage of revenue, related to the interaction of insurance
premiums, based on a factor other than revenue, with increased revenues. Insurance premiums based on a mileage basis,
such as auto liability premiums, and on a value basis, such as physical damage premiums, decreased as a percentage of
revenues as a result of higher revenues for the periods compared. On a dollar basis, insurance and claims expense
increased from $12.8 million during 2010 to $13.1 million during 2011. This dollar-based increase related primarily to an
increase in amounts reserved for auto liability claims during 2011 as compared to 2010.
Other expenses increased from 2.0% of revenues, before fuel surcharges, during 2010 to 2.3% of revenues, before fuel
surcharges, during 2011. The increase related primarily to an increase in building rents, advertising expenses and
professional services fees.
The truckload services division operating ratio, which measures the ratio of operating expenses, net of fuel surcharges, to
operating revenues, before fuel surcharges, increased to 102.1% for 2011 from 100.5% for 2010.
Non-operating income increased from 0.3% of revenues, before fuel surcharges, during 2010 to 0.6% of revenues, before
fuel surcharges, during 2011. The components of this category consist primarily of dividends earned and gains or losses on
the Company’s investments in marketable equity securities. The increase related primarily to an increase in the amount of
dividends and capital gains recognized between the periods on the Company’s investments in marketable equity
securities.
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24
Results of Operations - Logistics and Brokerage Services
The following table sets forth, for logistics and brokerage services, the percentage relationship of expense items to
operating revenues, before fuel surcharges, for the periods indicated. Brokerage service operations occur specifically in
certain divisions; however, brokerage operations occur throughout the Company in similar operations having substantially
similar economic characteristics. Rent and purchased transportation, which includes costs paid to third party carriers, are
shown net of fuel surcharges.
Operating revenues, before fuel surcharge
Operating expenses:
Salaries, wages and benefits
Fuel expense
Rent and purchased transportation, net of fuel surcharge
Depreciation and amortization
Operating supplies and expenses
Operating taxes and licenses
Insurance and claims
Communications and utilities
Other
Gain on sale or disposal of property
Total operating expenses
Operating income
Non-operating income
Interest expense
Income before income taxes
2012 Compared to 2011
Years Ended December 31,
2012
2011
2010
100.0%
100.0%
100.0%
1.8
0.0
95.2
0.0
0.0
0.0
0.0
0.1
0.2
0.0
97.3
2.7
0.2
(0.2)
2.7%
1.9
0.0
95.7
0.0
0.0
0.0
0.0
0.2
0.3
0.0
98.1
1.9
0.1
(0.1)
1.9%
4.6
0.0
93.0
0.0
0.0
0.0
0.1
0.3
0.7
(1.2)
97.5
2.5
0.3
(0.6)
2.2%
For the year ended December 31, 2012, logistics and brokerage services revenues, before fuel surcharges, increased
32.1% to $24.3 million as compared to $18.4 million for the year ended December 31, 2011. The increase was primarily
the result of an increase in the number of loads brokered during 2012 as compared to 2011.
Salaries, wages and benefits decreased from 1.9% of revenues, before fuel surcharges, in 2011 to 1.8% of revenues,
before fuel surcharges, in 2012. The decrease, as a percentage of revenues, resulted primarily from the fixed cost
characteristics of wages which do not fluctuate with changes in revenue, such as general and administrative and marketing
wages. Using a dollar-based comparison, salaries, wages and benefits increased from $0.3 million during 2011 to $0.4
million during 2012 as the number of employees assigned to the logistics and brokerage services division increased.
Rent and purchased transportation decreased from 95.7% of revenues, before fuel surcharges, in 2011 to 95.2% of
revenues, before fuel surcharges, in 2012. The decrease relates to a decrease in amounts charged by third party logistics
and brokerage service providers.
The logistics and brokerage services division operating ratio, which measures the ratio of operating expenses, net of fuel
surcharges, to operating revenues, before fuel surcharges, decreased to 97.3% for 2012 from 98.1% for 2011.
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25
2011 Compared to 2010
For the year ended December 31, 2011, logistics and brokerage services revenues, before fuel surcharges, decreased
53.7% to $18.4 million as compared to $39.7 million for the year ended December 31, 2010. The decrease was primarily
the result of a decrease in the number of loads brokered during 2011 as compared to 2010. The decrease in the number of
loads resulted primarily from the closing of a brokerage office located in New Jersey during the third quarter of 2010.
Salaries, wages and benefits decreased from 4.6% of revenues, before fuel surcharges, in 2010 to 1.9% of revenues,
before fuel surcharges, in 2011. The decrease related to a decrease in salaries and benefits associated with the closing of
a brokerage office located in New Jersey during the third quarter of 2010.
Rent and purchased transportation increased from 93.0% of revenues, before fuel surcharges, in 2010 to 95.7% of
revenues, before fuel surcharges, in 2011. The increase related to an increase in amounts charged by third party logistics
and brokerage service providers.
The logistics and brokerage services division operating ratio, which measures the ratio of operating expenses, net of fuel
surcharges, to operating revenues, before fuel surcharges, increased to 98.1% for 2011 from 97.5% for 2010.
Results of Operations - Combined Services
2012 Compared to 2011
Income tax expense was approximately $1.4 million in 2012 resulting in an effective rate of 39.4%, as compared to an
income tax benefit of approximately $2.7 million in 2011 resulting in an effective rate of 48.9%. The effective tax rate differs
from the statutory rate primarily due to the existence of partially non-deductible meal and incidental expense per-diem
payments to company drivers. Per-diem payments may cause a significant difference in the Company’s effective tax rate
from period-to-period as the proportion of non-deductible expenses to pre-tax net income increases or decreases.
We determined, based on significant judgment, that a valuation allowance against our deferred tax assets has not been
necessary. Management evaluates the ability to realize its deferred tax assets based upon negative and positive evidence
available and, based on the evidence available at this time, management concludes that it is "more likely than not" that we
will be able to realize the benefit of our deferred tax assets in the near future.
As of December 31, 2012, there were no significant unrecognized tax benefits and an adjustment to the Company’s
consolidated financial statements for uncertain tax positions was not required as management believes that the Company’s
significant tax positions taken in income tax returns filed or to be filed are supported by clear and unambiguous income tax
laws.
The Company and its subsidiaries are subject to U.S. and Canadian federal income tax laws as well as the income tax laws
of multiple state jurisdictions. The major tax jurisdictions in which we operate generally provide for a deficiency assessment
statute of limitation period of three years and as a result, the Company’s tax years 2009 and forward remain open to
examination in those jurisdictions. During 2012, the Company has not recognized or accrued any interest or penalties
related to uncertain income tax positions and does not believe it is reasonably possible that our unrecognized tax benefits
will significantly change within the next twelve months.
The combined net income for all divisions was $2.2 million, or 0.7% of revenues, before fuel surcharge, for 2012 as
compared to the combined net loss for all divisions of $2.9 million or 1.0% of revenues, before fuel surcharge, for 2011.
The increase in income resulted in an increase in diluted earnings per share to $0.25 for 2012 from a diluted loss per share
of $0.32 for 2011.
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26
2011 Compared to 2010
Income tax benefit was approximately $2.7 million in 2011 resulting in an effective rate of 48.9%, as compared to an
income tax benefit of approximately $0.9 million in 2010 resulting in an effective rate of 59.2%. The effective tax rate
differed from the statutory rate primarily due to the existence of partially non-deductible meal and incidental expense per-
diem payments to company drivers as well as tax credits related to the Company’s purchase of qualified alternative motor
fuel vehicles during 2010. Per-diem payments may cause a significant difference in the Company’s effective tax rate from
period-to-period as the proportion of non-deductible expenses to pre-tax net income increases or decreases.
We determined, based on significant judgment, that a valuation allowance against our deferred tax assets was not
necessary. Management evaluates the ability to realize its deferred tax assets based upon negative and positive evidence
available and, based on the evidence available, management concluded that it was "more likely than not" that we would be
able to realize the benefit of our deferred tax assets in the near future.
As of December 31, 2011, there were no significant unrecognized tax benefits and an adjustment to the Company’s
consolidated financial statements for uncertain tax positions was not required as management believed that the Company’s
significant tax positions taken in income tax returns filed or to be filed are supported by clear and unambiguous income tax
laws.
The Company and its subsidiaries are subject to U.S. and Canadian federal income tax laws as well as the income tax laws
of multiple state jurisdictions. The major tax jurisdictions in which we operate generally provide for a deficiency assessment
statute of limitation period of three years and as a result, the Company’s tax years 2009 and forward remain open to
examination in those jurisdictions. During 2011, the Company had not recognized or accrued any interest or penalties
related to uncertain income tax positions and did not believe it was reasonably possible that our unrecognized tax benefits
would significantly change within the next twelve months.
The combined net loss for all divisions was $2.9 million, or 1.0% of revenues, before fuel surcharge, for 2011 as compared
to the combined net loss for all divisions of $0.7 million or 0.2% of revenues, before fuel surcharge, for 2010. The decrease
in income resulted in an increase in the diluted loss per share from $0.07 for 2010 to a diluted loss per share of $0.32 for
2011.
Quarterly Results of Operations
The following table presents selected consolidated financial information for each of our last eight fiscal quarters through
December 31, 2012. 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.
Mar. 31,
2012
June 30,
Sept. 30,
Dec. 31,
Mar. 31,
June 30,
Sept. 30,
Dec. 31,
2012
2012
2012
2011
2011
2011
2011
Quarter Ended
(unaudited)
(in thousands, except earnings per share data)
$ 94,156 $ 94,549 $ 95,773 $ 85,026 $ 95,890 $ 88,938 $ 89,389
$ 96,155
Operating revenues
Total operating
expenses
Operating income (loss)
Net income (loss)
Earnings (loss) per
common share:
Basic
$
Diluted
$
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95,069
1,086
674
92,884 93,610 96,167 88,839 94,291 91,634 89,822
(433)
133
(2,696)
(1,705)
(3,813)
(1,978)
1,599
693
1,272
935
(394)
(311)
939
881
0.08
0.08
$
$
0.11 $
0.10 $
(0.04) $
(0.21) $
0.08 $
(0.19) $
0.11 $
0.10 $
(0.04) $
(0.21) $
0.08 $
(0.19) $
0.02
0.02
27
Liquidity and Capital Resources
Our business has required, and will continue to require, a significant investment in new revenue equipment. Our primary
sources of liquidity have been funds provided by operations, proceeds from the sales of revenue equipment, issuances of
equity securities, and borrowings under our lines of credit, installment notes, and investment margin account.
During 2012, we generated $33.6 million in cash from operating activities compared to $34.9 million and $15.0 million in
2011 and 2010, respectively. Investing activities used $72.6 million in cash during 2012 compared to $61.4 million and
$14.2 million in 2011 and 2010, respectively. The cash used for investing activities in all three years related primarily to the
purchase of revenue equipment such as trucks and trailers or related equipment such as auxiliary power units. Financing
activities provided $39.3 million in cash during 2012 compared to $12.9 million and $3.1 million in cash provided during
2011 and 2010, respectively. See the Consolidated Statements of Cash Flows in Item 8 of this Report.
Our primary use of funds is for the purchase of revenue equipment. We typically use installment notes, our existing lines of
credit on an interim basis, proceeds from the sale or trade of equipment, and cash flows from operations, to finance capital
expenditures and repay long-term debt. During 2012 and 2011, we utilized cash on hand, installment notes, and our lines of
credit to finance revenue equipment purchases of approximately $95.1 million and $67.6 million, respectively.
Occasionally we finance the acquisition of revenue equipment through installment notes with fixed interest rates and terms
ranging from 12 to 60 months. At December 31, 2012, the Company’s subsidiaries had combined outstanding
indebtedness under such installment notes of $102.1 million. These installment notes are payable in monthly installments,
ranging from 36 monthly installments to 60 monthly installments, at a weighted average interest rate of 3.02%. At
December 31, 2011, the Company’s subsidiaries had combined outstanding indebtedness under such installment notes of
$52.2 million. These installment notes were payable in 36 monthly installments at a weighted average interest rate of
3.66%.
In order to maintain our truck and trailer fleet count it is often necessary to purchase replacement units and place them in
service before trade units are removed from service. The timing of this process often requires the Company to pay for new
units without any reduction in price for trade units. In this situation, the Company later receives payment for the trade units
as they are delivered to the equipment vendor and have passed vendor inspection. During the twelve months ended
December 31, 2012 and 2011, the Company received approximately $12.7 million and $4.0 million, respectively, for units
delivered for trade.
During 2012, the Company negotiated an increase in its revolving line of credit from $30.0 million to $35.0 million. Amounts
outstanding under the line bear interest at LIBOR (determined as of the first day of each month) plus 1.95% (2.16% at
December 31, 2012), are secured by our trade accounts receivable and mature on June 1, 2014. At December 31, 2012,
outstanding advances on the line were approximately $6.5 million, including letters of credit of $1.1 million, with availability
to borrow $28.5 million.
The Company also maintains an investment margin account which is periodically used as a source for the purchase of
marketable equity securities and short-term liquidity.
Trade accounts receivable at December 31, 2012 increased approximately $2.0 million as compared to December 31,
2011. The increase relates to a general increase in freight revenue and fuel surcharge revenue, which flows through the
accounts receivable account, during 2012 as compared to the freight revenue and fuel surcharge revenue generated
during 2011.
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Marketable equity securities at December 31, 2012 decreased approximately $2.9 million as compared to December 31,
2011. The decrease was primarily related to sales of marketable equity securities with a combined cost basis of $2.2 million
and to a decrease in market value of approximately $0.9 million. At December 31, 2012, the remaining marketable equity
securities have a combined cost basis of approximately $10.5 million and a combined fair market value of approximately
$17.3 million. The Company has developed a strategy to invest in securities from which it expects to receive dividends that
qualify for favorable tax treatment, as well as appreciate in value. The Company anticipates that increases in the market
value of the investments combined with dividend payments will exceed interest rates paid on borrowings for the same
period. During 2012 the Company had net unrealized pre-tax losses of approximately $0.8 million and received dividends of
approximately $0.8 million. The holding term of these securities depends largely on the general economic environment, the
equity markets, borrowing rates and the Company's cash requirements.
Revenue equipment, at December 31, 2012, which generally consists of trucks, trailers, and revenue equipment
accessories such as Qualcomm™ satellite tracking units and auxiliary power units, increased approximately $6.6 million as
compared to December 31, 2011. The increase relates primarily to the purchase of new trucks to replace older trucks
which have not yet been retired or are otherwise in the process of being traded or sold and to the purchase of new trailers
during 2012 without corresponding trailer retirements as the Company intends to increase its trailer fleet size. Partially
offsetting the increase was the disposition of older, fully depreciated, Qualcomm™ units as the Company replaced older
units with newer units offering more advanced capabilities.
Accounts payable at December 31, 2012 decreased approximately $4.8 million as compared to December 31, 2011. The
decrease is primarily related to a decrease in the amount of bank drafts outstanding in excess of bank balance as
compared to bank drafts outstanding at December 31, 2011. As of December 31, 2012 bank drafts of approximately $4.8
million were reclassified to accounts payable as compared to approximately $7.0 million reclassified as of December 31,
2011. Also contributing to the decrease was a decrease in amounts accrued for the purchase of revenue equipment
received which had not been paid for by the end of the period and a decrease in amounts accrued for the purchase of fuel.
Accrued expenses and other liabilities at December 31, 2012 increased approximately $11.6 million as compared to
December 31, 2011. The increase is primarily related to a $10.7 million increase in margin account borrowings secured by
the Company’s investments in marketable equity securities. The Company periodically uses this margin account for the
purchase of marketable equity securities and as a source of short-term liquidity.
Current maturities of long term-debt and long-term debt fluctuations are reviewed on an aggregate basis as the
classification of amounts in each category are typically affected merely by the passage of time. Current maturities of long-
term debt and long-term debt, on an aggregate basis at December 31, 2012, increased approximately $45.9 million as
compared to December 31, 2011. The increase was related to additional borrowings received during 2012 net of the
principal portion of scheduled installment note payments made during 2012.
During 2012, the Company paid cash dividends of approximately $17.4 million and we currently intend to retain our future
earnings to finance our growth and do not anticipate paying additional dividends in the foreseeable future.
For 2013, we expect to purchase 550 new trucks and 720 new trailers while continuing to sell or trade older equipment,
which we expect to result in net capital expenditures of approximately $53.1 million. Management believes we will be able
to finance our near term needs for working capital over the next twelve months, as well as acquisitions of revenue
equipment during such period, with cash balances, cash flows from operations, and borrowings believed to be available
from financing sources. We will continue to have significant capital requirements over the long-term, which may require us
to incur debt or seek additional equity capital. The availability of additional capital will depend upon prevailing market
conditions, the market price of our common stock and several other factors over which we have limited control, as well as
our financial condition and results of operations. Nevertheless, based on our anticipated future cash flows and sources of
financing that we expect will be available to us, we do not expect that we will experience any significant liquidity constraints
in the foreseeable future.
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Contractual Obligations and Commercial Commitments
The following table sets forth the Company's contractual obligations and commercial commitments as of December 31,
2012:
Payments due by period
(in thousands)
1 to 3
Years
Less than
1 year
3 to 5
Years
Total
More than
5 Years
Long-term debt (1)
Operating leases (2)
Lease residual value guarantees
Total
$
$
123,321 $
1,905
197
125,423 $
31,608 $
741
32
32,381 $
89,435 $
638
165
90,238 $
2,278 $
321
-
2,599 $
-
205
-
205
(1) Including interest.
(2) Represents equipment, building, facilities, and drop yard operating leases.
Off-Balance Sheet Arrangements
During 2010, the Company entered into an operating lease for the lease of trailers. This lease included a requirement that
we guarantee a portion of the residual value of the trailers at the end of the lease term up to a certain amount. As a result,
we are subject to the risk that equipment values may decline below the amount of the guaranteed residual amount which
would result in the Company being required to make cash payments for a limited deficiency amount. At December 31,
2012, the maximum amount of the potential deficiency obligation equates to $197,000. We currently anticipate that the
value of the trailers at the end of the lease will be sufficient to cover the guaranteed portion of the expected residual value
of the trailers and that a cash payment will not be required. To the extent the expected value at the end of the lease
becomes lower than the amount of the residual value guaranteed, we would begin accruing for the difference over the
remaining lease term.
The trailers held under operating leases are not carried on our balance sheet and respective lease payments are reflected
in our consolidated statement of operations as a component of the caption “Rents and purchased transportation”. Rent
expense related to the trailers under the operating lease agreements totaled $371,000 for the year ended December 31,
2012.
Insurance
With respect to physical damage for trucks, cargo loss and auto liability, the Company maintains insurance coverage to
protect it from certain business risks. These policies are with various carriers and have per occurrence deductibles of
$2,500, $10,000 and $2,500 respectively. The Company maintains workers’ compensation coverage in Arkansas, Ohio,
Oklahoma, Mississippi, and Florida with a $500,000 self-insured retention and a $500,000 per occurrence excess policy.
The Company has elected to opt out of workers' compensation coverage in Texas and is providing coverage through the
P.A.M. Texas Injury Plan. The Company has reserved for estimated losses to pay such claims as well as claims incurred
but not yet reported. The Company has not experienced any adverse trends involving differences in claims experienced
versus claims estimates for workers’ compensation claims. Letters of credit aggregating approximately $1,101,000 and
certificates of deposit totaling $300,000 are held by banks as security for workers’ compensation claims. The Company self
insures for employee health claims with a stop loss of $275,000 per covered employee per year and estimates its liability
for claims incurred but not reported.
Inflation
Inflation has an impact on most of our operating costs. Over the past three years, the effect of inflation has been minimal.
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Adoption of Accounting Policies
See “Item 8. Financial Statements and Supplementary Data, Note 1 to the Consolidated Financial Statements - Recent
Accounting Pronouncements.”
Critical Accounting Policies
The preparation of financial statements in accordance with accounting principles generally accepted in the United States of
America requires management to adopt accounting policies and make significant judgments and estimates that impact the
amounts reported in our consolidated financial statements and accompanying notes. Therefore, the reported amounts of
assets, liabilities, revenue, expenses, and associated disclosures of contingent assets and liabilities are affected by
judgments and estimates. In many cases, there are alternative assumptions, policies, or estimation techniques that could
be used. Management evaluates its assumptions, policies, and estimates on an ongoing basis, utilizing historical
experience, and other methods considered reasonable in the particular circumstances. Nevertheless, actual results may
differ significantly from our estimates and assumptions, and it is possible that materially different amounts would be
reported using differing estimates or assumptions. Management considers our critical accounting policies to be those that
require more significant judgments and estimates when we prepare our consolidated financial statements. Our critical
accounting policies include the following:
Accounts receivable and allowance for doubtful accounts . Accounts receivable are presented in the Company’s
consolidated financial statements net of an allowance for estimated uncollectible amounts. Management estimates this
allowance based upon an evaluation of the aging of our customer receivables and historical write-offs, as well as other
trends and factors surrounding the credit risk of specific customers. The Company continually updates the history it uses to
make these estimates so as to reflect the most recent trends, factors and other information available. In order to gather
information regarding these trends and factors, the Company also performs ongoing credit evaluations of its customers.
Customer receivables are considered to be past due when payment has not been received by the invoice due date. Write-
offs occur when we determine an account to be uncollectible and could differ from the allowance estimate as a result of a
number of factors, including unanticipated changes in the overall economic environment or factors and risks surrounding a
particular customer. Management believes its methodology for estimating the allowance for doubtful accounts to be reliable
however, additional allowances may be required if the financial condition of our customers were to deteriorate and could
have a material effect on the Company’s consolidated financial statements.
Depreciation of trucks and trailers . Depreciation of trucks and trailers is calculated by the straight-line method over the
assets estimated useful life, which range from three to 12 years, down to an estimated salvage value at the end of the
assets estimated useful life. Management must use its judgment in the selection of estimated useful lives and salvage
values for purposes of this calculation. In some cases, the Company has agreements in place with certain manufacturers
whereby salvage values are guaranteed. In other cases, where salvage values are not guaranteed, estimates of salvage
value are based on the expected market values of equipment at the time of disposal.
The depreciation of trucks and trailers over their estimated useful lives and the determination of any salvage value also
require management to make judgments about future events. Therefore, the Company’s management periodically
evaluates whether changes to estimated useful lives or salvage values are necessary to ensure these estimates accurately
reflect the economic reality of the assets. This periodic evaluation may result in changes in the estimated lives and/or
salvage values used by the Company to depreciate its assets, which can affect the amount of periodic depreciation
expense recognized and, ultimately, the gain or loss on the disposal of an asset. Future changes in our estimated useful
life or salvage value estimates, or fluctuations in market value that is not reflected in current estimates, could have a
material effect on the Company’s consolidated financial statements.
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Impairment of long-lived assets. Long-lived assets are reviewed for impairment in accordance with Topic ASC 360,
“Property, Plant, and Equipment”. This authoritative guidance provides that whenever there are certain significant events or
changes in circumstances the value of long-lived assets or groups of assets must be tested to determine if their value can
be recovered from their future cash flows. In the event that undiscounted cash flows expected to be generated by the asset
are less than the carrying amount, the asset or group of assets must be evaluated for impairment. Impairment exists if the
carrying value of the asset exceeds its fair value. In light of the sustained general economic downturn in the United States
and world economies, the decline in the Company’s market capitalization and the net operating losses of the Company in
recent periods, triggering events and changes in circumstances have occurred which require management to test the
Company’s long-lived assets for recoverability each reporting period.
Significantly all of the Company’s cash flows from operations are generated by trucks and trailers, and as such, the cost of
other long-lived assets are funded by those operations. Therefore, management tests for the recoverability of all of the
Company’s long-lived assets as a single group at the entity level and examines the forecasted future cash flows generated
by trucks and trailers, including their eventual disposition, to determine if those cash flows exceed the carrying value of the
long-lived assets. As of December 31, 2012, the projected cash flows expected to be generated from long-lived assets
exceeded their carrying value. As such, no impairment indicators existed and no impairment losses were recorded during
the period. The forecasted cash flows were estimated using assumptions about future operations. To the extent that facts
and circumstances change in the future, our estimates of future cash flows may also change either positively or negatively.
Claims accruals. The Company is self-insured for health and workers' compensation benefits up to certain stop-loss limits.
Such costs are accrued based on known claims and an estimate of incurred, but not reported (IBNR) claims. IBNR claims
are estimated using historical lag information and other data either provided by outside claims administrators or developed
internally. Actual claims payments may differ from management’s estimates as a result of a number of factors, including
evaluation of severity, increases in legal or medical costs, and other case-specific factors. The actual claims payments are
charged against the Company’s recorded accrued claims liabilities and have been reasonable with respect to the estimates
of the liabilities made under the Company’s methodology. However, the estimation process is generally subjective, and to
the extent that future actual results materially differ from original estimates made by management, adjustments to recorded
accruals may be necessary which could have a material effect on the Company’s consolidated financial statements. Based
upon our 2012 health and workers' compensation expenses, a 10% increase in both claims incurred and claims incurred
but not reported, would increase our annual health and workers' compensation expenses by $0.7 million.
Revenue recognition. Revenue is recognized in full upon completion of delivery to the receiver's location. For freight in
transit at the end of a reporting period, the Company recognizes revenue pro rata based on relative transit time completed
as a portion of the estimated total transit time. Expenses are recognized as incurred.
Income Taxes. The Company’s deferred tax assets and liabilities represent items that will result in taxable income or a tax
deduction in future years for which the Company has already recorded the related tax expense or benefit in its
consolidated statements of operations. Deferred tax accounts arise as a result of timing differences between when items
are recognized in the Company’s consolidated financial statements compared to when they are recognized in the
Company’s tax returns. In establishing the Company’s deferred income tax assets and liabilities, management makes
judgments and interpretations based on the enacted tax laws and published tax guidance that are applicable to its
operations. Deferred income tax assets and liabilities are measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are expected to be recovered or settled. When it is more likely
than not that all or some portion of specific deferred income tax assets will not be realized, a valuation allowance must be
established for the amount of deferred income tax assets that are determined not to be realizable. A valuation allowance
for deferred income tax assets has not been deemed to be necessary. Significant management judgment is required as it
relates to future taxable income, future capital gains, tax settlements, valuation allowances, and the Company’s ability to
utilize tax loss and credit carryforwards.
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Management believes that future tax consequences have been adequately provided for based on the current facts and
circumstances and current tax law. However, should current circumstances change or the Company’s tax positions be
challenged, different outcomes could result which could have a material effect on the Company’s consolidated financial
statements.
Item 7A. Quantitative and Qualitative Disclosures about Market Risk.
Our primary market risk exposures include equity price risk, interest rate risk, commodity price risk (the price paid to obtain
diesel fuel for our trucks), and foreign currency exchange rate risk. The potential adverse impact of these risks are
discussed below.
The following sensitivity analyses do not consider the effects that an adverse change may have on the overall economy nor
do they consider additional actions we may take to mitigate our exposure to such changes. Actual results of changes in
prices or rates may differ materially from the hypothetical results described below.
Equity Price Risk
We hold certain actively traded marketable equity securities which subjects the Company to fluctuations in the fair market
value of its investment portfolio based on current market price. The recorded value of marketable equity securities
decreased to $17.3 million at December 31, 2012 from $20.3 million at December 31, 2011. The decrease includes
additional purchases of $0.2 million, sales of $2.2 million, return of capital proceeds of $0.1 million, and a decrease in the
fair market value, net of write-downs, of approximately $0.9 million during 2012. A 10% decrease in the market price of our
marketable equity securities would cause a corresponding 10% decrease in the carrying amounts of these securities, or
approximately $1.7 million. For additional information with respect to the marketable equity securities, see Note 3 to our
consolidated financial statements.
Interest Rate Risk
Our line of credit bears interest at a floating rate equal to LIBOR plus a fixed percentage. Accordingly, changes in LIBOR,
which are affected by changes in interest rates, will affect the interest rate on, and therefore our costs under, the line of
credit. Assuming $5.0 million of variable rate debt was outstanding under our line of credit for a full fiscal year, a
hypothetical 100 basis point increase in LIBOR would result in approximately $50,000 of additional interest expense.
Commodity Price Risk
Prices and availability of all petroleum products are subject to political, economic and market factors that are generally
outside of our control. Accordingly, the price and availability of diesel fuel, as well as other petroleum products, can be
unpredictable. Because our operations are dependent upon diesel fuel, significant increases in diesel fuel costs could
materially and adversely affect our results of operations and financial condition. Based upon our 2012 fuel consumption, a
10% increase in the average annual price per gallon of diesel fuel would increase our annual fuel expenses by
approximately $11.1 million.
Foreign Currency Exchange Rate Risk
We are exposed to foreign currency exchange rate risk related to the activities of our branch office located in Mexico.
Currently, we do not hedge our exchange rate exposure through any currency forward contracts, currency options, or
currency swaps as all of our revenues, and substantially all of our expenses and capital expenditures, are transacted in
U.S. dollars. However, certain operating expenditures and capital purchases related to our Mexico branch office are
incurred in or exposed to fluctuations in the exchange rate between the U.S. Dollar and the Mexican peso. Based on 2012
expenditures denominated in pesos, a 10% increase in the exchange rate would increase our annual operating expenses
by approximately $50,000.
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Item 8. Financial Statements and Supplementary Data.
The following statements are filed with this report:
Report of Independent Registered Public Accounting Firm – Grant Thornton LLP
Consolidated Balance Sheets - December 31, 2012 and 2011
Consolidated Statements of Operations - Years ended December 31, 2012, 2011 and 2010
Consolidated Statements of Comprehensive Income - Years ended December 31, 2012, 2011 and 2010
Consolidated Statements of Stockholders’ Equity - Years ended December 31, 2012, 2011 and 2010
Consolidated Statements of Cash Flows - Years ended December 31, 2012, 2011 and 2010
Notes to Consolidated Financial Statements
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Board of Directors and Stockholders
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
related
consolidated statements of operations, comprehensive income, stockholders’ equity, and cash flows for each of the three
years in the period ended December 31, 2012. These financial statements are the responsibility of the Company’s
management. Our responsibility is to express an opinion on these financial statements based on our audits.
“Company”) as of December 31, 2012 and 2011, and
(the
the
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (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, 2012 and 2011, and the results of
their operations and their cash flows for each of the three years in the period ended December 31, 2012 in conformity with
accounting principles generally accepted in the United States of America.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United
States), the Company’s internal control over financial reporting as of December 31, 2012, based on criteria established in
Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway
Commission (COSO), and our report dated March 15, 2013 expressed an unqualified opinion thereon.
/s/ GRANT THORNTON LLP
Tulsa, Oklahoma
March 15, 2013
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P.A.M. TRANSPORTATION SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 2012 AND 2011
(in thousands, except share and per share data)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents
Accounts receivable—net:
Trade
Other
Inventories
Prepaid expenses and deposits
Marketable equity securities
Income taxes refundable
Total current assets
PROPERTY AND EQUIPMENT:
Land
Structures and improvements
Revenue equipment
Office furniture and equipment
Total property and equipment
Accumulated depreciation
Net property and equipment
OTHER ASSETS
TOTAL ASSETS
See notes to consolidated financial statements.
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2012
2011
$
507 $
180
50,017
3,558
1,770
11,274
17,320
354
48,019
2,218
1,658
10,993
20,264
233
84,800
83,565
4,924
15,952
331,197
6,719
4,924
14,206
324,644
9,002
358,792
352,776
(128,353)
(159,646)
230,439
193,130
2,430
2,398
$
317,669 $
279,093
(Continued)
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 2012 AND 2011
(in thousands, except share and per share data)
LIABILITIES AND STOCKHOLDERS' EQUITY
2012
2011
CURRENT LIABILITIES:
Accounts payable
Accrued expenses and other liabilities
Current maturities of long—term debt
Deferred income taxes—current
Total current liabilities
Long-term debt—less current portion
Deferred income taxes—less current portion
Total liabilities
COMMITMENTS AND CONTINGENCIES (Note 15)
STOCKHOLDERS’ EQUITY
Preferred stock, $.01 par value, 10,000,000 shares
authorized; none issued
Common stock, $.01 par value, 40,000,000 shares
authorized; 11,384,207 and 11,378,207 shares issued;
8,701,607 and 8,695,607 shares outstanding at
December 31, 2012 and December 31, 2011, respectively
Additional paid-in capital
Accumulated other comprehensive income
Treasury stock, at cost; 2,682,600 shares
Retained earnings
Total stockholders’ equity
$
19,025 $
21,308
28,918
3,272
23,803
9,670
17,438
2,277
72,523
53,188
78,583
44,368
44,135
44,293
195,474
141,616
-
-
114
78,448
4,235
(37,239)
76,637
114
78,036
4,705
(37,239)
91,861
122,195
137,477
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
$
317,669 $
279,093
See notes to consolidated financial statements.
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(Concluded)
P.A.M. TRANSPORTATION SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 2012, 2011 AND 2010
(in thousands, except per share data)
OPERATING REVENUES:
Revenue, before fuel surcharge
Fuel surcharge
2012
2011
2010
$
297,698 $
82,935
284,178 $
75,065
282,524
49,470
Total operating revenues
380,633
359,243
331,994
OPERATING EXPENSES AND COSTS:
Salaries, wages and benefits
Fuel expense
Rents and purchased transportation
Depreciation
Operating supplies and expenses
Operating taxes and licenses
Insurance and claims
Communications and utilities
Other
(Gain) loss on disposition of equipment
139,062
111,378
23,815
38,298
39,011
5,003
13,744
2,235
5,350
(166)
118,321
124,956
21,842
34,163
38,659
4,952
13,070
2,496
6,029
98
109,728
97,523
42,469
27,035
30,105
4,954
12,820
2,731
5,169
(337)
Total operating expenses and costs
377,730
364,586
332,197
OPERATING INCOME (LOSS)
NON-OPERATING INCOME
INTEREST EXPENSE
2,903
(5,343)
(203)
3,288
(2,596)
1,551
(1,798)
852
(2,252)
INCOME (LOSS) BEFORE INCOME TAXES
3,595
(5,590)
(1,603)
FEDERAL & STATE INCOME TAX EXPENSE (BENEFIT):
Current
Deferred
51
1,365
35
(2,768)
195
(1,143)
Total federal & state income tax expense (benefit)
1,416
(2,733)
(948)
NET INCOME (LOSS)
$
2,179 $
(2,857) $
(655)
EARNINGS (LOSS) PER COMMON SHARE:
Basic
Diluted
AVERAGE COMMON SHARES OUTSTANDING:
Basic
Diluted
$
$
0.25 $
0.25 $
(0.32) $
(0.32) $
(0.07)
(0.07)
8,700
8,702
9,056
9,056
9,415
9,415
DIVIDENDS DECLARED PER COMMON SHARE
$
2.00 $
- $
-
See notes to consolidated financial statements.
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P.A.M. TRANSPORTATION SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
YEARS ENDED DECEMBER 31, 2012, 2011 AND 2010
(in thousands)
2012
2011
2010
NET INCOME (LOSS)
$
2,179 $
(2,857) $
(655)
Other comprehensive income (loss), net of tax:
Reclassification adjustment for realized gains on marketable
securities included in net income (1)
(1,009)
(526)
(189)
Reclassification adjustment for unrealized losses on marketable
securities included in net income (2)
44
196
37
Changes in fair value of marketable securities (3)
495
629
1,495
COMPREHENSIVE INCOME (LOSS)
$
1,709 $
(2,558) $
688
_______________
(1) Net of deferred income taxes of $(618), $(322) and $(125), respectively.
(2) Net of deferred income taxes of $27, $120 and $24, respectively.
(3) Net of deferred income taxes of $304, $386 and $842, respectively.
See notes to consolidated financial statements.
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P.A.M. TRANSPORTATION SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
YEARS ENDED DECEMBER 31, 2012, 2011 AND 2010
(in thousands, except per share data)
Common
Stock
Shares /
Amount
Additional
Paid-In
Capital
Accumulated
Other
Comprehensive
Income
Treasury
Stock
Retained
Earnings
Total
BALANCE— January 1, 2010 9,414 $ 114 $
77,704 $
3,063 $
(29,127) $
95,373 $ 147,127
Net loss
Other comprehensive
income, net of tax of $741
Exercise of stock options-
shares issued including tax
benefits
Share-based compensation
1,343
1
10
123
(655)
(655)
1,343
10
123
BALANCE— December 31,
2010
9,415 114
77,837
4,406
(29,127)
94,718
147,948
Net loss
Other comprehensive
income, net of tax of $184
Exercise of stock options-
shares issued including tax
benefits
Treasury stock repurchases
Share-based compensation
299
5
(724)
35
164
(8,112)
(2,857)
(2,857)
299
35
(8,112)
164
BALANCE— December 31,
2011
8,696 114
78,036
4,705
(37,239)
91,861
137,477
Net income
Other comprehensive
income, net of tax of $(287)
Exercise of stock options-
shares issued including tax
benefits
Dividends on common
stock, $2 per share
Share-based compensation
(470)
6
60
2,179
2,179
(470)
60
352
(17,403)
(17,403)
352
BALANCE— December 31,
2012
8,702 $ 114 $
78,448 $
4,235 $
(37,239) $
76,637 $ 122,195
See notes to consolidated
financial statements.
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P.A.M. TRANSPORTATION SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 2012, 2011 AND 2010
(in thousands)
OPERATING ACTIVITIES:
Net income (loss)
Adjustments to reconcile net income (loss) to net cash provided by operating
activities:
Depreciation
Bad debt (recovery) expense
Stock compensation—net of excess tax benefits
Provision for (benefit from) deferred income taxes
Reclassification of unrealized loss on marketable equity securities
Recognized gain on sale of marketable equity securities
(Gain) loss on sale or disposal of equipment
Changes in operating assets and liabilities:
Accounts receivable
Prepaid expenses, deposits, inventories, and other assets
Income taxes (payable) refundable
Trade accounts payable
Accrued expenses and other liabilities
Net cash provided by operating activities
INVESTING ACTIVITIES:
Purchases of property and equipment
Proceeds from disposition of equipment
Changes in restricted cash
Sales of marketable equity securities
Purchases of marketable equity securities, net of return of capital
Net cash used in investing activities
FINANCING ACTIVITIES:
Borrowings under line of credit
Repayments under line of credit
Borrowings of long-term debt
Repayments of long-term debt
Borrowings under margin account
Repayments under margin account
Repurchases of common stock
Stock compensation excess tax benefits
Dividends paid
Exercise of stock options
Net cash provided by financing activities
2012
2011
2010
$
2,179 $
(2,857) $
(655)
38,298
(285)
346
1,365
70
(2,362)
(166)
(2,837)
(426)
(115)
(3,369)
927
33,625
34,163
22
149
(2,768)
315
(817)
98
1,580
(2,290)
2,139
4,987
174
34,895
27,035
274
118
(1,143)
60
(329)
(337)
(2,232)
(5,005)
(1,883)
108
(1,007)
15,004
(98,046)
21,190
(215)
4,554
(77)
(72,594)
(69,352)
9,023
(40)
1,137
(2,142)
(61,374)
(24,056)
11,614
(746)
622
(1,621)
(14,187)
445,224
(449,135)
72,991
(23,152)
15,948
(5,237)
-
6
(17,403)
54
39,296
349,868
(340,540)
36,064
(24,430)
1,512
(1,512)
(8,112)
16
-
19
12,885
378,347
(378,347)
15,048
(11,970)
-
-
-
5
-
4
3,087
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
327
(13,594)
3,904
CASH AND CASH EQUIVALENTS—Beginning of year
CASH AND CASH EQUIVALENTS—End of year
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION—
Cash paid during the period for:
Interest
Income taxes
NONCASH INVESTING AND FINANCING ACTIVITIES—
180
507 $
13,774
180 $
9,870
13,774
2,558 $
1,778 $
174 $
90 $
2,243
2,296
$
$
$
Purchases of revenue equipment included in accounts payable
$
2,794 $
4,211 $
2,525
See notes to consolidated financial statements.
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P.A.M. TRANSPORTATION SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2012, 2011 AND 2010
1. ACCOUNTING POLICIES
Description of Business and Principles of Consolidation –P.A.M. Transportation Services, Inc. (the “Company”),
through its subsidiaries, operates as a truckload transportation and logistics company.
The consolidated financial statements include the accounts of the Company and its wholly owned operating
subsidiaries: P.A.M. Transport, Inc., P.A.M. Cartage Carriers, LLC, Choctaw Express, LLC, Decker Transport Co.,
LLC, T.T.X., LLC, Transcend Logistics, Inc., and East Coast Transport and Logistics, LLC. The following subsidiaries
were inactive during all periods presented: P.A.M. International, Inc., P.A.M. Logistics Services, Inc., Choctaw
Brokerage, Inc., P.A.M. Canada, Inc. and S & L Logistics, Inc. Effective January 1, 2010, Allen Freight Services, Inc.
merged into East Coast Transport and Logistics, LLC. All significant intercompany accounts and transactions have
been eliminated.
Use of Estimates–The preparation of financial statements in conformity with accounting principles generally
accepted in the United States of America requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities, disclosure of any contingent assets and liabilities at the financial statement
date and reported amounts of revenue and expenses during the reporting period. The Company periodically reviews
these estimates and assumptions. The Company's estimates were based on its historical experience and various
other assumptions that the Company believes to be reasonable under the circumstances. Actual results could differ
from those estimates.
Cash and Cash Equivalents –The Company considers all highly liquid investments with a maturity of three months
or less when purchased to be cash equivalents.
Accounts Receivable and Allowance for Doubtful Accounts–Accounts receivable are presented in the
Company’s consolidated financial statements net of an allowance for estimated uncollectible amounts. Management
estimates this allowance based upon an evaluation of the aging of our customer receivables and historical write-offs,
as well as other trends and factors surrounding the credit risk of specific customers. The Company continually
updates the history it uses to make these estimates so as to reflect the most recent trends, factors and other
information available. In order to gather information regarding these trends and factors, the Company also performs
ongoing credit evaluations of its customers. Customer receivables are considered to be past due when payment has
not been received by the invoice due date. Write-offs occur when we determine an account to be uncollectible and
could differ from the allowance estimate as a result of a number of factors, including unanticipated changes in the
overall economic environment or factors and risks surrounding a particular customer. Management believes its
methodology for estimating the allowance for doubtful accounts to be reliable however, additional allowances may be
required if the financial condition of our customers were to deteriorate, and could have a material effect on the
Company’s consolidated financial statements.
Bank Overdrafts–The Company classifies bank overdrafts in current liabilities as an accounts payable and does not
offset other positive bank account balances located at the same or other financial institutions. Bank overdrafts
generally represent checks written that have not yet cleared the Company’s bank accounts. The majority of the
Company’s bank accounts are zero balance accounts that are funded at the time items clear against the account by
drawings against a line of credit, therefore the outstanding checks represent bank overdrafts. Because the recipients
of these checks have generally not yet received payment, the Company continues to classify bank overdrafts as
accounts payable. Bank overdrafts are classified as changes in accounts payable in the cash flows from operating
activities section of the Company’s Consolidated Statement of Cash Flows. Bank overdrafts as of December 31,
2012 and 2011 were approximately $4,803,000 and $6,997,000, respectively.
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Accounts Receivable Other–The components of accounts receivable other consist primarily of amounts
representing company driver advances, owner-operator advances, equipment manufacturer warranties, and
restricted cash. Advances receivable from company drivers as of December 31, 2012 and 2011, were approximately
$882,000 and $601,000, respectively. Restricted cash consists of cash proceeds from the sale of trucks and trailers
under our like-kind exchange (“LKE”) tax program. See Note 11, “Federal and State Income Taxes,” for a discussion
of the Company’s LKE tax program. We classify restricted cash as a current asset within “Accounts receivable-other”
as the exchange process must be completed within 180 days in order to qualify for income tax deferral treatment.
The changes in restricted cash balances are reflected as an investing activity in our Consolidated Statements of
Cash Flows as they relate to the sales and purchases of revenue equipment.
Marketable Equity Securities–Marketable equity securities are classified by the Company as either available for
sale or trading. Securities classified as available for sale are carried at market value with unrealized gains and losses
recognized in accumulated other comprehensive income in the statements of stockholders’ equity. Securities
classified as trading are carried at market value with unrealized gains and losses recognized in the statements of
operations. Realized gains and losses are computed utilizing the specific identification method.
Impairment of Long-Lived Assets –The Company reviews its long-lived assets for impairment whenever events or
changes in circumstances indicate that the carrying amount of a long-lived asset may not be recoverable. An
impairment loss would be recognized if the carrying amount of the long-lived asset is not recoverable, and it exceeds
its fair value. For long-lived assets classified as held and used, if the carrying value of the long-lived asset exceeds
the sum of the future net cash flows, it is not recoverable.
Property and Equipment–Property and equipment is recorded at historical cost, less accumulated depreciation. For
financial reporting purposes, the cost of such property is depreciated principally by the straight-line method. For tax
reporting purposes, accelerated depreciation or applicable cost recovery methods are used. Depreciation is
recognized over the estimated asset life, considering the estimated salvage value of the asset. Such salvage values
are based on estimates using expected market values for used equipment and the estimated time of disposal which,
in many cases include guaranteed residual values by the manufacturers. Gains and losses are reflected in the year
of disposal. The following is a table reflecting estimated ranges of asset useful lives by major class of depreciable
assets:
Asset Class
Service vehicles
Office furniture and equipment
Revenue equipment
Structure and improvements
Estimated Asset Life
3-5 years
3-7 years
3-12 years
5-40 years
The Company’s management periodically evaluates whether changes to estimated useful lives and/or salvage
values are necessary to ensure its estimates accurately reflect the economic use of the assets. During 2012,
management adjusted the estimated useful lives and salvage values of certain trucks based on such an evaluation.
These changes resulted in a decrease in depreciation expense of approximately $450,000 during 2012. This
reduction in depreciation expense increased the Company’s 2012 reported net income by approximately $300,000
($0.03 per diluted share).
During 2011, management decreased the estimated useful lives and adjusted the salvage values of certain trucks
which were expected to be traded for newer model trucks. These changes resulted in additional depreciation
expense of approximately $4,200,000 during 2011. This additional depreciation expense increased the Company’s
2011 reported net loss by approximately $2,600,000 ($0.29 per diluted share).
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Prepaid Tires–Tires purchased with revenue equipment are capitalized as a cost of the related equipment.
Replacement tires are included in prepaid expenses and deposits and are amortized over a 24-month period.
Amounts paid for the recapping of tires are expensed when incurred.
Advertising Expense–Advertising costs are expensed as incurred and totaled approximately $685,000, $437,000
and $239,000 for the years ended December 31, 2012, 2011 and 2010, respectively.
Repairs and Maintenance –Repairs and maintenance costs are expensed as incurred.
Self Insurance Liability–A liability is recognized for known health, workers’ compensation, cargo damage, property
damage and auto liability damage claims. An estimate of the incurred but not reported claims for each type of liability
is made based on historical claims made, estimated frequency of occurrence, and considering changing factors that
contribute to the overall cost of insurance.
Income Taxes–The Company applies the asset and liability method of accounting for income taxes, under which
deferred taxes are determined based on the temporary differences between the financial statement and tax basis of
assets and liabilities using tax rates expected to be in effect during the years in which the basis differences reverse.
A valuation allowance is recorded when it is more likely than not that some of the deferred tax assets will not be
realized.
The application of income tax law to multi-jurisdictional operations such as those performed by the Company, are
inherently complex. Laws and regulations in this area are voluminous and often ambiguous. As such, we may be
required to make subjective assumptions and judgments regarding our income tax exposures. Interpretations of and
guidance surrounding income tax laws and regulations may change over time which could cause changes in our
assumptions and judgments that could materially affect amounts recognized in the consolidated financial statements.
We recognize the impact of tax positions in our financial statements. These tax positions must meet a more-likely-
than-not recognition threshold to be recognized and tax positions that previously failed to meet the more-likely-than-
not threshold are recognized in the first subsequent financial reporting period in which that threshold is met.
Previously recognized tax positions that no longer meet the more-likely-than-not threshold are derecognized in the
first subsequent financial reporting period in which that threshold is no longer met. We recognize potential accrued
interest and penalties related to unrecognized tax benefits within the consolidated statements of income as income
tax expense.
Revenue Recognition–Revenue is recognized in full upon completion of delivery to the receiver’s location. For
freight in transit at the end of a reporting period, the Company recognizes revenue pro rata based on relative transit
time completed as a portion of the estimated total transit time. Expenses are recognized as incurred.
Share-Based Compensation–The Company estimates the fair value of stock option awards on the option grant
date using the Black-Scholes pricing model and recognizes compensation for stock option awards expected to vest
on a straight-line basis over the requisite service period for the entire award. Forfeitures are estimated at grant date
based on historical experience. For additional information with respect to share-based compensation, see Note 12 to
our consolidated financial statements.
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Earnings Per Share–The Company computes basic earnings per share (“EPS”) by dividing net income (loss)
available to common stockholders by the weighted average number of common shares outstanding during the
period. Diluted EPS includes the potential dilution that could occur from stock-based awards and other stock-based
commitments using the treasury stock or the as if converted methods, as applicable. The difference between the
Company's weighted-average shares outstanding and diluted shares outstanding is due to the dilutive effect of stock
options for all periods presented. See Note 13 for computation of diluted EPS.
Fair Value Measurements –Certain financial assets and liabilities are measured at fair value within the financial
statements on a recurring basis. Fair value is defined as the exchange price that would be received for an asset or
paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an
orderly transaction between market participants on the measurement date. The fair value hierarchy requires an
entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair
value. For additional information with respect to fair value measurements, see Note 16 to our consolidated financial
statements.
Reporting Segments–The Company's operations are all in the motor carrier segment and are aggregated into a
single reporting segment in accordance with the aggregation criteria under Generally Accepted Accounting
Principles (“GAAP”). The Company provides truckload transportation services as well as brokerage and logistics
services to customers throughout the United States and portions of Canada and Mexico. Truckload transportation
services revenues, excluding fuel surcharges, represented 91.8%, 93.5% and 85.9% of total revenues, excluding fuel
surcharges, for the twelve months ended December 31, 2012, 2011 and 2010, respectively. Remaining revenues,
excluding fuel surcharges, for each respective year were generated by brokerage and logistics services.
Concentrations of Credit Risk–The Company performs ongoing credit evaluations and generally does not require
collateral from its customers. The Company maintains reserves for potential credit losses. In view of the
concentration of the Company’s revenues and accounts receivable among a limited number of customers within the
automobile industry, the financial health of this industry is a factor in the Company’s overall evaluation of accounts
receivable.
Subsequent Events–We have evaluated subsequent events for recognition and disclosure through the date these
financial statements were filed with the United States Securities and Exchange Commission.
Foreign Currency Transactions – The functional currency of the Company’s foreign branch office in Mexico is the
U.S. dollar. The Company remeasures the monetary assets and liabilities of this branch office, which are maintained
in the local currency ledgers, at the rates of exchange in effect at the end of the reporting period. Revenues and
expenses recorded in the local currency during the period are remeasured using average exchange rates for each
period. Non-monetary assets and liabilities are remeasured using historical rates. Any resulting exchange gain or
loss from the remeasurement process are included in non-operating income in the Company’s consolidated
statements of operations.
Recent Accounting Pronouncements– In February 2013, the Financial Accounting Standards Board ("FASB")
issued Accounting Standards Update No. 2013-2, Reporting of Amounts Reclassified Out of Accumulated Other
Comprehensive Income. This guidance requires an organization to present the effects on the line items of net
income of significant amounts reclassified out of accumulated other comprehensive income (“OCI”), but only if the
item reclassified is required under U.S. GAAP to be reclassified to net income in its entirety in the same reporting
period. The guidance is effective for fiscal years beginning after December 15, 2012. The adoption of this guidance
is not expected to have a significant impact on the Company’s financial condition, results of operations, or cash flow.
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In December 2011, the FASB issued ASU No. 2011-11, Disclosures about Offsetting Assets and Liabilities , which
requires entities to disclose both gross and net information about both instruments and transactions eligible for offset
in the statement of financial position and instruments and transactions subject to an agreement similar to a master
netting agreement. The objective of the disclosure is to facilitate comparison between those entities that prepare their
financial statements on the basis of U.S. GAAP and those entities that prepare their financial statements on the basis
of International Financial Reporting Standards. Retrospective presentation for all comparative periods presented is
required. This ASU is effective for fiscal years, and interim periods within those years, beginning on or after January
1, 2013, and is not expected to have a material effect on the Company’s financial condition, results of operations, or
cash flow.
In June 2011, the FASB issued ASU No. 2011-05, Presentation of Comprehensive Income , (“ASU 2011-05”). ASU
2011-05 requires presentation of all non-owner changes in equity to be presented in one continuous statement of
comprehensive income or in two separate but consecutive statements. It also prohibits the inclusion of
comprehensive income items in the statement of equity. Also, the amendments in this update do not change the
items that must be reported in OCI or when an item of OCI must be reclassified to net income. The guidance is
effective for fiscal years, and interim periods within those years, beginning after December 15, 2011. ASU 2011-05
was modified by the issuance of ASU 2011-12, Deferral of the Effective Date for Amendments to the Presentation of
Reclassifications of Items out of Accumulated Other Comprehensive Income in Accounting Standards Update No.
2011-05 in December 2011. This amendment deferred certain paragraphs of ASU 2011-05 that required
reclassifications of items from OCI to net income by component of net income and by component of OCI. The
adoption of the revised guidance on January 1, 2012 did not have a material effect on the Company’s financial
condition, results of operations, or cash flow.
2. TRADE ACCOUNTS RECEIVABLE
The Company's receivables result primarily from the sale of transportation and logistics services. The Company
performs ongoing credit evaluations of its customers and generally does not require collateral for accounts
receivable. Accounts receivable which consist of both billed and unbilled receivables are presented net of an
allowance for doubtful accounts. Accounts outstanding longer than contractual payment terms are considered past
due and are reviewed individually for collectibility. Accounts receivable balances consist of the following components
as of December 31, 2012 and 2011:
Billed
Unbilled
Allowance for doubtful accounts
Total accounts receivable—net
2012
2011
(in thousands)
$
44,374 $
6,800
(1,157)
44,370
5,723
(2,074)
$
50,017 $
48,019
An analysis of changes in the allowance for doubtful accounts for the years ended December 31, 2012, 2011 and
2010 follows:
Balance—beginning of year
Provision for bad debts
Charge-offs
Recoveries
Balance—end of year
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2012
2011
(in thousands)
2010
$
$
2,074 $
(285)
(632)
-
1,157 $
2,418 $
22
(565)
199
2,074 $
2,660
529
(1,100)
329
2,418
3. MARKETABLE EQUITY SECURITIES
The Company accounts for its marketable securities in accordance with ASC Topic 320, Investments-Debt and
Equity Securities. ASC Topic 320 requires companies to classify their investments as trading, available-for-sale or
held-to-maturity. The Company’s investments in marketable securities are classified as either trading or available-for-
sale and consist of equity securities. Management determines the appropriate classification of these securities at the
time of purchase and re-evaluates such designation as of each balance sheet date. The cost of securities sold is
based on the specific identification method and interest and dividends on securities are included in non-operating
income.
Marketable equity securities classified as available-for-sale are carried at fair value, with the unrealized gains and
losses, net of tax, included as a component of accumulated other comprehensive income in stockholders’ equity.
Realized gains and losses, declines in value judged to be other-than-temporary on available-for-sale securities, and
increases or decreases in value on trading securities, if any, are included in the determination of net income. A
quarterly evaluation is performed in order to judge whether declines in value below cost should be considered
temporary and when losses are deemed to be other-than-temporary. Several factors are considered in this
evaluation process including the severity and duration of the decline in value, the financial condition and near-term
outlook for the specific issuer and the Company’s ability to hold the securities.
For the years ended December 31, 2012, 2011 and 2010, the evaluation resulted in an impairment charges of
approximately $71,000, $315,000 and $60,000, respectively, being reported in the Company’s non-operating
income in its statement of operations.
The following table sets forth cost, market value and unrealized gain/(loss) on equity securities classified as
available-for-sale and equity securities classified as trading as of December 31, 2012 and 2011.
Available-for-sale securities
Fair market value
Cost
Unrealized gain
Trading securities
Fair market value
Cost
Unrealized loss
Total
Fair market value
Cost
Unrealized gain
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2012
2011
(in thousands)
17,188 $
10,361
6,827 $
20,123
12,539
7,584
132 $
158
(26) $
141
157
(16)
17,320 $
10,519
6,801 $
20,264
12,696
7,568
$
$
$
$
$
$
The following table sets forth the gross unrealized gains and losses on the Company’s marketable securities that are
classified as available-for-sale as of December 31, 2012 and 2011.
Available-for-sale securities
Gross unrealized gains
Gross unrealized losses
Net unrealized gains
2012
2011
(in thousands)
$
6,960 $
133
7,866
282
$
6,827 $
7,584
As of December 31, 2012 and 2011, the total net unrealized gain, net of deferred income taxes, in accumulated other
comprehensive income was approximately $4,235,000 and $4,705,000, respectively.
For the year ended December 31, 2012, the Company had net unrealized losses in market value on securities
classified as available-for-sale of approximately $459,000, net of deferred income taxes. For the year ended
December 31, 2011, the Company had net unrealized gains in market value on securities classified as available-for-
sale of approximately $825,000, net of deferred income taxes.
As of December 31, 2012, the Company's marketable securities that are classified as trading had gross recognized
losses of approximately $26,000 and had no gross recognized gains. As of December 31, 2011, the Company's
marketable securities that were classified as trading had gross recognized losses of approximately $16,000 and had
no gross recognized gains. The following table shows recognized gains (losses) in market value for securities
classified as trading during 2012, 2011 and 2010.
Trading securities
Recognized (loss) gain at beginning of period
Recognized (loss) gain at end of period
Securities transferred from trading to available-for-sale
Change in net recognized (loss) gain
Change in net recognized (loss) gain, net of taxes
2012
2011
(in thousands)
2010
$
$
$
(16) $
(26)
-
14 $
(16)
-
(10) $
(30) $
(6) $
(15) $
63
14
63
14
6
During 2012 and 2011, there were no reclassifications of marketable securities.
The following table shows the Company’s realized gains during 2012, 2011 and 2010 on certain securities which
were held as available-for-sale. The cost of securities sold is based on the specific identification method and interest
and dividends on securities are included in non-operating income.
Realized gains
Sale proceeds
Cost of securities sold
Realized gains
Realized gains, net of taxes
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2012
2011
(in thousands)
2010
$
$
$
4,554 $
2,183
1,137 $
289
622
308
2,371 $
848 $
314
1,437 $
526 $
190
48
The following table shows the Company’s investments’ approximate gross unrealized losses and fair value at
December 31, 2012 and 2011. As of December 31, 2012 and 2011 there were no investments that had been in a
continuous unrealized loss position for twelve months or longer.
2012
2011
(in thousands)
Fair Value
Fair Value
Unrealized
Losses
Unrealized
Losses
Equity securities – Available for sale
Equity securities – Trading
$
1,567 $
129
133 $
26
2,914 $
141
Totals
$
1,696 $
159 $
3,055 $
282
16
298
The market value of the Company’s equity securities are periodically used as collateral against any outstanding
margin account borrowings. As of December 31, 2012, the Company had outstanding borrowings of $10,711,000
under its margin account. As of December 31, 2011, the Company did not have any outstanding borrowings under
its margin account.
4. ACCRUED EXPENSES AND OTHER LIABILITIES
Accrued expenses and other liabilities at December 31 are summarized as follows:
Payroll
Accrued vacation
Taxes—other than income
Interest
Driver escrows
Margin account borrowings
Self-insurance claims
Total accrued expenses and other liabilities
5. CLAIMS LIABILITIES
2012
2011
(in thousands)
$
2,733 $
1,872
2,063
152
1,197
10,711
2,580
1,829
1,960
1,956
114
1,010
-
2,801
$
21,308 $
9,670
With respect to physical damage for trucks, cargo loss and auto liability, the Company maintains insurance coverage
to protect it from certain business risks. These policies are with various carriers and have per occurrence deductibles
of $2,500, $10,000 and $2,500 respectively. The Company has elected to self-insure for physical damage to trailers.
The Company maintains workers’ compensation coverage in Arkansas, Ohio, Oklahoma, Mississippi, and Florida
with a $500,000 self-insured retention and a $500,000 per occurrence excess policy. The Company has elected to
opt out of workers' compensation coverage in Texas and is providing coverage through the P.A.M. Texas Injury Plan.
The Company has accrued for estimated losses to pay such claims as well as claims incurred but not yet reported.
The Company has not experienced any adverse trends involving differences in claims experienced versus claims
estimates for workers’ compensation claims. Letters of credit aggregating approximately $1,101,000 and certificates
of deposit totaling $300,000 are held by banks as security for workers’ compensation claims. The Company self
insures for employee health claims with a stop loss of $275,000 per covered employee per year and estimates its
liability for claims outstanding and claims incurred but not reported.
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6. LONG-TERM DEBT
Long-term debt at December 31, consists of the following:
Line of credit with a bank—due June 1, 2014, and
collateralized by accounts receivable (1)
Equipment financing (2)
Total long-term debt
Less current maturities
Long-term debt—net of current maturities
2012
2011
(in thousands)
$
$
5,417 $
102,084
107,501 $
(28,918)
9,328
52,245
61,573
(17,438)
$
78,583 $
44,135
(1) Line of credit agreement with a bank provides for maximum borrowings of $35.0 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 1.95% (2.16% at
December 31, 2012) and are secured by our trade accounts receivable. Monthly payments of interest are
required under this agreement. Also, under the terms of the agreement the Company must have (a) a debt to
equity ratio of no more than 2:1, and (b) maintain a tangible net worth of at least $115 million. The Company
was in compliance with all provisions of the agreement throughout 2012.
(2) Equipment financings consist of installment obligations for revenue equipment purchases, payable in various
monthly installments with various maturity dates through September 2017, at a weighted average interest rate
of 3.02% as of December 31, 2012 and collateralized by revenue equipment.
The Company has provided letters of credit to third parties totaling approximately $1,101,000 at December 31,
2012. The letters are held by these third parties to assist such parties in collection of any amounts due by the
Company should the Company default in its commitments to the parties.
Scheduled annual maturities on long-term debt outstanding at December 31, 2012, are:
2013
2014
2015
2016
2017
Total
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(in
thousands)
$
28,918
37,689
38,674
1,408
812
$
107,501
7. CAPITAL STOCK
The Company's authorized capital stock consists of 40,000,000 shares of common stock, par value $.01 per share,
and 10,000,000 shares of preferred stock, par value $.01 per share. At December 31, 2012, there were 11,384,207
shares of our common stock issued and 8,701,607 shares outstanding. No shares of our preferred stock were issued
or outstanding at December 31, 2012.
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. As of
December 31, 2012, we have no agreements or understandings for the issuance of any shares of preferred stock.
Treasury Stock
In November 2010, our Board of Directors authorized the repurchase of up to 500,000 shares of our common stock
during the twelve month period following the announcement. All 500,000 shares were repurchased under this
repurchase authorization prior to the authorization expiration date.
In September 2011, our Board of Directors authorized the repurchase of up to 500,000 shares of our common stock.
Under this authorization, the Company repurchased 224,000 shares of its common stock during the fourth quarter of
2011. The Company did not repurchase any additional shares during 2012.
The Company accounts for Treasury stock using the cost method and as of December 31, 2012, 2,682,600 shares
were held in the treasury at an aggregate cost of approximately $37,239,000.
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8. COMPREHENSIVE INCOME (LOSS)
Comprehensive income (loss) was comprised of net income (loss) plus or minus market value adjustments related to
marketable securities. The components of comprehensive income (loss) were as follows:
Net income (loss)
$
2,179 $
(2,857) $
(655)
2012
2011
(in thousands)
2010
Other comprehensive income (loss):
Reclassification adjustment for realized gains
on marketable securities, included
in net income, net of income taxes
Reclassification adjustment for unrealized
losses on marketable securities, included in
net income, net of income taxes
Change in fair value of marketable
securities, net of income taxes
(1,009)
(526)
(189)
44
196
37
495
629
1,495
Total comprehensive income (loss)
$
1,709 $
(2,558) $
688
9. SIGNIFICANT CUSTOMERS AND INDUSTRY CONCENTRATION
In 2012, 2011 and 2010, one customer, who is in the automobile manufacturing industry, accounted for 17%, 26%
and 34% of revenues, respectively. The Company also provides transportation services to other manufacturers who
are suppliers for automobile manufacturers including suppliers for the Company’s largest customer. As a result,
concentration of the Company’s business within the automobile industry is significant. Of the Company’s revenues
for 2012, 2011 and 2010, 37%, 38% and 40%, respectively, were derived from transportation services provided to
the automobile manufacturing industry. Accounts receivable from the largest customer totaled approximately
$10,947,000 and $13,506,000 at December 31, 2012 and 2011, respectively.
10. DIVIDENDS
In March 2012, the Board declared a cash dividend of $1.00 per common share. This dividend was paid in cash on
April 9, 2012 to stockholders of record at the close of business on March 30, 2012. In December 2012, the Board
declared a cash dividend of $1.00 per common share. This dividend was paid in cash on December 28, 2012 to
stockholders of record at the close of business on December 17, 2012. The Company currently intends to retain
future earnings to finance the growth, development and expansion of its business and does not anticipate paying
cash dividends in the future. Any future determination to pay dividends will be at the discretion of the Board and will
depend on its financial condition, results of operations, capital requirements, any legal or contractual restrictions on
the payment of dividends and other factors the Board deems relevant.
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11. FEDERAL AND STATE INCOME TAXES
Under GAAP, deferred income taxes reflect the net tax effects of temporary differences between the carrying
amounts of assets and liabilities for financial reporting purposes and for income tax reporting purposes.
Significant components of the Company’s deferred tax liabilities and assets at December 31 are as follows:
Deferred tax liabilities:
Property and equipment
Unrealized gains on securities
Prepaid expenses and other
2012
2011
(in thousands)
Current
Long-Term Current
Long-Term
$
- $
2,591
4,171
69,667 $
-
-
- $
2,879
4,138
65,236
-
-
Total deferred tax liabilities
6,762
69,667
7,017
65,236
Deferred tax assets:
Allowance for doubtful accounts
Alternative minimum tax credit carryforward
QAFMV tax credit carryforward
New hire tax credit
Compensated absences
Self-insurance allowances
Share-based compensation
Goodwill
Marketable equity securities
Net operating loss carryover
Capital loss carryover
Non-competition agreement
Other
439
-
-
-
616
787
-
-
723
-
915
-
10
-
193
864
124
-
-
582
364
-
23,115
-
47
10
787
-
-
-
668
767
-
-
1,691
-
821
-
6
-
215
864
124
-
-
448
691
-
18,522
-
64
15
Total deferred tax assets
3,490
25,299
4,740
20,943
Net deferred tax liability
$
3,272 $
44,368 $
2,277 $
44,293
The reconciliation between the effective income tax rate and the statutory Federal income tax rate for the years
ended December 31, 2012, 2011 and 2010 is presented in the following table:
2012
2011
(in thousands)
2010
Amount
Percent
Amount
Percent
Amount
Percent
$
1,222
138
-
-
34.0 $
3.8
-
-
(1,901)
171
-
(124)
34.0 $
(3.0)
-
2.2
(545)
217
(570)
-
34.0
(13.5)
35.6
-
56
1.6
(879)
15.7
(50)
3.1
Income tax at the
statutory federal rate
Nondeductible expense
QAFMV credit
New hire credit
State income taxes—net
of federal benefit
Total income tax expense
(benefit)
$
1,416
39.4 $
(2,733)
48.9 $
(948)
59.2
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The provision (benefit) for income taxes consisted of the following:
Current:
Federal
State
Deferred:
Federal
State
2012
2011
(in thousands)
2010
$
- $
51
51
- $
35
35
-
195
195
1,166
199
1,365
(1,904)
(864)
(2,768)
(970)
(173)
(1,143)
Total income tax expense (benefit)
$
1,416 $
(2,733) $
(948)
The Company has alternative minimum tax credits of approximately $193,000 at December 31, 2012, which have no
expiration date under the current federal income tax laws and general business credits of approximately $988,000
which begin to expire after the year 2030. The Company also has net operating loss carryovers for federal income
purposes of approximately $60,892,000 which begin to expire after the year 2030.
The Company does not have any material accrued interest or penalties associated with any unrecognized tax
benefits. The Company's policy is to account for interest and penalties related to uncertain tax positions, if any, in
income tax expense. The Company did not have any unrecognized tax benefits at December 31, 2012 or December
31, 2011 and there was no change in total gross unrecognized tax benefit liabilities for the year ended December 31,
2012.
The Company and its subsidiaries are subject to U.S. and Canadian federal income tax laws as well as the income
tax laws of multiple state jurisdictions. The major tax jurisdictions in which the Company operates generally provide
for a deficiency assessment statute of limitation period of three years and as a result, the Company’s tax years 2009
and forward remain open to examination in those jurisdictions.
During 2007, the Company contracted with a third-party qualified intermediary in order to implement a like-kind
exchange tax program. Under the program, dispositions of eligible trucks or trailers and acquisitions of replacement
trucks or trailers are made in a form whereby any associated tax gains related to the disposal are deferred. To
qualify for like-kind exchange treatment, we exchange, through our qualified intermediary, eligible trucks or trailers
being disposed with trucks or trailers being acquired that allows us to generally carryover the tax basis of the trucks
or trailers sold. The program is expected to result in a significant deferral of federal and state income taxes. Under
the program, the proceeds from the sale of eligible trucks or trailers carry a Company-imposed restriction for the
acquisition of replacement trucks or trailers. These proceeds may be disqualified under the program at any time and
at the Company’s sole discretion, however income tax deferral would not be available for any sale for which the
Company disqualifies the related proceeds. At December 31, 2012, the Company had $503,000 of restricted cash
held by the third-party qualified intermediary. At December 31, 2011, the Company had $718,000 of restricted cash
held by the third-party qualified intermediary. Restricted cash is accounted for in “Accounts receivable-other”.
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12. STOCK-BASED COMPENSATION
The Company maintains a stock option plan under which incentive stock options and nonqualified stock options may
be granted. On March 2, 2006, the Company’s Board of Director’s adopted, and stockholders later approved, the
2006 Stock Option Plan (the “2006 Plan”). The 2006 Plan replaced the expired 1995 Stock Option Plan which had
263,500 options remaining which were never issued. Under the 2006 Plan 750,000 shares were reserved for the
issuance of stock options to directors, officers, key employees and others. The option exercise price under the 2006
Plan is the fair market value of the stock on the date the option is granted. The fair market value is determined by
the average of the highest and lowest sales prices for a share of the Company’s common stock, on its primary
exchange, on the same date that the option is granted.
Outstanding incentive stock options at December 31, 2012, must be exercised within either five or ten years from the
date of grant and vest in increments of 20% each year. Outstanding nonqualified stock options at December 31,
2012, must be exercised within either five or ten years from the date of grant.
During 2012, nonqualified options for 14,000 shares were issued under the 2006 Plan at an option exercise price of
$11.54 per share and nonqualified options for 125,000 shares were issued under the 2006 Plan at an option
exercise price of $10.90 per share. At December 31, 2012, 401,000 shares were available for granting future
options.
In May 2012, the Company granted to certain key employees, 104,000 nonqualified stock options. The exercise
price for these awards was fixed at the grant date and was equal to the fair market value of the stock on that date.
The nonqualified stock options vest in increments of 20% each year. As of December 31, 2012, none of the options
for shares have vested under this 104,000 share option grant.
In November 2010, the Company granted to certain key employees, 50,000 nonqualified stock options and 64,000
performance-based variable nonqualified stock options. The exercise price for these awards was fixed at the grant
date and was equal to the fair market value of the stock on that date. The nonqualified stock options vest in
increments of 20% each year. The performance-based nonqualified stock options were eligible to be earned in four
quarterly installments and one annual installment with vesting to occur in increments of 20% each year for any
options earned. In order to meet the performance criteria, certain quarterly and annual “operating ratio” results must
have been achieved during 2011. During 2011, 4,442 performance-based variable nonqualified stock options were
earned with vesting to begin during the third quarter of 2012. The remaining 59,558 performance-based variable
nonqualified stock options expired as the related performance criteria was not met. As of December 31, 2012,
20,000 nonqualified stock options under this grant have vested and 889 performance-based variable nonqualified
stock options under this grant have vested.
The total fair value of options vested during 2012, 2011 and 2010 was approximately $268,000, $162,000 and
$118,000, respectively. Total pre-tax stock-based compensation expense, recognized in Salaries, wages and
benefits was approximately $352,000 during 2012 and includes approximately $199,000 recognized as a result of the
increased annual grant of 5,000 shares to each non-employee director during 2012. The Company recognized a total
income tax benefit of approximately $139,000 related to stock-based compensation expense during 2012. The
recognition of stock-based compensation expense decreased diluted and basic earnings per common share by
approximately $0.02 during 2012. As of December 31, 2012, the Company had stock-based compensation plans
with total unvested stock-based compensation expense of approximately $749,000 which is being amortized on a
straight-line basis over the remaining vesting period. As a result, the Company expects to recognize approximately
$195,000 in additional compensation expense related to unvested option awards during each of the years 2013
through 2014, $189,000 in additional compensation expense related to unvested option awards during 2015,
$128,000 in additional compensation expense related to unvested option awards during 2016 and $42,000 in
additional compensation expense related to unvested option awards during 2017.
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Total pre-tax stock-based compensation expense, recognized in Salaries, wages and benefits was approximately
$164,000 during 2011 and included approximately $98,000 recognized as a result of the annual grant of 2,000
shares to each non-employee director during the first quarter of 2011. The Company recognized a total income tax
benefit of approximately $80,000 related to stock-based compensation expense during 2011. The recognition of
stock-based compensation expense increased diluted and basic loss per common share by approximately $0.01
during 2011. As of December 31, 2011, the Company had stock-based compensation plans with total unvested
stock-based compensation expense of approximately $272,000.
Total pre-tax stock-based compensation expense, recognized in Salaries, wages and benefits was approximately
$123,000 during 2010 and included approximately $118,000 recognized as a result of the annual grant of 2,000
shares to each non-employee director during the first quarter of 2010. The Company recognized a total income tax
benefit of approximately $74,000 related to stock-based compensation expense during 2010. The recognition of
stock-based compensation expense increased diluted and basic loss per common share by approximately $0.01
during 2010. As of December 31, 2010, the Company had stock-based compensation plans with total unvested
stock-based compensation expense, excluding stock-based compensation related to the performance-based variable
nonqualified stock option grant, of approximately $312,000.
Transactions in stock options under these plans are summarized as follows:
Outstanding—January 1, 2010:
Granted
Exercised
Canceled
Outstanding—December 31, 2010:
Granted
Exercised
Canceled
Outstanding—December 31, 2011:
Granted
Exercised
Canceled
Outstanding—December 31, 2012:
Options exercisable—December 31, 2012:
Shares
Under
Option
Weighted-
Average
Exercise
Price
186,500 $
130,000
(1,000)
(64,000)
251,500 $
16,000
(5,000)
(81,558)
180,942 $
139,000
(6,000)
(78,500)
21.02
11.60
3.84
22.45
15.86
11.75
3.84
14.35
16.50
10.96
9.04
22.64
235,442 $
11.38
97,889 $
11.94
The fair value of the Company’s employee stock options was estimated at the date of grant using a Black-Scholes-
Merton (“BSM”) option-pricing model using the following assumptions:
Dividend yield
Volatility range
Risk-free rate range
Expected life
Fair value of options (per share)
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2012
0%
57.88%—65.89%
0.64%—1.09%
4.2 years—6.5 years
$5.54—$6.06
56
2011
0%
65.81%
1.79%
4.3 years
$6.14
2010
0%
57.35%—64.31%
1.80%—1.99%
4.3 years—6.5 years
$6.34—$7.38
The Company does not anticipate paying any additional dividends in the foreseeable future. The estimated volatility
is based on the historical volatility of our stock. The risk free rate for the periods within the expected life of the option
is based on the U.S. Treasury yield curve in effect at the time of grant. The expected life of the options was
calculated based on the historical exercise behavior.
Information related to the Company’s option activity as of December 31, 2012, and changes during the year then
ended is presented below:
Outstanding at January 1, 2012
Granted
Exercised
Canceled/forfeited/expired
Outstanding at December 31, 2012
Fully vested and
exercisable at December 31, 2012
Shares
Under
Option
Weighted-
Average
Exercise
Price
(per share)
Weighted-
Average
Remaining
Contractual
Term
(in years)
Aggregate
Intrinsic
Value*
180,942 $
139,000
(6,000)
(78,500)
235,442 $
16.50
10.96
9.04
22.64
11.38
6.9 $
25,560
97,889 $
11.94
3.9 $
25,560
___________________________
* The intrinsic value of a stock option is the amount by which the market value of the underlying stock exceeds the
exercise price of the option. The per share market value of our common stock, as determined by the closing price on
December 31, 2012, was $10.23.
The weighted-average grant-date fair value of options granted during the years 2012, 2011 and 2010 was $5.96,
$6.14 and $6.47 per share, respectively. The weighted-average grant-date fair value of options either canceled,
forfeited, or expired during the years 2012, 2011 and 2010 was $8.88, $6.43 and $9.03 per share, respectively.
The total intrinsic value of options exercised during the years ended December 31, 2012, 2011 and 2010, was
approximately $15,000, $33,000 and $2,000, respectively.
A summary of the status of the Company’s nonvested options as of December 31, 2012 and changes during the
year ended December 31, 2012, is presented below:
Nonvested at January 1, 2012
Granted
Canceled/forfeited/expired
Vested
Nonvested at December 31, 2012
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57
Weighted-
Average
Grant Date
Fair Value
Number of
Options
44,442 $
139,000
-
(45,889)
137,553 $
6.34
5.96
-
5.83
6.13
The number, weighted average exercise price and weighted average remaining contractual life of options
outstanding as of December 31, 2012 and the number and weighted average exercise price of options exercisable
as of December 31, 2012 is as follows:
Exercise Price
Shares Under
Outstanding Options
$3.84
$10.90
$10.90
$11.22
$11.54
$11.75
$14.32
$14.98
4,000
21,000
104,000
54,442
12,000
12,000
14,000
14,000
235,442
Weighted-Average Remaining
Contractual Term
(in years)
1.2
4.4
9.4
7.9
4.2
3.2
2.2
0.2
6.9
Shares Under
Exercisable Options
4,000
21,000
-
20,889
12,000
12,000
14,000
14,000
97,889
Cash received from option exercises totaled approximately $54,000, $19,000 and $4,000 during the years ended
December 31, 2012, 2011 and 2010, respectively. The Company issues new shares upon option exercise.
13. EARNINGS (LOSS) PER SHARE
Basic earnings (loss) per common share was computed by dividing net income (loss) by the weighted average
number of shares outstanding during the period. Diluted earnings (loss) per common share was calculated as
follows:
For the Year Ended December 31,
2010
2011
2012
(in thousands, except per share data)
Net income (loss)
$
2,179 $
(2,857) $
(655)
Basic weighted average common shares outstanding
Dilutive effect of common stock equivalents
8,700
2
9,056
-
9,415
-
Diluted weighted average common shares outstanding
8,702
9,056
9,415
Basic earnings (loss) per share
Diluted earnings (loss) per share
$
$
0.25 $
(0.32) $
(0.07)
0.25 $
(0.32) $
(0.07)
Average options outstanding to purchase 227,199, 233,717 and 164,850 shares of common stock for December 31,
2012, 2011 and 2010, respectively, were not included in the computation of diluted earnings (loss) per share
because to do so would have an anti-dilutive effect.
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14. BENEFIT PLAN
The Company sponsors a benefit 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 and vests at the rate of 20% each year until fully vested after five years. Total
employer matching contributions to the plan totaled approximately $193,000, $224,000 and $245,000 in 2012, 2011
and 2010, respectively.
15. COMMITMENTS AND CONTINGENCIES
The Company is not a party to any pending legal proceedings which management believes to be material to the
Consolidated financial statements of the Company. The Company maintains liability insurance against risks arising
out of the normal course of its business.
The Company leases certain semi-trailers and premises under noncancelable operating lease agreements. Future
minimum annual lease payments under these leases are as follows:
2013
2014
2015
2016
2017 and thereafter
Total
$
740,908
366,865
270,799
157,976
367,602
$ 1,904,150
Total rental expense, net of amounts reimbursed for the years ended December 31, 2012, 2011 and 2010 was
approximately $1,555,000, $1,602,000, and $1,124,000, respectively.
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16. FAIR VALUE OF FINANCIAL INSTRUMENTS
Our financial instruments consist of cash and cash equivalents, marketable equity securities, accounts receivable,
trade accounts payable, and borrowings.
The Company adopted guidance effective January 1, 2008 for financial assets and liabilities measured on a recurring
basis. This guidance defines fair value as the exchange price that would be received for an asset or paid to transfer
a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction
between market participants on the measurement date and also establishes a fair value hierarchy which requires an
entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair
value. The standard describes three levels of inputs that may be used to measure fair value:
Level 1:
Quoted market prices in active markets for identical assets or liabilities.
Level 2:
Inputs other than Level 1 inputs that are either directly or indirectly observable such as quoted prices for
similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets
that are not active; inputs other than quoted prices that are observable; or other inputs not directly observable,
but derived principally from, or corroborated by, observable market data.
Level 3:
Unobservable inputs that are supported by little or no market activity.
The Company utilizes the market approach to measure fair value for its financial assets and liabilities. The market
approach uses prices and other relevant information generated by market transactions involving identical or
comparable assets or liabilities.
At December 31, 2012, the following items are measured at fair value on a recurring basis:
Total
Level 1
Level 2
Level 3
(in thousands)
Marketable equity securities
$
17,320 $
17,320
-
-
The Company’s investments in marketable equity securities are recorded at fair value based on quoted market
prices. The carrying value of cash and cash equivalents, accounts receivable, trade accounts payable, and accrued
liabilities approximate fair value due to their short maturities.
The carrying amount for the line of credit approximates fair value because the line of credit interest rate is adjusted
frequently.
For long-term debt other than the lines of credit, the fair values are estimated using discounted cash flow analyses,
based on the Company’s current incremental borrowing rates for similar types of borrowing arrangements. The
carrying values and estimated fair values of this other long-term debt at December 31, 2012 and 2011 are
summarized as follows:
2012
2011
Carrying
Value
Estimated
Fair Value
Carrying
Value
Estimated
Fair Value
(in thousands)
Long-term debt
$
102,084 $
101,969 $
52,245 $
52,170
The Company has not elected the fair value option for any of our financial instruments.
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17. RELATED PARTY TRANSACTIONS
In the normal course of business, transactions for transportation and repair services, property leases and other
services are conducted between the Company and companies affiliated with a major stockholder. The Company
recognized approximately $3,298,000, $3,011,000 and $5,800,000 in operating revenue and approximately
$1,313,000, $1,316,000 and $830,000 in operating expenses in 2012, 2011 and 2010, respectively.
The Company purchased physical damage, auto liability, and general liability insurance through an unaffiliated
insurance broker which was written by an insurance company affiliated with a major stockholder. Premiums paid for
physical damage coverage were approximately $1,590,000, $1,536,000 and $1,696,000 for 2012, 2011 and 2010,
respectively. Premiums paid for auto liability coverage during 2012, 2011 and 2010 were approximately $9,235,000,
$8,947,000 and $8,831,000, respectively. Premiums paid for general liability coverage during 2012, 2011 and 2010
were approximately $22,000, $22,000 and $22,000, respectively. Beginning in 2012, the Company secured coverage
for workers’ compensation insurance under the same arrangement. Premiums paid for workers’ compensation
coverage during 2012 was approximately $84,000.
Amounts owed to the Company by these affiliates were approximately $1,822,000 and $1,271,000 at December 31,
2012 and 2011, respectively. Of the accounts receivable at December 31, 2012, approximately $216,000 represents
revenue resulting from maintenance performed in the Company’s maintenance facilities and charges paid by the
Company to third parties on behalf of their affiliate and charged back at the amount paid, $1,501,000 represents
freight transportation, $92,000 represents property lease charges, and $12,000 represents cross-border inspection
charges. Amounts payable to affiliates at December 31, 2012 and 2011 were approximately $564,000 and $554,000
respectively.
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18. QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
The tables below present quarterly financial information for 2012 and 2011:
Operating revenues
Operating expenses and costs
Operating income (loss)
Non-operating income
Interest expense
Income tax expense (benefit)
Net income (loss)
Net income (loss) per common share:
Basic
Diluted
Average common shares outstanding:
Basic
Diluted
Operating revenues
Operating expenses and costs
Operating (loss) income
Non-operating income
Interest expense
Income tax (benefit) expense
2012
Three Months Ended
March 31
June 30
September
30
December
31
(in thousands, except per share data)
$
96,155 $
95,069
94,156 $
92,884
94,549 $
93,610
95,773
96,167
1,086
594
561
445
1,272
895
605
627
939
1,188
645
601
(394)
611
785
(257)
674 $
935 $
881 $
(311)
0.08 $
0.08 $
0.11 $
0.11 $
0.10 $
0.10 $
(0.04)
(0.04)
$
$
$
8,696
8,698
8,702
8,703
8,702
8,703
8,702
8,702
2011
Three Months Ended
March 31
June 30
September
30
December
31
(in thousands, except per share data)
$
85,026 $
88,839
95,890 $
94,291
88,938 $
91,634
89,389
89,822
(3,813)
1,126
490
(1,199)
1,599
26
491
441
(2,696)
173
375
(1,193)
(433)
226
442
(782)
Net (loss) income
$
(1,978) $
693 $
(1,705) $
133
Net (loss) income per common share:
Basic
Diluted
Average common shares outstanding:
Basic
Diluted
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$
$
(0.21) $
(0.21) $
0.08 $
0.08 $
(0.19) $
(0.19) $
0.02
0.02
9,392
9,392
9,098
9,102
8,941
8,941
8,798
8,798
62
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
None.
Item 9A. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our chief executive officer and chief financial officer, evaluated the effectiveness
of our disclosure controls and procedures pursuant to Rule 13a-15 under the Securities Exchange Act of 1934, as
amended (the “Exchange Act”). In designing and evaluating the disclosure controls and procedures, management
recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable
assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must
reflect the fact that there are resource constraints and that management is required to apply its judgment in evaluating the
benefits of possible controls and procedures relative to their costs.
Based on management’s evaluation, our chief executive officer and chief financial officer concluded that, as of December
31, 2012, our disclosure controls and procedures are designed at a reasonable assurance level and are effective to provide
reasonable assurance that information we are required to disclose in reports that we file or submit under the Exchange Act
is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange
Commission rules and forms, and that such information is accumulated and communicated to our management, including
our chief executive officer and chief financial officer, as appropriate, to allow timely decisions regarding required disclosure.
Changes in Internal Control Over Financial Reporting
We regularly review our system of internal control over financial reporting and make changes to our processes and systems
to improve controls and increase efficiency, while ensuring that we maintain an effective internal control environment.
Changes may include such activities as implementing new, more efficient systems, consolidating activities, and migrating
processes.
There were no changes in our internal control over financial reporting that occurred during the last quarter of the period
covered by this Annual Report on Form 10-K that have materially affected, or are reasonably likely to materially affect, our
internal control over financial reporting.
Management’s Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as
defined in Exchange Act Rule 13a-15(f). Management conducted an evaluation of the effectiveness of our internal control
over financial reporting based on the framework in Internal Control—Integrated Framework issued by the Committee of
Sponsoring Organizations of the Treadway Commission. Based on this evaluation, management concluded that our
internal control over financial reporting was effective as of December 31, 2012. Management reviewed the results of its
assessment with our Audit Committee. The effectiveness of our internal control over financial reporting as of December 31,
2012 has been audited by Grant Thornton LLP, an independent registered public accounting firm, as stated in its report
which is included below.
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63
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Board of Directors and Stockholders
P.A.M. Transportation Services, Inc.
We have audited the internal control over financial reporting of P.A.M. Transportation Services, Inc. (a Delaware
corporation) and subsidiaries (the “Company”) as of December 31, 2012, based on criteria established in Internal Control—
Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The
Company’s management is responsible for maintaining effective internal control over financial reporting and for its
assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s
Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal
control over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United
States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether
effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an
understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and
evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other
procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for
our opinion.
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in accordance with
generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and
procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the
transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are
recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting
principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of
management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection
of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial
statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of
December 31, 2012, based on criteria established in Internal Control—Integrated Framework issued by COSO.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United
States), the consolidated financial statements of the Company as of and for the year ended December 31, 2012, and our
report dated March 15, 2013 expressed an unqualified opinion on those financial statements.
/s/ GRANT THORNTON LLP
Tulsa, Oklahoma
March 15, 2013
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64
Item 9B. Other Information.
None.
PART III
Portions of the information required by Part III of Form 10-K are, pursuant to General Instruction G (3) of Form 10-K,
incorporated by reference from our definitive proxy statement to be filed pursuant to Regulation 14A for our Annual Meeting
of Stockholders to be held on May 23, 2013. We will, within 120 days of the end of our fiscal year, file with the Securities
and Exchange Commission a definitive proxy statement pursuant to Regulation 14A.
Item 10. Directors, Executive Officers and Corporate Governance.
The information presented under the captions “Election of Directors”, “Executive Officers”, “Section 16(a) Beneficial
Ownership Reporting Compliance”, “Corporate Governance – Code of Ethics”, “Corporate Governance – Director
Nominating Process” and “Corporate Governance – Board Committees,” in the proxy statement is incorporated here by
reference.
Item 11. Executive Compensation.
The information presented under the captions “Executive Compensation”, “Corporate Governance – Compensation
Committee Interlocks and Insider Participation”, and “Compensation Committee Report” in the proxy statement is
incorporated here by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
The information presented under the caption “Security Ownership of Certain Beneficial Owners and Management” in the
proxy statement is incorporated here by reference.
Equity Compensation Plan Information
The following table summarizes, as of December 31, 2012, information about compensation plans under which equity
securities of the Company are authorized for issuance:
Number of
securities to
be issued
upon
exercise of
outstanding
options,
warrants
and rights
Weighted-
average
exercise
price of
outstanding
options,
warrants and
rights
Number of
securities
remaining
available for
future
issuance
under equity
compensation
plans
Plan Category
Equity Compensation Plans approved by Security Holders
235,442 $
11.38
401,000
Equity Compensation Plans not approved by Security Holders
-0-
-0-
-0-
Total
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65
235,442 $
11.38
401,000
Item 13. Certain Relationships and Related Transactions, and Director Independence.
The information presented under the captions “Transactions with Related Persons” and “Corporate Governance – Director
Independence” in the proxy statement is incorporated here by reference.
Item 14. Principal Accounting Fees and Services.
The information presented under the caption “Independent Public Accountants – Principal Accountant Fees and Services”
in the proxy statement is incorporated here by reference.
PART IV
Item 15. Exhibits, Financial Statement Schedules.
(a) Financial Statements and Schedules.
(1)
Financial Statements: See Part II, Item 8 hereof.
Report of Independent Registered Public Accounting Firm - Grant Thornton LLP
Consolidated Balance Sheets - December 31, 2012 and 2011
Consolidated Statements of Operations - Years ended December 31, 2012, 2011 and 2010
Consolidated Statements of Comprehensive Income - Years ended December 31, 2012, 2011 and 2010
Consolidated Statements of Stockholders’ Equity - Years ended December 31, 2012, 2011 and 2010
Consolidated Statements of Cash Flows - Years ended December 31, 2012, 2011 and 2010
Notes to Consolidated Financial Statements
(2)
Financial Statement Schedules.
All schedules for which provision is made in the applicable accounting regulations of the SEC are omitted as the
information is inapplicable, or because the information is presented in the consolidated financial
required
statements or related notes.
(3)
Exhibits.
The following exhibits are filed with or incorporated by reference into this Report. The exhibits which are
denominated by an asterisk (*) were previously filed as a part of, and are hereby incorporated by reference from
either (i) the Form S-1 Registration Statement under the Securities Act of 1933, as filed with the Securities and
Exchange Commission on July 30, 1986, Registration No. 33-7618, as amended on August 8, 1986, September 3,
1986 and September 10, 1986 (“1986 S-1”); (ii) the Quarterly Report on Form 10-Q for the quarter ended June 30,
1994 (“6/30/94 10-Q”); (iii) the Quarterly Report on Form 10-Q for the quarter ended June 30, 1995 (“6/30/95 10-
Q”); (iv) the Quarterly Report on Form 10-Q for the quarter ended September 30, 1996 (“9/30/96 10-Q”); (v) the
Quarterly Report on Form 10-Q for the quarter ended March 31, 2002 (“3/31/02 10-Q”); (vi) Form 8-K filed on May
31, 2006 (“5/31/06 8-K”); (vii) the Form 8-K filed on December 11, 2007 (“12/11/07 8-K”); (viii) the Annual Report
on Form 10-K for the year ended December 31, 2007 (“2007 10-K”); (ix) Form 8-K filed on July 10, 2009 (“7/10/09
8-K”); or (x) Form 8-K filed on December 3, 2010 (“12/03/10 8-K”).
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66
Exhibit #
*3.1
*3.2
*4.1
*4.2
*4.2.1
*4.3
*4.3.1
*4.3.2
*4.3.3
*4.4
*4.4.1
*4.4.2
*4.4.3
*4.5
Description of Exhibit
Amended and Restated Certificate of Incorporation of the Registrant (Exh. 3.1, 3/31/02 10-Q)
Amended and Restated By-Laws of the Registrant (Exh. 3.2, 12/11/07 8-K)
Specimen Stock Certificate (Exh. 4.1, 1986 S-1)
Loan Agreement dated July 26, 1994 among First Tennessee Bank National Association, Registrant and
P.A.M. Transport, Inc. together with Promissory Note (Exh. 4.1, 6/30/94 10-Q)
Security Agreement dated July 26, 1994 between First Tennessee Bank National Association and P.A.M.
Transport, Inc. (Exh. 4.2, 6/30/94 10-Q)
First Amendment to Loan Agreement dated June 27, 1995 by and among P.A.M. Transport, Inc., First
Tennessee Bank National Association and P.A.M. Transportation Services, Inc., together with Promissory
Note in the principal amount of $2,500,000 (Exh. 4.1.1, 6/30/95 10-Q)
First Amendment to Security Agreement dated June 28, 1995 by and between P.A.M. Transport, Inc. and
First Tennessee Bank National Association (Exh. 4.2.2, 6/30/95 10-Q)
Security Agreement dated June 27, 1995 by and between Choctaw Express, Inc. and First Tennessee
Bank National Association (Exh. 4.1.3, 6/30/95 10-Q)
Guaranty Agreement of P.A.M. Transportation Services, Inc. dated June 27, 1995 in favor of First
Tennessee Bank National Association $10,000,000 line of credit (Exh. 4.1.4, 6/30/95 10-Q)
Second Amendment to Loan Agreement dated July 3, 1996 by P.A.M. Transport, Inc., First Tennessee
Bank National Association and P.A.M. Transportation Services, Inc., together with Promissory Note in the
principal amount of $5,000,000 (Exh. 4.1.1, 9/30/96 10-Q)
Second Amendment to Security Agreement dated July 3, 1996 by and between P.A.M. Transport, Inc.
and First Tennessee National Bank Association (Exh. 4.1.2, 9/30/96 10-Q)
First Amendment to Security Agreement dated July 3, 1996 by and between Choctaw Express, Inc. and
First Tennessee Bank National Association (Exh. 4.1.3, 9/30/96 10-Q)
Security Agreement dated July 3, 1996 by and between Allen Freight Services, Inc. and First Tennessee
Bank National Association (Exh. 4.1.4, 9/30/96 10-Q)
Fourth Amendment to Loan Agreement dated July 26, 1994 among First Tennessee Bank National
Association, Registrant and P.A.M. Transport, Inc. together with Promissory Note (Exh. 4.6, 2007 10-K)
*10.1
(1) Employment Agreement between the Registrant and Daniel H. Cushman, dated June 29, 2009 (Exh.
10.2, 7/10/09 8-K)
*10.2
(1) 2006 Stock Option Plan (Exh. 10.1, 5/31/06 8-K)
*10.3
(1) Form of Non-Qualified Stock Option Agreement for Non-Employee Director stock options that are granted
under the 2006 Stock Option Plan (Exh. 10.2, 5/31/06 8-K)
*10.4
(1) Incentive Compensation Plan (Exh. 10.3, 7/10/09 8-K)
*10.5
(1) Consulting Agreement between the Registrant and Manuel J. Moroun, dated December 6, 2007 (Exh.
10.10, 2007 10-K)
*10.6
(1) Form of Stock Option Agreement based on performance schedule and granted under the 2006 Stock
Option Plan (Exh. 10.1, 12/03/10 8-K)
*10.7
(1) Form of Stock Option Agreement granted under the 2006 Stock Option Plan (Exh. 10.2, 12/03/10 8-K)
table of contents
67
21.1
23.1
31.1
31.2
32.1
Subsidiaries of the Registrant
Consent of Grant Thornton LLP
Rule 13a-14(a) Certification of Principal Executive Officer
Rule 13a-14(a) Certification of Principal Financial Officer
Section 1350 Certifications of Chief Executive Officer and Chief Financial Officer
101.INS
XBRL Instance Document
101.SCH
XBRL Taxonomy Extension Schema Document
101.CAL
XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF
XBRL Taxonomy Extension Definition Linkbase Document
101.LAB
XBRL Taxonomy Extension Label Linkbase Document
101.PRE
XBRL Taxonomy Extension Presentation Linkbase Document
(1) Management contract or compensatory plan or arrangement.
table of contents
68
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf by the undersigned, thereunto duly authorized.
SIGNATURES
Dated: March 13, 2013
P.A.M. TRANSPORTATION SERVICES, INC.
By:/s/ Daniel H. Cushman
DANIEL H. CUSHMAN
President and Chief Executive Officer
(principal executive officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the dates indicated.
Dated: March 13, 2013
By:/s/ Frederick P. Calderone
Dated: March 13, 2013
Dated: March 13, 2013
Dated: March 13, 2013
Dated: March 13, 2013
FREDERICK P. CALDERONE, Director
By:/s/ Frank L. Conner
FRANK L. CONNER, Director
By:/s/ Daniel H. Cushman
DANIEL H. CUSHMAN
President and Chief Executive Officer, Director
(principal executive officer)
By:/s/ W. Scott Davis
W. SCOTT DAVIS, Director
By:/s/ Manuel J. Moroun
MANUEL J. MOROUN, Director
Dated: March 13, 2013
By:/s/ Matthew T. Moroun
MATTHEW T. MOROUN, Director and Chairman of
the Board
Dated: March 13, 2013
By:/s/ Lance K. Stewart
Dated: March 13, 2013
Dated: March 13, 2013
table of contents
LANCE K. STEWART
Vice President-Finance, Chief Financial Officer,
Secretary and Treasurer
(principal financial and accounting officer)
By:/s/ Daniel C. Sullivan
DANIEL C. SULLIVAN, Director
By:/s/ Charles F. Wilkins
CHARLES F. WILKINS, Director
69
EXHIBIT INDEX
The following exhibits are filed with or incorporated by reference into this Report. The exhibits which are denominated by
an asterisk (*) were previously filed as a part of, and are hereby incorporated by reference from either (i) the Form S-1
Registration Statement under the Securities Act of 1933, as filed with the Securities and Exchange Commission on July 30,
1986, Registration No. 33-7618, as amended on August 8, 1986, September 3, 1986 and September 10, 1986 (“1986 S-1”);
(ii) the Quarterly Report on Form 10-Q for the quarter ended June 30, 1994 (“6/30/94 10-Q”); (iii) the Quarterly Report on
Form 10-Q for the quarter ended June 30, 1995 (“6/30/95 10-Q”); (iv) the Quarterly Report on Form 10-Q for the quarter
ended September 30, 1996 (“9/30/96 10-Q”); (v) the Quarterly Report on Form 10-Q for the quarter ended March 31, 2002
(“3/31/02 10-Q”); (vi) Form 8-K filed on May 31, 2006 (“5/31/06 8-K”); (vii) the Form 8-K filed on December 11, 2007
(“12/11/07 8-K”); (viii) the Annual Report on Form 10-K for the year ended December 31, 2007 (“2007 10-K”); (ix) Form 8-K
filed on July 10, 2009 (“7/10/09 8-K”); or (x) Form 8-K filed on December 3, 2010 (“12/03/10 8-K”).
Exhibit #
*3.1
*3.2
*4.1
*4.2
*4.2.1
*4.3
*4.3.1
*4.3.2
*4.3.3
*4.4
*4.4.1
*4.4.2
*4.4.3
*4.5
Description of Exhibit
Amended and Restated Certificate of Incorporation of the Registrant (Exh. 3.1, 3/31/02 10-Q)
Amended and Restated By-Laws of the Registrant (Exh. 3.2, 12/11/07 8-K)
Specimen Stock Certificate (Exh. 4.1, 1986 S-1)
Loan Agreement dated July 26, 1994 among First Tennessee Bank National Association, Registrant and
P.A.M. Transport, Inc. together with Promissory Note (Exh. 4.1, 6/30/94 10-Q)
Security Agreement dated July 26, 1994 between First Tennessee Bank National Association and
P.A.M. Transport, Inc. (Exh. 4.2, 6/30/94 10-Q)
First Amendment to Loan Agreement dated June 27, 1995 by and among P.A.M. Transport, Inc., First
Tennessee Bank National Association and P.A.M. Transportation Services, Inc., together with
Promissory Note in the principal amount of $2,500,000 (Exh. 4.1.1, 6/30/95 10-Q)
First Amendment to Security Agreement dated June 28, 1995 by and between P.A.M. Transport, Inc.
and First Tennessee Bank National Association (Exh. 4.2.2, 6/30/95 10-Q)
Security Agreement dated June 27, 1995 by and between Choctaw Express, Inc. and First Tennessee
Bank National Association (Exh. 4.1.3, 6/30/95 10-Q)
Guaranty Agreement of P.A.M. Transportation Services, Inc. dated June 27, 1995 in favor of First
Tennessee Bank National Association $10,000,000 line of credit (Exh. 4.1.4, 6/30/95 10-Q)
Second Amendment to Loan Agreement dated July 3, 1996 by P.A.M. Transport, Inc., First Tennessee
Bank National Association and P.A.M. Transportation Services, Inc., together with Promissory Note in
the principal amount of $5,000,000 (Exh. 4.1.1, 9/30/96 10-Q)
Second Amendment to Security Agreement dated July 3, 1996 by and between P.A.M. Transport, Inc.
and First Tennessee National Bank Association (Exh. 4.1.2, 9/30/96 10-Q)
First Amendment to Security Agreement dated July 3, 1996 by and between Choctaw Express, Inc. and
First Tennessee Bank National Association (Exh. 4.1.3, 9/30/96 10-Q)
Security Agreement dated July 3, 1996 by and between Allen Freight Services, Inc. and First Tennessee
Bank National Association (Exh. 4.1.4, 9/30/96 10-Q)
Fourth Amendment to Loan Agreement dated July 26, 1994 among First Tennessee Bank National
Association, Registrant and P.A.M. Transport, Inc. together with Promissory Note (Exh. 4.6, 2007 10-K)
*10.1
(1) Employment Agreement between the Registrant and Daniel H. Cushman, dated June 29, 2009 (Exh.
10.2, 7/10/09 8-K)
*10.2
(1) 2006 Stock Option Plan (Exh. 10.1, 5/31/06 8-K)
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70
*10.3
(1) Form of Non-Qualified Stock Option Agreement for Non-Employee Director stock options that are granted
under the 2006 Stock Option Plan (Exh. 10.2, 5/31/06 8-K)
*10.4
(1) Incentive Compensation Plan (Exh. 10.3, 7/10/09 8-K)
*10.5
(1) Consulting Agreement between the Registrant and Manuel J. Moroun, dated December 6, 2007 (Exh.
10.10, 2007 10-K)
*10.6
(1) Form of Stock Option Agreement based on performance schedule and granted under the 2006 Stock
Option Plan (Exh. 10.1, 12/03/10 8-K)
*10.7
(1) Form of Stock Option Agreement granted under the 2006 Stock Option Plan (Exh. 10.2, 12/03/10 8-K)
21.1
23.1
31.1
31.2
32.1
Subsidiaries of the Registrant
Consent of Grant Thornton LLP
Rule 13a-14(a) Certification of Principal Executive Officer
Rule 13a-14(a) Certification of Principal Financial Officer
Section 1350 Certifications of Chief Executive Officer and Chief Financial Officer
101.INS
XBRL Instance Document
101.SCH
XBRL Taxonomy Extension Schema Document
101.CAL
XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF
XBRL Taxonomy Extension Definition Linkbase Document
101.LAB
XBRL Taxonomy Extension Label Linkbase Document
101.PRE
XBRL Taxonomy Extension Presentation Linkbase Document
(1) Management contract or compensatory plan or arrangement.
71