10-K 1 ptsi20151231_10k.htm FORM 10-K Table Of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
☒ Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
☐ Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the Fiscal Year Ended December 31, 2015
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 ☐ No ☑
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 ☐ No ☑
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 ☑ No ☐
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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 ☑ No ☐
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.
☑
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 ☐
Accelerated filer ☑
Non-accelerated filer ☐
Smaller reporting company ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).
Yes ☐ No ☑
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 $178,260,112. Solely for the purposes of this response, the
registrant has assumed, without admitting for any purpose, that all executive officers and directors of the registrant,
and no other persons, are the affiliates of the registrant at that date.
The number of shares outstanding of the registrant’s common stock, as of February 23, 2016: 7,120,661 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 April 26,
2016, 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, 2015.
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.
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P.A.M. TRANSPORTATION SERVICES, INC.
FORM 10-K
For the fiscal year ended December 31, 20 15
TABLE OF CONTENTS
PART I
Business
Risk Factors
Unresolved Staff Comments
Properties
Legal Proceedings
Mine Safety Disclosures
Page
1
7
15
16
16
17
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 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
Item 15
Exhibits, Financial Statement Schedules
PART IV
SIGNATURES
EXHIBIT INDEX
17
20
21
34
35
69
69
71
71
71
71
72
72
72
75
76
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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, Overdrive Leasing, 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., and P.A.M. International, 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 an effort to more
clearly reflect the Company’s scope and available service offerings.
We are headquartered and maintain our primary terminal, 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 independent contractor
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 independent contractor 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 87.6%, 92.5% and 92.6% of total
operating revenues for the years ended December 31, 2015, 2014 and 2013, respectively. The remaining operating
revenues, before fuel surcharge for the same periods were generated by brokerage and logistics services,
representing 12.4%, 7.5%, and 7.4%, respectively.
Approximately 56% of the Company's revenues are derived from domestic shipments while approximately 44% 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 2015” report, the trucking industry
transported approximately 68.8% of the total volume of freight transported in the United States during 2014, which
equates to 10.0 billion tons and approximately $700 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; and
● Pressure on less profitable or undercapitalized carriers to consolidate or 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 nine 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 44%, 48% and 43% of our total revenues in 2015, 2014 and 2013, respectively. General
Motors Company accounted for approximately 15%, 20% and 21% of our revenues in 2015, 2014 and 2013,
respectively. Chrysler, accounted for approximately 11%, 14% and 12% of our revenues in 2015, 2014 and 2013,
respectively. During 2015, Ford Motor Company accounted for approximately 11% of our revenues but represented
less than 10% of our revenues for each of the years 2014 and 2013.
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We also provide transportation services to other manufacturers who are suppliers for automobile manufacturers.
Approximately 47%, 48% and 46% of our revenues were derived from transportation services provided to the
automobile industry during 2015, 2014 and 2013, respectively.
Revenue Equipment
At December 31, 2015, our truck fleet consisted of 1,860 trucks, which included 462 trucks leased under operating
leases and 482 independent contractor trucks. At December 31, 2015, our trailer fleet consisted of 4,983 trailers,
which included 80 trailers leased under operating leases. Our company-owned trucks and leased 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. The average age of our tractors and trailers as of December 31, 2015
was 1.32 and 3.47 years respectively. 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 independent contractors to provide greater flexibility in responding to fluctuations in consumer
demand. Independent contractors 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.
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.
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 truck warranties can be
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 five years with certain components covered for up to ten years.
Employees
At December 31, 2015, we employed 3,049 persons, of whom 2,420 were drivers, 173 were employed in
maintenance, 213 were employed in operations, 65 were employed in marketing, 102 were employed in safety and
personnel, and 76 were employed in general administration and accounting. None of our employees are represented
by a collective bargaining unit, and we believe that our employee relations are good.
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Drivers
At December 31, 2015, we utilized 2,420 company drivers in our operations. We also had 482 independent contractors
under contract who were 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 achieving certain miles per
gallon goals. All of our drivers are recruited, screened, and drug tested and participate in our driver training program.
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 occurs en route that
might delay their scheduled delivery time.
We contract with independent contractors to supply one or more tractors and drivers for our use. Independent
contractors must pay their own tractor expenses, fuel, maintenance, insurance, and driver costs. They must meet and
operate within our guidelines with respect to safety. We have a lease-purchase program whereby we offer
independent contractors the opportunity to lease a tractor, with the option to purchase the tractor at the end of the
lease term. We believe our lease-purchase program has contributed to our ability to attract and retain independent
contractors. At December 31, 2015, approximately 187 independent contractors were leasing 255 tractors in this
program.
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, 2015, we employed 92 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.
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 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
Generally, our revenues do not exhibit a significant seasonal pattern; however, revenue is affected by adverse
weather conditions, holidays and the number of business days that occur during a given period because revenue is
directly related to the available work days of shippers. Operating expenses are typically higher in the winter months
primarily due to decreased fuel efficiency and increased maintenance costs associated with inclement weather. In
addition, automobile plants for which we transport a large amount of freight typically undergo scheduled shutdowns in
July and December and the volume of automotive freight we ship is reduced during such scheduled plant shutdowns.
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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, size, and weight 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
rating 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 December 2011, the FMCSA released new rules regulating HOS that became effective in July 2013. These rules
reduced the maximum hours that could be driven in a consecutive seven day period from 82 to 70, required that a
driver take a mandatory thirty minute break during each consecutive eight hour driving period, and required that a
driver take a 34 hour rest period, or restart, that included two periods between 1:00 a.m. and 5:00 a.m. that could only
be used one time every seven calendar days.
In December 2014 the Consolidated and Further Continuing Appropriations Act of 2015 suspended enforcement of the
requirements for use of the 34 hour restart that became effective in July 2013 and replaced them with the previous
restart rules that were in effect on June 30, 2013 pending the completion of the Commercial Vehicle Driver Restart
Study which is designed to measure and compare the fatigue and safety performance of truck drivers using the two
different versions of the HOS restart provisions. As of December 31, 2015 the study was still in progress.
In July 2012 Congress passed legislation renewing the mandate for electronic logging devices and designated
authority to the FMCSA to propose a new rule. In December 2015 the FMCSA amended the Federal Motor Carrier
Safety Regulations to establish minimum performance and design standards for HOS electronic logging devices
(“ELD’s”); requirements for the mandatory use of these devices by drivers currently required to prepare HOS records
of duty status; requirements concerning HOS supporting documents; and measures to address concerns about
harassment resulting from the mandatory use of ELDs. This ruling affects nearly all carriers, including us, and requires
ELD’s be installed prior to December 2017. Since our tractors are currently ELD equipped, we do not foresee a
negative impact to our profitability as a result of this new rule; however, we believe that more effective enforcement of
HOS rules on smaller carriers may present challenges for them and may improve our competitive position.
The FMCSA administers carrier safety compliance and enforcement through its Compliance, Safety, Accountability
(“CSA”) program that became effective in December 2010. CSA is designed to measure and evaluate the safety
performance of carriers and drivers through categorization of inspection and crash results into Behavior Analysis and
Safety Improvement Categories (“BASICs”) including unsafe/fatigued driving, driver fitness, controlled substances and
alcohol, maintenance, cargo, and crashes. BASIC scores are evaluated relative to carrier peer groups to determine
carriers that exceed certain thresholds, identifying them for intervention. Intervention status might include targeted
roadside inspections, onsite investigations and the development of cooperative safety plans among other things.
Ongoing compliance with CSA may result in additional expenses to the Company or a reduction in the pool of drivers
eligible for us to hire. In addition to FMCSA action, a BASIC score that exceeds an intervention threshold might have a
negative impact on our ability to attract customers and drivers.
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The Environmental Protection Agency (“EPA”) and the National Highway Traffic Safety Administration (“NHTSA”)
jointly developed new standards for various vehicles, including heavy duty trucks, that were adopted in August 2011
and cover model years 2014 through 2018. The standard adopted for heavy duty trucks is intended to achieve a
reduction in CO2 and fuel consumption ranging from 7% to 20% by model year 2017. The EPA and NHTSA are
expected to publish additional standards to further reduce GHG emissions beyond model year 2018 vehicles. In
addition, the state of California has adopted its own fuel efficiency regulations that include the use of special
aerodynamic equipment for tractors and 53 foot trailers traveling through the state. Compliance with these federal and
state requirements has increased the cost of our equipment and may further increase the cost of replacement
equipment in the future.
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 one bulk fuel storage above
ground tank and fuel island. 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 are often conducted in industrial areas, where truck terminals and other industrial activities are
conducted, and where groundwater or other forms of environmental contamination have occurred, which could
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.
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.
Risks Related to Our Business
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, independent
contractors, and third party carriers.
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.
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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/or 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;
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 2015, our top five customers, based
on revenue, accounted for approximately 44% of our revenue, and our three largest customers, General Motors
Company, Chrysler, and Ford Motor Company, accounted for approximately 15%, 11%, and 11% of our revenue,
respectively. 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 47% of our revenues for 2015 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.
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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 and independent contractors could affect our profitability and ability to grow.
The transportation industry often experiences significant difficulty in attracting and retaining qualified drivers and
independent contractors. This shortage is exacerbated by several factors, including demand from competing
industries, such as manufacturing, construction and farming, other transportation companies, and by the impact of
regulations, including CSA and new hours of service rules. Economic conditions affecting operating costs such as fuel,
insurance, equipment and maintenance costs can negatively impact the number of qualified independent contractors
available for us to contract with. 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 or contract with independent contractors when
needed, we could be required to further adjust our driver compensation packages, increase driver recruiting efforts, or
let trucks sit idle, any of 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 be certain of our ability to retain these key individuals.
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. Healthcare
legislation and inflationary cost increases could also have a negative effect on our results.
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 and engine design costs resulting from compliance with increasingly
stringent EPA engine emission standards. 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 price 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.
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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.
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 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.
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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.
Our operations are authorized and regulated by various federal and state agencies in the United States, Mexico and
Canada, that generally govern such activities as authorization to engage in motor carrier operations, safety, and
financial reporting. Specific standards and regulations such as equipment dimensions, engine emissions,
maintenance, drivers’ hours of service, drug and alcohol testing, and hazardous materials are regulated by the
Department of Transportation, Federal Motor Carrier Administration, the Environmental Protection Agency and various
other state and federal agencies. We may become subject to new or more restrictive regulations imposed by these
authorities which could significantly impair equipment and driver productivity and increase operating expenses.
The FMCSA administers carrier safety compliance and enforcement through its CSA program that became effective in
December 2010. The program places carriers in peer groups and assigns each carrier a relative ranking compared to
their peers in various categories. Carriers that exceed allowable thresholds in a particular category are placed in
“intervention” status by the FMCSA until the score improves to a level below the threshold. If future roadside
inspections or crashes were to result in the Company being placed in intervention status, we may incur additional
operating costs to improve our safety program in deficient categories, experience increased roadside inspections, or
have onsite visits by the FMCSA. If the intervention category is not remedied, it could affect our ability to attract and
retain drivers and customers as they seek competitive carriers with scores below intervention thresholds. In addition
the CSA program could increase competition and related compensation and recruitment costs for drivers and
independent contractors by reducing the pool of qualified drivers if existing drivers exit the profession, become
disqualified due to low scores or as carriers focus recruiting efforts on drivers with the best relative safety scores.
The EPA and the NHTSA jointly developed new standards for various vehicles, including heavy duty trucks, that were
adopted in August 2011 and cover model years 2014 through 2018. Additional standards are expected in a second
phase designed to further reduce GHG emissions for heavy vehicles through model year 2027. Compliance with these
federal and state requirements has increased the cost of our equipment and may further increase the cost of
replacement equipment in the future.
The Regulation section in Item 1 of Part I of this Annual Report on Form 10-K discusses several proposed and final
regulations that could materially impact our business and operations.
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. The agreement permitting cross border movements for both United States and Mexican
based carriers in the United States and Mexico presents additional risks in the form of potential increased competition
and the potential for increased congestion in our lanes that cross the border between countries.
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A determination by regulators that independent contractors are employees could expose us to various liabilities and
additional costs.
Tax and other regulatory authorities often seek to assert that independent contractors in the transportation service
industry are employees rather than independent contractors. There can be no assurance that interpretations and tax
laws that support the independent contractor status will not change or that various authorities will not successfully
assert a position that re-classifies independent contractors to be employees. If our independent contractors 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.
Our results of operations may be affected by seasonal factors.
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. In addition, automobile plants for which we transport a large amount of freight typically undergo
scheduled shutdowns in July and December which reduces the volume of automotive freight we ship during these
plant shutdowns.
Our business may be disrupted by natural disasters and severe weather conditions 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.
Specifically, these events may damage or destroy our assets, disrupt fuel supplies, increase fuel costs, disrupt freight
shipments or routes, and affect regional economies. As a result, 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 or make our results more volatile.
We may incur additional operating expenses or liabilities as a result of potential future requirements to address climate
change issues.
As global warming issues become more prevalent, federal, state and local governments as well as some of our
customers, have made efforts to respond to these issues. This increased focus on sustainability may result in new
legislation or 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.
Legislation or regulations that potentially impose 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
relating 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. In addition, 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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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.
If our employees were to unionize, our operating costs would increase and our ability to compete would be impaired.
None of our employees is 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 cyber security 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 cyber security risks such as 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 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, 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.
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Our business may be harmed by terrorist attacks, future war or anti-terrorism measures.
In order to prevent terrorist attacks, 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 independent contractors 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.
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 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.
Risks Related to Our Common Stock
The Chairman of our board of directors holds a controlling interest in us; therefore, the influence of our public
shareholders over significant corporate actions is limited, and we are not subject to certain corporate governance
standards that apply to other publicly traded companies.
Matthew T. Moroun, the Chairman of our Board of Directors, and a trust of which Mr. Moroun is a co-trustee together,
own approximately 58.7% of our outstanding common stock. As a result, Mr. Moroun has the power to:
●
●
●
●
control all matters submitted to our shareholders;
elect our directors;
adopt, extend or remove any anti-takeover provisions that are available to us; and
exercise control over our business, policies and affairs.
This concentration of ownership could limit the price that some investors might be willing to pay for shares of our
common stock, and our ability to engage in significant transactions, such as a merger, acquisition or liquidation, will
require the consent of Mr. Moroun. Conflicts of interest could arise between us and Mr. Moroun, and any conflict of
interest may be resolved in a manner that does not favor us. Accordingly, Mr. Moroun could cause us to enter into
transactions or agreements of which our other shareholders would not approve or make decisions with which they
may disagree. Because of Mr. Moroun’s level of ownership, we have elected to be treated as a controlled company in
accordance with the rules of the NASDAQ Stock Market. Accordingly, we are not required to comply with NASDAQ
Stock Market rules which would otherwise require a majority of our Board to be comprised of independent directors
and require our Board to have a compensation committee and a nominating and corporate governance committee
comprised of independent directors.
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Mr. Moroun may continue to retain control of us for the foreseeable future and may decide not to enter into a
transaction in which shareholders would receive consideration for our common stock that is much higher than the
then-current market price of our common stock. In addition, Mr. Moroun could elect to sell a controlling interest in us to
a third-party and our other shareholders may not be able to participate in such transaction or, if they are able to
participate in such a transaction, such shareholders may receive less than the then-current fair market value of their
shares. Any decision regarding ownership of us that Mr. Moroun may make at some future time will be in his absolute
discretion, subject to applicable laws and fiduciary duties.
Our stock trading volume may not provide adequate liquidity for investors.
Although shares of our common stock are traded on the NASDAQ Global Market, the average daily trading volume in
our common stock is less than that of other larger transportation and logistics companies. A public trading market
having the desired characteristics of depth, liquidity and orderliness depends on the presence in the marketplace of a
sufficient number of willing buyers and sellers of the common stock at any given time. This presence depends on the
individual decisions of investors and general economic and market conditions over which we have no control. Given
the daily average trading volume of our common stock, significant sales of the common stock in a brief period of time,
or the expectation of these sales, could cause a decline in the price of our common stock. Additionally, low trading
volumes may limit a stockholder’s ability to sell shares of our common stock.
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. 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, stockholders should not rely on future dividend income from
shares of our common stock.
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; North Jackson, Ohio; Tahlequah,
Oklahoma; and Monterrey, Mexico. Our terminal facilities in North Little Rock, Arkansas; Columbia, Mississippi;
Willard, Ohio; and Irving and Laredo, Texas are owned. The leased facilities are leased primarily on contractual terms
typically ranging from one to five years. As of December 31, 2015, 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
Columbia, Mississippi
North Jackson, Ohio
Willard, Ohio
Tahlequah, Oklahoma
Irving, Texas
Laredo, Texas
Monterrey, Mexico
Own/
Lease
Own
Own
Lease
Lease
Own
Lease
Own
Lease
Own
Own
Lease
Dispatch
Office
Yes
No
No
No
No
Yes
Yes
No
Yes
Yes
No
Maintenance
Facility
Yes
Yes
Yes
Yes
No
Yes
Yes
No
Yes
Yes
No
Safety
Training
Yes
Yes
No
No
No
Yes
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.
We are a defendant in a collective-action lawsuit which was filed on August 22, 2013, in the United States District
Court for the Western District of Arkansas. The plaintiffs, who are current and former drivers and who worked for the
Company during the period of August 22, 2010, through the date of the filing, allege claims for unpaid wages under
the Fair Labor Standards Act and the Arkansas Minimum Wage Law. The complaint alleges that the Company failed
to pay newly hired drivers minimum wage during orientation, training, and while traveling during normal business
hours and that the Company failed to pay all drivers when working on assignment for more than 24 hours. The
plaintiffs seek to enjoin the Company from continuing its current pay practices related to the allegations. They also
seek actual damages, liquidated damages equal to accrual damages, court costs, and legal fees. During 2014, the
Company reached a preliminary settlement with the plaintiffs in the amount of $3,950,000 and accordingly, reserved
this amount, along with estimated settlement costs, in its 2014 consolidated financial statements. During the first
quarter of 2015, the Company negotiated a reduction in the settlement amount to approximately $3,450,000. The
settlement was approved by the court in January 2016 and we expect to make the settlement payment during 2016.
Management has determined that any losses under this claim will not be covered by existing insurance policies.
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Item 4. Mine Safety Disclosures.
Not applicable.
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.
Fiscal Year Ended December 31, 2015
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
Fiscal Year Ended December 31, 2014
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
$
$
High
Low
63.70 $
67.61
62.16
45.65
High
Low
23.00 $
29.01
40.19
54.74
49.77
54.01
30.33
25.65
17.83
19.46
27.66
33.71
As of February 23, 2016, there were approximately 92 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 dividends were paid during any year prior to 2012 or during 2013, 2014 or 2015. 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 May
2014, when the Board of Directors reauthorized 500,000 shares of common stock for repurchase under the initial
September 2011 authorization. Following the reauthorization, the Company repurchased 33,341 shares of its common
stock during the remainder of 2014 under this repurchase program. The Company repurchased 31,263 shares of its
common stock during 2015 under this repurchase program.
On May 22, 2015, the Company announced a Dutch auction tender offer (the “2015 tender offer”) to repurchase up to
80,000 shares of its common stock, par value $0.01 per share, subject to the terms and conditions described in the
2015 tender offer pursuant to the Board of Directors approval on May 21, 2015. On June 23, 2015, the Company
extended the offer and increased the offer from 80,000 shares to 150,000 shares. Subject to certain limitations and
legal requirements, the Company could purchase up to an additional 2% of its outstanding shares which totaled
148,566 shares. The 2015 tender offer began on the date of the announcement, May 22, 2015, and expired on July 9,
2015.
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Through the 2015 tender offer, the Company’s shareholders had the opportunity to tender some or all of their shares
at a price within the range of $59.00 to $63.00 per share. Upon expiration of the offer, the Company accepted for
purchase a total of 298,566 shares at a price of $59.00 per share, for a total purchase price of approximately $17.8
million, including fees and commission. The purchases were settled on July 16, 2015. The Company accounted for
the repurchase of these shares as treasury stock on the Company’s consolidated balance sheet as of December 31,
2015.
On December 2, 2014, the Company announced a Dutch auction tender offer (the “2014 tender offer”) to repurchase
up to 640,000 shares of its common stock, par value $0.01 per share, subject to the terms and conditions described in
the 2014 tender offer pursuant to the Board of Directors approval on November 25, 2014. Subject to certain limitations
and legal requirements, the Company could purchase up to an additional 2% of its outstanding shares which totaled
160,000 shares. The 2014 tender offer began on the date of the announcement, December 2, 2014, and expired on
December 30, 2014.
Through the 2014 tender offer, the Company’s shareholders had the opportunity to tender some or all of their shares
at a price within the range of $46.00 to $50.00 per share. Upon expiration of the offer, the Company accepted for
purchase a total of 571,865 shares at a price of $50.00 per share, for a total purchase price of approximately $28.7
million, including fees and commission. The purchases were settled on January 6, 2015. The Company accounted for
the repurchase of these shares as treasury stock on the Company’s consolidated balance sheet as of December 31,
2014.
On December 2, 2013, the Company announced a Dutch auction tender offer (the “2013 tender offer”) to repurchase
up to 600,000 shares of its common stock, par value $0.01 per share, subject to the terms and conditions described in
the 2013 tender offer pursuant to the Board of Directors approval on November 27, 2013. Subject to certain limitations
and legal requirements, the Company could purchase up to an additional 2% of its outstanding shares which totaled
173,000 shares. The 2013 tender offer began on the date of the announcement, December 2, 2013, and expired on
December 30, 2013.
Through the 2013 tender offer, the Company’s shareholders had the opportunity to tender some or all of their shares
at a price within the range of $19.00 to $21.00 per share. Upon expiration of the offer, the Company accepted for
purchase a total of 675,000 shares at a price of $20.50 per share, for a total purchase price of approximately $13.9
million, including fees and commission. The purchases were settled on January 6, 2014. The Company accounted for
the repurchase of these shares as treasury stock on the Company’s consolidated balance sheet as of December 31,
2013.
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 NASDAQ OMX Index for the NASDAQ Stock Market (U.S.
companies) and the NASDAQ OMX Index for the NASDAQ Trucking and Transportation Stocks for the period of five
years commencing December 31, 2010 and ending December 31, 2015. The graph assumes that the value of the
investment in our common stock and in each index was $100 on December 31, 2010 and that all dividends were
reinvested.
COMPARISON OF CUMULATIVE TOTAL RETURN AMONG OUR COMMON STOCK,
THE NASDAQ OMX INDEX FOR THE NASDAQ STOCK MARKET (U.S. COMPANIES)
AND THE NASDAQ TRUCKING AND TRANSPORTATION STOCKS INDEX THROUGH DECEMBER 31, 2015
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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.
2015
Year Ended December 31,
2013
(in thousands, except per share amounts)
2012
2014
2011
Statement of Operations Data:
Operating revenues:
Operating revenues, before fuel surcharge
Fuel surcharge
$
Total operating revenues
Operating expenses:
Salaries, wages and benefits
Operating supplies and expenses
Rent and purchased transportation
Depreciation
Insurance and claims
Other
(Gain) loss on sale or disposal of property
Total operating expenses
Operating income (loss)
Non-operating income
Interest expense
Income (loss) before income taxes
Income tax expense (benefit)
Net income (loss)
Earnings (loss) per common share:
Basic
Diluted
$
$
$
355,403 $
61,647
417,050
105,943
89,878
134,188
32,346
15,315
8,904
(5,754)
380,820
36,230
1,516
(2,818)
34,928
13,492
21,436 $
316,584 $ 313,117 $ 297,698 $ 284,178
75,065
94,353
359,243
410,937
89,696
402,813
82,935
380,633
108,371
126,875
90,831
36,296
20,274
9,871
(4,591)
387,927
23,010
2,099
(2,897)
22,212
8,721
13,491 $
107,037
137,268
85,226
39,088
14,586
8,956
(854)
391,307
11,506
1,540
(3,375)
9,671
3,756
5,915 $
108,866
155,392
54,011
38,298
13,744
7,585
(166)
377,730
2,903
3,288
(2,596)
3,595
1,416
2,179 $
110,037
168,567
30,126
34,163
13,070
8,525
98
364,586
(5,343)
1,551
(1,798)
(5,590)
(2,733)
(2,857)
2.94 $
2.93 $
1.69 $
1.68 $
0.68 $
0.68 $
0.25 $
0.25 $
(0.32)
(0.32)
Average common shares outstanding – Basic
Average common shares outstanding – Diluted
(1)
7,288
7,990
8,662
8,700
9,056
7,325
8,034
8,682
8,702
9,056
Cash dividends declared per common share
__________
(1) Diluted income per share for 2015, 2014, and 2013 assumes the exercise of stock options to purchase an
2.00 $
- $
- $
- $
$
-
aggregate of 44,755, 71,990, and 92,496 shares of common stock, respectively.
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Table Of Contents
2015
2014
At December 31,
2013
(in thousands)
2012
2011
Balance Sheet Data:
Total assets
Long-term debt, excluding current portion
Stockholders' equity
$
357,995 $
99,223
101,554
324,605 $ 329,302 $ 317,669 $ 279,093
44,135
137,477
78,583
122,195
70,366
115,946
52,293
99,985
2015
Year Ended December 31,
2013
2014
2012
2011
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
$
$
89.8%
92.7%
96.3%
99.0%
6,388
673
218,418
119,419
5,674
729
209,990
117,868
6,120
675
209,837
116,256
5,704
693
200,765
114,071
101.9%
5,586
687
195,081
110,215
765
$
700
$
683
$
666
$
632
1.53
$
6.8%
1.50
$
6.8%
1.49
$
7.3%
1.49
$
8.7%
1.49
8.3%
1,761(3)
1,860(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 482 independent contractor trucks; (3) Includes 325 independent contractor trucks; (4) Includes 357
6.34
3,022
3.47
3,049
5.19
2,911
6.99
3,031
1,800(5)
4,943(10)
1,837(4)
5,170(9)
4,983(7)
4,919(8)
1.52
1.32
1.58
1.63
7.09
2,764
1,770(6)
2.62
4,696(11)
independent contractor trucks;
(5) Includes 220 independent contractor trucks; (6) Includes 79 independent contractor trucks; (7) Includes 80 leased
trailers;
(8) Includes 141 leased trailers; (9) Includes 91 leased trailers; (10) Includes 36 leased trailers; (11) Includes 53
leased trailers.
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 independent contractor 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 independent contractor 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 87.6%, 92.5% and
92.6% of total revenues, excluding fuel surcharges for the twelve months ended December 31, 2015, 2014 and 2013,
respectively.
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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 operating supplies and expense,
net of fuel 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 2015,
2014 and 2013, approximately $61.6 million, $94.4 million and $89.7 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. Operating supplies and expenses are shown net of fuel
surcharges.
Operating revenues, before fuel surcharge
Operating expenses:
Salaries, wages and benefit
Operating supplies and expenses, net of fuel
surcharge
Rent and purchased transportation
Depreciation
Insurance and claims
Other
Gain on sale or disposal of property
Total operating expenses
Operating income
Non-operating income
Interest expense
Income before income taxes
Years Ended December 31,
2014
2015
2013
100.0%
100.0%
100.0%
33.6
36.8
9.1
29.8
10.4
4.9
2.8
(1.9)
88.7
11.3
0.5
(0.9)
10.9%
11.1
23.5
12.4
6.9
3.3
(1.6)
92.4
7.6
0.7
(1.0)
7.3%
36.7
16.4
21.9
13.5
5.0
3.1
(0.3)
96.3
3.7
0.5
(1.1)
3.1%
2015 Compared to 2014
For the year ended December 31, 2015, truckload services revenue, before fuel surcharges, increased 6.3% to $311.2
million as compared to $292.7 million for the year ended December 31, 2014. The increase relates primarily to an
increase in the number of miles traveled, an increase in equipment utilization, and an increase in the average rate
charged to customers. The number of miles traveled increased from 210.0 million miles during 2014 to 218.4 million
miles during 2015 primarily as a result of an increase in the average number of trucks in service, which increased from
1,781 during 2014 to 1,829 during 2015. Also contributing to the increase in miles traveled was an increase in
equipment utilization as the average number of miles traveled each work day increased from 464 miles per truck
during 2014 to 470 miles per truck during 2015. The average rate charged per total mile during 2015 increased $0.03
as compared to the average rate charged during 2014.
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Salaries, wages and benefits decreased from 36.8% of revenues, before fuel surcharges, during 2014 to 33.6% of
revenues, before fuel surcharges, during 2015. The decrease relates primarily to a decrease in company driver wages
paid during 2015 as compared to company driver wages paid during 2014. Our driver pool consists of both company
drivers and third-party independent contractor drivers. Company drivers are employees of the Company and perform
services in company-owned equipment while independent contractors provide services, under contract, using their
own equipment. While each group is generally compensated on a per-mile basis, independent contractor payments
are classified in the Company’s financial statements under Rent and purchased transportation. The decrease in
Salaries, wages and benefits primarily resulted from a decrease in the proportion of total miles driven by company
drivers during 2015 in comparison to the proportion of total miles driven by company drivers during 2014. This
proportional decrease was the result of an increase in the average number of independent contractors under contract
from 339 during 2014 to 414 during 2015. Also contributing to the decrease was the interaction of expenses with fixed-
cost characteristics, such as general and administrative wages, with the increase in revenues for the periods
compared.
Operating supplies and expenses decreased from 11.1% of revenues, before fuel surcharges, during 2014 to 9.1% of
revenues, before fuel surcharges, during 2015. 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 during 2015 as compared to 2014. The average surcharge-adjusted fuel price paid per gallon of diesel
fuel decreased as a result of more favorable fuel surcharge arrangements made with customers and to an increase in
the number of independent contractors 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 independent contractors is
reflected as a reduction in net operating supplies and expenses, while fuel surcharges paid to independent contractors
for their services is reported along with their base rate of pay in the Rent and purchased transportation category.
These categorizations have the effect of reducing our net operating supplies and expenses while increasing the Rent
and purchased transportation category, as discussed below. The average mpg experienced increased during 2015 as
compared to the mpg experienced during 2014 as a result of replacing older trucks with newer trucks, which are more
fuel efficient. Partially offsetting this decrease was an increase in amounts paid for driver recruiting and driver training
schools during 2015 as compared to amounts paid during 2014. The increase in driver recruiting and training 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.
Rent and purchased transportation increased from 23.5% of revenues, before fuel surcharges, during 2014 to 29.8% of
revenues, before fuel surcharges, during 2015. The increase relates primarily to an increase in driver lease expense
as the average number of independent contractors under contract increased from 339 during 2014 to 414 during
2015. Also contributing to the increase was an increase in operating lease payments associated with the lease of
Company trucks as the average number of Company trucks under operating lease agreements increased from 213
during 2014 to 465 during 2015. The increase in costs in this category, as they relate to the increase in independent
contractors, are partially offset by a decrease in other cost categories, such as repairs and fuel, which are generally
borne by the independent contractor.
Depreciation decreased from 12.4% of revenues, before fuel surcharges, during 2014 to 10.4% of revenues, before
fuel surcharges, during 2015. The decrease relates primarily to a decrease in the average number of company-owned
trucks as a result of leasing arrangements entered into at various times throughout 2014 for the lease of 421 Company
trucks, including 97 company-owned trucks which were sold to a third party and then leased back to the Company.
During 2015, the Company entered into a lease agreement for the lease of an additional 50 trucks, and as of
December 31, 2015, the Company’s truck fleet includes 462 leased trucks. The lease payments associated with these
leases are reported in the Rents and purchased transportation category.
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Insurance and claims decreased from 6.9% of revenues, before fuel surcharges, during 2014 to 4.9% of revenues,
before fuel surcharges, during 2015. The decrease relates primarily to a decrease in amounts reserved for lawsuit
settlements during 2015 as compared to amounts reserved during 2014. During 2014, the Company reserved an
estimated amount for the anticipated settlement of a lawsuit, which claimed that the Company was in violation of
minimum wage laws with regard to certain activities performed by employee drivers as described in the section “Legal
Proceedings” in Item 3 of this Report.
Other expenses decreased from 3.3% of revenues, before fuel surcharges, during 2014 to 2.8% of revenues, before
fuel surcharges, during 2015. The decrease relates primarily to a decrease in amounts expensed for legal fees and
uncollectible revenue.
The truckload services division operating ratio, which measures the ratio of operating expenses, net of fuel
surcharges, to operating revenues, before fuel surcharges, improved to 88.7% for 2015 from 92.4% for 2014.
2014 Compared to 2013
For the year ended December 31, 2014, truckload services revenue, before fuel surcharges, increased 0.9% to $292.7
million as compared to $290.1 million for the year ended December 31, 2013. The increase was related primarily to an
increase in equipment utilization, an increase in the average rate charged to customers and a reduction in
uncompensated miles. Although the average number of trucks declined from 1,804 during 2013 to 1,781 during 2014,
the number of miles traveled increased from 209.8 million miles during 2013 to 210.0 million miles during 2014 as a
result of an increase in the average number of miles traveled each work day from 458 miles per truck during 2013 to
464 miles per truck during 2014. The average rate charged per total mile during 2014 increased $0.01 as compared to
the average rate charged during 2013. The average percentage of uncompensated miles declined from 7.3% of total
miles for 2013 to 6.8% of total miles during 2014.
Salaries, wages and benefits increased from 36.7% of revenues, before fuel surcharges, during 2013 to 36.8% of
revenues, before fuel surcharges, during 2014. The increase related primarily to an increase in non-driver wages paid
during 2014 as compared to non-driver wages paid during 2013. The number of non-driver employees increased from
an average of 530 during 2013 to an average of 580 during 2014 as a result of increasing our operations staff to
provide increased service to our drivers and maintenance staff in order to more efficiently maintain our equipment and
manage maintenance costs. Partially offsetting the increase was a decrease in costs associated with workers’
compensation benefits during 2014 as compared to 2013.
Operating supplies and expenses decreased from 16.4% of revenues, before fuel surcharges, during 2013 to 11.1% of
revenues, before fuel surcharges, during 2014. The decrease related 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 during 2014 as compared to 2013. The average surcharge-adjusted fuel price paid per gallon of diesel
fuel decreased as a result of more favorable fuel surcharge arrangements made with customers and to an increase in
the number of independent contractors 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 independent contractors is
reflected as a reduction in net operating supplies and expenses, while fuel surcharges paid to independent contractors
for their services is reported along with their base rate of pay in the Rent and purchased transportation category.
These categorizations have the effect of reducing our net operating supplies and expenses while increasing the Rent
and purchased transportation category, as discussed below. The average mpg experienced increased during 2014 as
compared to the mpg experienced during 2013 as a result of replacing older trucks with newer trucks, which are more
fuel efficient. The decrease also relates to a decrease in amounts paid for equipment maintenance costs during 2014
as compared to amounts paid during 2013 as a result of replacing older equipment with new equipment. Partially
offsetting this decrease is an increase in amounts paid for driver recruiting and driver training schools during 2014 as
compared to amounts paid during 2013. The increase in driver recruiting and training costs were a result of heightened
competition for qualified drivers as industry demand increased and increased regulations had forced some drivers to
exit the profession.
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Rent and purchased transportation increased from 21.9% of revenues, before fuel surcharges, during 2013 to 23.5% of
revenues, before fuel surcharges, during 2014. This increase related primarily to lease payments associated with the
lease of 421 trucks, as discussed below. This increase was partially offset by a decrease in driver lease expense as a
result of fewer miles being driven by independent contractors during 2014 as compared to 2013.
Depreciation decreased from 13.5% of revenues, before fuel surcharges, during 2013 to 12.4% of revenues, before
fuel surcharges, during 2014. The decrease related primarily to a decrease in the average number of company-owned
trucks as a result of a leasing arrangement entered into during the first quarter of 2014 for the lease of 147 trucks,
including 97 company-owned trucks which were sold to a third party and then leased back to the Company. During the
remainder of 2014, the Company entered into lease agreements for the lease of an additional 274 trucks, and as of
December 31, 2014, the Company’s truck fleet included of 421 leased trucks. The lease payments associated with
these leases were reported in the Rents and purchased transportation category.
Insurance and claims increased from 5.0% of revenues, before fuel surcharges, during 2013 to 6.9% of revenues,
before fuel surcharges, during 2014. This increase related primarily to an estimated amount reserved during 2014 for
the anticipated settlement of a lawsuit, which claims that the Company was in violation of minimum wage laws with
regard to certain activities performed by employee driver as described in the section “Legal Proceedings” in Item 3 of
this Report, as well as an increase in amounts expensed for litigation costs associated with other claims. The increase
also related to increases in the amount paid for physical damage insurance premiums during 2014 as compared to
2013 due to an increase in the value of the equipment covered as a result of replacing older equipment with new
equipment and to obtaining physical damage coverage on our trailers effective during the fourth quarter of 2013.
Other expenses increased from 3.1% of revenues, before fuel surcharges, during 2013 to 3.3% of revenues, before
fuel surcharges, during 2014. The increase related primarily to an increase in amounts expensed for legal fees.
The truckload services division operating ratio, which measures the ratio of operating expenses, net of fuel
surcharges, to operating revenues, before fuel surcharges, improved to 92.4% for 2014 from 96.3% for 2013.
Non-operating income increased from 0.5% of revenues, before fuel surcharges, during 2013 to 0.7% of revenues,
before fuel surcharges, during 2014. 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 gains recognized during 2014 as compared to 2013 on the Company’s investments in marketable
equity securities.
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Table Of Contents
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
Operating supplies and expenses
Rent and purchased transportation
Depreciation
Insurance and claims
Other
Gain on sale or disposal of property
Total operating expenses
Operating income
Non-operating income
Interest expense
Income before income taxes
2015 Compared to 2014
Years Ended December 31,
2014
2015
2013
100.0%
100.0%
100.0%
3.1
0.0
94.0
0.0
0.0
0.6
0.0
97.7
2.3
0.2
(0.4)
2.1%
2.7
0.0
93.0
0.0
0.4
0.4
0.0
96.5
3.5
0.1
(0.2)
3.4%
2.6
0.0
94.3
0.0
0.0
0.4
0.0
97.3
2.7
0.1
(0.3)
2.5%
For the year ended December 31, 2015, logistics and brokerage services revenues, before fuel surcharges, increased
85.1% to $44.2 million as compared to $23.9 million for the year ended December 31, 2014. The increase was
primarily the result of an increase in the number of loads brokered during 2015 as compared to 2014.
Salaries, wages and benefits increased from 2.7% of revenues, before fuel surcharges, in 2014 to 3.1% of revenues,
before fuel surcharges, in 2015. The increase relates to an increase in the number of employees employed by the
logistics and brokerage services division as the Company continues its efforts to expand this division.
Rent and purchased transportation increased from 93.0% of revenues, before fuel surcharges, in 2014 to 94.0% of
revenues, before fuel surcharges, in 2015. The increase relates to an increase in amounts paid to 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 97.7% for 2015 from 96.5% for 2014.
2014 Compared to 2013
For the year ended December 31, 2014, logistics and brokerage services revenues, before fuel surcharges, increased
3.6% to $23.9 million as compared to $23.0 million for the year ended December 31, 2013. The increase was primarily
the result of an increase in the brokered load rates during 2014 as compared to 2013.
Rent and purchased transportation decreased from 94.3% of revenues, before fuel surcharges, in 2013 to 93.0% of
revenues, before fuel surcharges, in 2014. The decrease related to a decrease in amounts charged by third party
logistics and brokerage service providers.
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Table Of Contents
Insurance and claims increased to 0.4% of revenues, before fuel surcharges, in 2014 compared to 2013. This increase
related primarily to an estimated amount reserved during 2014 for the anticipated settlement of a lawsuit, which claims
that the Company was in violation of minimum wage laws with regard to certain activities performed by employee
drivers as mentioned in the section “Legal Proceedings” in Item 3 of this Report, as well as an increase in amounts
expensed for litigation costs associated with other claims.
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, improved to 96.5% for 2014 from 97.3% for 2013.
Results of Operations - Combined Services
2015 Compared to 2014
Income tax expense was approximately $13.5 million in 2015 resulting in an effective rate of 38.6%, as compared to
an income tax expense of approximately $8.7 million in 2014 resulting in an effective rate of 39.3%. 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.
In determining whether a tax asset valuation allowance is necessary, management, in accordance with the provisions
of Accounting Standards Codification (“ASC”) 740-10-30, weighs all available evidence, both positive and negative to
determine whether, based on the weight of that evidence, a valuation allowance is necessary. If negative conditions
exist which indicate a valuation allowance might be necessary, consideration is then given to what effect the future
reversals of existing taxable temporary differences and the availability of tax strategies might have on future taxable
income to determine the amount, if any, of the required valuation allowance. As of December 31, 2015, management
determined that the future reversals of existing taxable temporary differences and available tax strategies would
generate sufficient future taxable income to realize its tax assets and therefore a valuation allowance was not
necessary.
The Company recognizes a tax benefit from an uncertain tax position only if it is more likely than not that the position
will be sustained on examination by taxing authorities, based on the technical merits of the position. As of December
31, 2015, an adjustment to the Company’s consolidated financial statements for uncertain tax positions has not been
required as management believes that the Company’s tax positions taken in income tax returns filed or to be filed are
supported by clear and unambiguous income tax laws. The Company recognizes interest and penalties related to
uncertain income tax positions, if any, in income tax expense. During 2015 and 2014, the Company has not
recognized or accrued any interest or penalties related to uncertain income tax positions.
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 2012 and forward
remain open to examination in those jurisdictions.
The combined net income for all divisions was $21.4 million, or 6.0% of revenues, before fuel surcharge, for 2015 as
compared to the combined net income for all divisions of $13.5 million or 4.3% of revenues, before fuel surcharge, for
2014. The increase in net income resulted in an increase in diluted earnings per share to $2.93 for 2015 from a diluted
earnings per share of $1.68 for 2014.
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2014 Compared to 2013
Income tax expense was approximately $8.7 million in 2014 resulting in an effective rate of 39.3%, as compared to an
income tax expense of approximately $3.8 million in 2013 resulting in an effective rate of 38.8%. 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.
In determining whether a tax asset valuation allowance is necessary, management, in accordance with the provisions
of Accounting Standards Codification (“ASC”) 740-10-30, weighs all available evidence, both positive and negative to
determine whether, based on the weight of that evidence, a valuation allowance is necessary. If negative conditions
exist which indicate a valuation allowance might be necessary, consideration is then given to what effect the future
reversals of existing taxable temporary differences and the availability of tax strategies might have on future taxable
income to determine the amount, if any, of the required valuation allowance. As of December 31, 2014, management
determined that the future reversals of existing taxable temporary differences and available tax strategies would
generate sufficient future taxable income to realize its tax assets and therefore a valuation allowance was not
necessary.
As of December 31, 2014, 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 2011 and forward
remained open to examination in those jurisdictions.
The combined net income for all divisions was $13.5 million, or 4.3% of revenues, before fuel surcharge, for 2014 as
compared to the combined net income for all divisions of $5.9 million or 1.9% of revenues, before fuel surcharge, for
2013. The increase in net income resulted in an increase in diluted earnings per share to $1.68 for 2014 from a diluted
earnings per share of $0.68 for 2013.
Quarterly Results of Operations
The following table presents selected consolidated financial information for each of our last eight fiscal quarters
through December 31, 2015. 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,
2015
June 30,
Sept. 30,
Dec. 31,
Mar. 31,
June 30,
Sept. 30,
Dec. 31,
2015
2015
2015
2014
2014
2014
2014
Quarter Ended
(unaudited)
(in thousands, except earnings per share data)
Operating
revenues $ 99,483 $ 108,033 $ 107,110 $ 102,424 $ 97,820 $ 104,343 $ 107,059 $ 101,715
Total
operating
expenses
Operating
income
Net income
Income per
common
share:
90,336
96,151
96,884
97,449
94,975
95,754
98,609
98,589
9,147
5,369
11,882
7,039
10,226
5,795
4,975
3,233
2,845
1,357
8,589
4,945
8,450
5,057
3,126
2,132
Basic
Diluted
$
$
0.72 $
0.72 $
0.95 $
0.94 $
0.81 $
0.80 $
0.45 $
0.45 $
0.17 $
0.17 $
0.62 $
0.62 $
0.63 $
0.63 $
0.27
0.27
- 28 -
Table Of Contents
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,
borrowings under our lines of credit, installment notes and investment margin account, and issuances of equity
securities.
During 2015, we generated $61.5 million in cash from operating activities compared to $55.3 million and $43.2 million
in 2014 and 2013, respectively. Investing activities used $85.5 million in cash during 2015 compared to $0.1 million
and $44.3 million in 2014 and 2013, 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 used $3.5 million in cash during 2015 compared to $28.7 million in cash used during
2014 and $1.8 million in cash provided during 2013. 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 2015 and 2014, we utilized cash on hand, installment
notes, and our lines of credit to finance revenue equipment purchases of approximately $122.3 million and $26.7
million, respectively.
Occasionally we finance the acquisition of revenue equipment through installment notes with fixed interest rates and
terms ranging from 36 to 60 months. At December 31, 2015, the Company’s subsidiaries had combined outstanding
indebtedness under such installment notes of $129.3 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
2.27%. At December 31, 2014, the Company’s subsidiaries had combined outstanding indebtedness under such
installment notes of $95.2 million. These installment notes were payable in monthly installments, ranging from 36 to 60
months at a weighted average interest rate of 2.66%.
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, 2015 and 2014, the Company received approximately $27.5 million and $15.3
million, respectively, for units delivered for trade.
During 2015, the Company maintained a $40.0 million revolving line of credit. Amounts outstanding under the
line bear interest at LIBOR (determined as of the first day of each month) plus 1.50% (1.74% at December 31, 2015),
are secured by our trade accounts receivable and mature on July 1, 2017. At December 31, 2015, outstanding
advances on the line were approximately $10.8 million, including letters of credit totaling $0.8 million, with availability
to borrow $29.2 million.
Cash and cash equivalents decreased from $27.6 million at December 31, 2014 to $0.2 million at December 31, 2015.
The decrease relates primarily to the payment of $28.7 million for shares of our common stock purchased under a
tender offer completed during the fourth quarter of 2014 which was paid in 2015, and to the payment of $17.8 million
for treasury stock under a tender offer completed during the third quarter of 2015. These cash reductions were
partially offset through cash flows from continuing operations and the sale of older revenue equipment which was
replaced with new revenue equipment subject to installment debt financing agreements.
Trade accounts receivable decreased from $53.0 million at December 31, 2014 to $49.3 million at December 31,
2015. The decrease relates primarily to amounts collected in excess of freight revenue and fuel surcharge revenue
generated, which flows through the accounts receivable account, during 2015 as compared to amounts collected
during 2014, which lagged amounts generated for freight revenue and fuel surcharge revenue.
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Table Of Contents
Accounts receivable-other decreased from $11.5 million at December 31, 2014 to $5.9 million at December 31, 2015.
The decrease relates primarily to a decrease in amounts held with the Company’s third-party qualified intermediary.
The Company contracts with a third-party qualified intermediary in order to accomplish tax-deferred, like-kind
exchanges related to its revenue equipment. 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. Amounts held by the Company’s third-
party qualified intermediary are dependent on the timing and extent of the Company’s revenue equipment sales and/or
purchase activities which can fluctuate significantly from period-to-period. This decrease was partially offset by an
increase in amounts advanced to independent contractors and third party brokerage companies of approximately $1.7
million.
Prepaid expenses and deposits decreased from $10.1 million at December 31, 2014 to $8.1 million at December 31,
2015. The decrease relates to the payment of approximately $1.3 million of insurance premiums which were paid in
advance in December 2014 for which there was no corresponding payment made during December of 2015. The
decrease also relates to a $0.5 million reduction in amounts prepaid for new tires at December 31, 2015 as compared
to amounts prepaid for new tires at December 31, 2014.
Marketable equity securities at December 31, 2015 decreased approximately $0.3 million as compared to December
31, 2014. The decrease was related to changes in market value of approximately $1.9 million, sales of marketable
equity securities with a combined cost basis of approximately $0.3 million, other than temporary write downs of
approximately $0.8 million, and returns of capital of approximately $0.1 million which were almost entirely offset by
purchases of marketable equity securities of approximately $2.9 million. At December 31, 2015, the remaining
marketable equity securities have a combined cost basis of approximately $16.0 million and a combined fair market
value of approximately $24.6 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 2015, the Company had net unrealized pre-tax losses of
approximately $1.8 million and received dividends of approximately $1.1 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, 2015, which generally consists of trucks, trailers, and revenue equipment
accessories such as Qualcomm™ satellite tracking units and auxiliary power units, increased approximately $59.8
million as compared to December 31, 2014. The increase relates primarily to the purchase of new trucks and trailers in
a greater quantity than the quantity of trucks and trailers sold. The increase is also reflective of the higher purchase
price of new trucks and trailers compared to the trucks and trailers which are being replaced and sold.
Accounts payable at December 31, 2015 decreased approximately $23.9 million as compared to December 31, 2014.
The decrease was primarily related to the payment, during the first quarter of 2015, for shares of our common stock
purchased under a tender offer completed during the fourth quarter of 2014 in the amount of $28.7 million. The
decrease was partially offset by an increase in amounts accrued for revenue equipment of approximately $4.0 million
at December 31, 2015 as compared to December 31, 2014.
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, 2015, increased approximately $44.0
million as compared to December 31, 2014. The increase was related to additional borrowings received during 2015
net of the principal portion of scheduled installment note payments made during 2015.
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For 2016, we expect to purchase 450 new trucks and 1,590 new trailers while continuing to sell or trade equipment that
has reached the end of its cycle, which we expect to result in net capital expenditures of approximately $77.0 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.
Contractual Obligations and Commercial Commitments
The following table sets forth the Company's contractual obligations and commercial commitments as of December
31, 2015:
Payments due by period
(in thousands)
Less than
Total
1 year
1 to 3
Years
3 to 5
Years
More than
5 Years
Long-term debt (1)
Operating leases (2)
Total
$
$
156,426 $
16,895
173,321 $
43,374 $
10,113
53,487 $
99,355 $
6,771
106,126 $
13,697 $
11
13,708 $
-
-
-
(1) Including interest.
(2) Represents equipment, building, facilities, and drop yard operating leases.
Off-Balance Sheet Arrangements
At December 31, 2015, the Company operated 462 trucks under operating lease agreements. These lease
agreements do not require any residual value guarantees; however, the trucks must meet certain normal wear and
tear conditions upon return to lessor at the end of the lease term.
The trucks held under operating leases are not carried on our balance sheet and the respective lease payments are
reflected in our consolidated statements of operations as a component of the caption “Rents and purchased
transportation.” Rent expense related to the trucks under the operating lease agreements totaled approximately $10.2
million for the year ended December 31, 2015.
Insurance
The Company maintains certain insurance coverages for physical damage, auto liability, and cargo loss risks as well
as other general business risks. This coverage is provided through insurance policies with various insurance carriers
which have per occurrence deductibles of up to $10,000. During October 2015, the Company began self-insuring its
trailer fleet for physical damage losses. 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 $600,000 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 $325,000 per covered
employee per year and estimates its liability for claims incurred but not reported.
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Inflation
Inflation has an impact on most of our operating costs. Over the past three years, the effect of inflation has been
minimal.
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 by the manufacturer. 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.
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. Forecasted cash flows are 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. In light of the Company’s market capitalization during 2015 and net
operating profits of the Company for the years ended December 31, 2015 and 2014, no impairment indicators existed
which required management to test the Company’s long-lived assets for recoverability as of December 31, 2015. As
such, no impairment losses were recorded during 2015.
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 2015 health and workers' compensation
expenses, a 10% increase in both claims incurred and IBNR claims, 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.
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Table Of Contents
In determining whether a tax asset valuation allowance is necessary, management, in accordance with the provisions
of ASC 740-10-30, weighs all available evidence, both positive and negative to determine whether, based on the
weight of that evidence, a valuation allowance is necessary. If negative conditions exist which indicate a valuation
allowance might be necessary, consideration is then given to what effect the future reversals of existing taxable
temporary differences and the availability of tax strategies might have on future taxable income to determine the
amount, if any, of the required valuation allowance. 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. As of December 31, 2015, management determined that the future reversals of existing
taxable temporary differences and available tax strategies would generate sufficient future taxable income to realize its
tax assets and therefore a valuation allowance was not necessary.
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 $24.6 million at December 31, 2015 from $24.9 million at December 31, 2014. The decrease
was related to changes in market value of approximately $1.9 million, sales of marketable equity securities with a
combined cost basis of approximately $0.3 million, other than temporary write downs of approximately $0.8 million, and
returns of capital of approximately $0.1 million which were almost entirely offset by purchases of marketable equity
securities of approximately $2.9 million. 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 $2.5 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 $10.0 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 $100,000 of additional interest
expense.
- 34 -
Table Of Contents
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 2015 fuel
consumption, a 10% increase in the average annual price per gallon of diesel fuel would increase our annual fuel
expenses by approximately $5.1 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 within or exposed to fluctuations in the exchange rate between the U.S. Dollar and the Mexican peso. Based
on 2015 expenditures denominated in pesos, a 10% increase in the exchange rate would increase our annual
operating expenses by approximately $55,000.
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, 2015 and 2014
Consolidated Statements of Operations - Years ended December 31, 2015, 2014 and 2013
Consolidated Statements of Comprehensive Income - Years ended December 31, 2015, 2014 and 2013
Consolidated Statements of Stockholders’ Equity - Years ended December 31, 2015, 2014 and 2013
Consolidated Statements of Cash Flows - Years ended December 31, 2015, 2014 and 2013
Notes to Consolidated Financial Statements
- 35 -
Table Of Contents
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 (the “Company”) as of December 31, 2015 and 2014, and the related consolidated
statements of operations, comprehensive income, stockholders’ equity, and cash flows for each of the three years in
the period ended December 31, 2015. These financial statements are the responsibility of the Company’s
management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with 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, 2015 and 2014, and the
results of their operations and their cash flows for each of the three years in the period ended December 31, 2015 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, 2015, based on criteria
established in the 2013 Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations
of the Treadway Commission (COSO), and our report dated March 15, 2016 expressed an unqualified opinion
thereon.
/s/ GRANT THORNTON LLP
Tulsa, Oklahoma
March 15, 2016
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Table Of Contents
P.A.M. TRANSPORTATION SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 2015 AND 2014
(in thousands, except share and per share data)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents
Accounts receivable—net:
Trade, less allowance of $549 and $1,611, respectively
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.
- 37 -
2015
2014
$
157 $
27,649
49,312
5,850
1,890
8,052
24,575
2,865
52,983
11,469
1,306
10,110
24,895
507
92,701
128,919
5,374
17,858
338,853
9,854
4,924
16,165
279,079
9,257
371,939
309,425
(109,087)
(116,178)
262,852
193,247
2,442
2,439
$
357,995 $
324,605
(Continued)
Table Of Contents
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 2015 AND 2014
(in thousands, except share and per share data)
LIABILITIES AND STOCKHOLDERS' EQUITY
2015
2014
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
Other long-term liabilities
Total liabilities
COMMITMENTS AND CONTINGENCIES (Note 15)
$
17,791 $
27,093
40,025
1,835
41,695
27,517
42,908
2,951
86,744
115,071
99,223
70,474
-
52,293
57,125
131
256,441
224,620
STOCKHOLDERS’ EQUITY
Preferred stock, $.01 par value, 10,000,000 shares authorized; none issued
Common stock, $.01 par value, 40,000,000 shares authorized; 11,497,471 and
11,474,096 shares issued; 7,116,661 and 7,423,115 shares outstanding at
December 31, 2015 and December 31, 2014, respectively
Additional paid-in capital
Accumulated other comprehensive income
Treasury stock, at cost; 4,380,810 and 4,050,981 shares at December 31, 2015
and December 31, 2014, respectively
Retained earnings
Total stockholders’ equity
-
-
115
80,429
5,310
(101,779)
117,479
115
79,926
6,402
(82,501)
96,043
101,554
99,985
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
$
357,995 $
324,605
See notes to consolidated financial statements.
(Concluded)
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Table Of Contents
P.A.M. TRANSPORTATION SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 2015, 2014 AND 2013
(in thousands, except per share data)
OPERATING REVENUES:
Revenue, before fuel surcharge
Fuel surcharge
2015
2014
2013
$
355,403 $
61,647
316,584 $
94,353
313,117
89,696
Total operating revenues
417,050
410,937
402,813
OPERATING EXPENSES AND COSTS:
Salaries, wages and benefits
Operating supplies and expenses
Rents and purchased transportation
Depreciation
Insurance and claims
Other
Gain on disposition of equipment
105,943
89,878
134,188
32,346
15,315
8,904
(5,754)
108,371
126,875
90,831
36,296
20,274
9,871
(4,591)
107,037
137,268
85,226
39,088
14,586
8,956
(854)
Total operating expenses and costs
380,820
387,927
391,307
OPERATING INCOME
NON-OPERATING INCOME
INTEREST EXPENSE
36,230
23,010
11,506
1,516
(2,818)
2,099
(2,897)
1,540
(3,375)
INCOME BEFORE INCOME TAXES
34,928
22,212
9,671
FEDERAL & STATE INCOME TAX EXPENSE:
Current
Deferred
591
12,901
1,209
7,512
159
3,597
Total federal & state income tax expense
13,492
8,721
3,756
NET INCOME
EARNINGS PER COMMON SHARE:
Basic
Diluted
AVERAGE COMMON SHARES OUTSTANDING:
Basic
Diluted
See notes to consolidated financial statements.
$
$
$
21,436 $
13,491 $
5,915
2.94 $
2.93 $
1.69 $
1.68 $
7,288
7,325
7,990
8,034
0.68
0.68
8,662
8,682
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P.A.M. TRANSPORTATION SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
YEARS ENDED DECEMBER 31, 2015, 2014 AND 2013
(in thousands)
2015
2014
2013
NET INCOME
$
21,436 $
13,491 $
5,915
Other comprehensive income (loss), net of tax:
Reclassification adjustment for realized gains on marketable
securities included in net income (1)
(646)
(630)
(215)
Reclassification adjustment for unrealized losses on
marketable securities included in net income (2)
516
1
18
Changes in fair value of marketable securities (3)
(962)
871
2,122
COMPREHENSIVE INCOME
$
20,344 $
13,733 $
7,840
(1)Net of deferred income taxes of $(396), $(385), and $(131), respectively.
(2)Net of deferred income taxes of $316, $0, and $11, respectively.
(3)Net of deferred income taxes of $(588), $533, and $1,298, 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, 2015, 2014 AND 2013
(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, 2013 8,702 $
114 $
78,448 $
4,235 $ (37,239) $ 76,637 $122,195
Net income
Other comprehensive
income, net of tax of
$1,178
Exercise of stock options-
shares issued including
tax benefits
Treasury stock repurchases
Share-based compensation
5,915
5,915
1,925
1,925
7
(725)
46
317
(14,452)
46
(14,452)
317
BALANCE— December 31,
2013
7,984
114
78,811
6,160
(51,691) 82,552 115,946
Net income
Other comprehensive
income, net of tax of $148
Exercise of stock options-
shares issued including
tax benefits
Restricted stock issued
Treasury stock repurchases
Share-based compensation
77
5
(643)
242
13,491 13,491
242
846
1
845
270
(30,810)
(30,810)
270
BALANCE— December 31,
2014
7,423
115
79,926
6,402
(82,501) 96,043 99,985
Net income
Other comprehensive
(loss), net of tax of $(668)
Exercise of stock options-
shares issued including
tax benefits
Restricted stock issued
Treasury stock repurchases
Share-based compensation
21
3
(330)
(1,092)
21,436 21,436
(1,092)
236
(19,278)
(19,278)
267
236
267
BALANCE— December 31,
2015
7,117 $
115 $
80,429 $
5,310 $(101,779) $ 117,479 $101,554
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, 2015, 2014 AND 2013
(in thousands)
OPERATING ACTIVITIES:
Net income
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation
Bad debt expense
Stock compensation—net of excess tax benefits
Sale leaseback deferred gain amortization
Provision for deferred income taxes
Reclassification of other than temporary impairment in
marketable equity securities
Recognized gain on marketable equity securities
Gain on sale or disposal of equipment
Changes in operating assets and liabilities:
Accounts receivable
Prepaid expenses, deposits, inventories, and other assets
Income taxes 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
Exercise of stock options
Net cash (used in) provided by financing activities
2015
2014
2013
$
21,436 $
13,491 $
5,915
32,346
151
267
(224)
12,901
833
(1,001)
(5,754)
1,128
1,470
(2,358)
886
(556)
61,525
(125,720)
33,472
8,012
1,500
(2,769)
(85,505)
549,955
(539,979)
88,018
(53,947)
3,005
(2,779)
(48,021)
236
(3,512)
36,296
456
270
(205)
7,512
1
(1,040)
(4,591)
5,109
(3,299)
(277)
(1,555)
3,085
55,253
(28,588)
38,902
(7,873)
1,720
(4,210)
(49)
469,918
(469,918)
42,979
(58,247)
4,351
(2,645)
(16,011)
846
(28,727)
39,088
424
317
-
3,597
29
(601)
(854)
(8,873)
4,918
124
(2,802)
1,888
43,170
(71,520)
27,304
(120)
857
(838)
(44,317)
422,324
(427,741)
41,593
(33,208)
999
(1,693)
(508)
46
1,812
NET (DECREASE) INCREASE IN CASH AND CASH
EQUIVALENTS
(27,492)
26,477
665
CASH AND CASH EQUIVALENTS—Beginning of year
CASH AND CASH EQUIVALENTS—End of year
$
27,649
157 $
1,172
27,649 $
507
1,172
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION—
Cash paid during the period for:
Interest
Income taxes
$
$
2,821 $
2,950 $
2,946 $
1,486 $
3,417
77
NONCASH INVESTING AND FINANCING ACTIVITIES—
Purchases of revenue equipment included in accounts payable $
Purchases of common stock included in accrued expenses and
other liabilities
$
5,031 $
1,079 $
598
- $
28,743 $
13,944
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, 2015, 2014 AND 2013
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, Overdrive Leasing, 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., and S & L Logistics, Inc.
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 management 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. At times cash held at banks may exceed FDIC insured
limits.
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 management
determines 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 in future
periods.
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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, 2015 were approximately $467,000. There were no bank overdrafts as of December 31, 2014.
Accounts Receivable Other–The components of accounts receivable other consist primarily of amounts
representing company driver advances, independent contractor advances, equipment manufacturer warranties,
and restricted cash. Advances receivable from company drivers as of December 31, 2015 and 2014, were
approximately $580,000 and $486,000, 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 undiscounted 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
Structures and improvements
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Estimated
Asset Life
(in years)
3 - 5
3 - 7
3 - 12
5 - 40
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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 2015 and
2014, management determined that an adjustment to the estimated useful lives or salvage values of trucks or
trailers was not necessary based on such an evaluation. During 2013, 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 $550,000 during 2013. This reduction in depreciation
expense increased the Company’s 2013 reported net income by approximately $340,000 ($0.04 per diluted
share).
Inventory–Inventories consist primarily of revenue equipment parts, tires, supplies, and fuel. Inventories are
carried at the lower of cost or market with cost determined using the first in, first out method.
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 $988,000,
$683,000 and $662,000 for the years ended December 31, 2015, 2014 and 2013, 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 or all 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.
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In determining whether a tax asset valuation allowance is necessary, management, in accordance with the
provisions of ASC 740-10-30, weighs all available evidence, both positive and negative to determine whether,
based on the weight of that evidence, a valuation allowance is necessary. If negative conditions exist which
indicate a valuation allowance might be necessary, consideration is then given to what effect the future reversals
of existing taxable temporary differences and the availability of tax strategies might have on future taxable
income to determine the amount, if any, of the required valuation allowance. As of December 31, 2015,
management determined that the future reversals of existing taxable temporary differences and available tax
strategies would generate sufficient future taxable income to realize its tax assets and therefore a valuation
allowance was not necessary.
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.
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 17 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 87.6%, 92.5% and 92.6% of total
revenues, excluding fuel surcharges, for the twelve months ended December 31, 2015, 2014 and 2013,
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.
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Subsequent Events–In February 2016, our Board of Directors authorized the repurchase of up to 325,000
shares of our common stock through a Dutch auction tender offer (the “2016 tender offer”). Subject to certain
limitations and legal requirements, the Company could repurchase up to an additional 2% of its outstanding
shares which totals 142,413 shares. The 2016 tender offer commenced on February 18, 2016 and expires on
March 17, 2016. Through this tender offer, the Company’s shareholders have the opportunity to tender some or
all of their shares at a price within the range of $27.00 to $30.00 per share.
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 (loss) in
the Company’s consolidated statements of operations.
Recent Accounting Pronouncements–In April 2014, the Financial Accounting Standards Board (“FASB”)
issued Accounting Standards Update (“ASU”) No. 2014-08 (“ASU 2014-08”), Reporting Discontinued Operations
and Disclosures of Disposals of Components of an Entity. ASU 2014-08 changes the criteria for determining
which disposals can be presented as discontinued operations and modifies the related disclosure requirements.
Under the new guidance, a disposal of a component of an entity or a group of components of an entity is required
to be reported in discontinued operations if the disposal represents a strategic shift that has (or will have) a major
effect on an entity’s operations and financial results and is disposed of or classified as held for sale. The standard
also introduces several new disclosures. The guidance applies prospectively to new disposals and new
classifications of disposal groups as held for sale after the effective date. ASU 2014-08 is effective for annual and
interim periods beginning after December 15, 2014, with early adoption permitted. The adoption of this guidance
on January 1, 2015, did not have a significant impact on the Company’s financial condition, results of operations,
or cash flows.
In May 2014, the FASB issued ASU No. 2014-09, (“ASU 2014-09”), Revenue from Contracts with Customers .
The objective of ASU 2014-19 is to establish a single comprehensive model for entities to use in accounting for
revenue arising from contracts with customers and will supersede most of the existing revenue recognition
guidance, including industry-specific guidance. The core principle of ASU 2014-09 is that an entity recognizes
revenue to depict the transfer of promised goods or services to customers in an amount that reflects the
consideration to which the entity expects to be entitled in exchange for those goods or services. In applying the
new guidance, an entity will (1) identify the contract(s) with a customer; (2) identify the performance obligations
in the contract; (3) determine the transaction price; (4) allocate the transaction price to the contract’s
performance obligations; and (5) recognize revenue when (or as) the entity satisfies a performance obligation.
ASU 2014-09 applies to all contracts with customers except those that are within the scope of other topics in the
FASB Accounting Standards Codification. The new guidance is effective for annual reporting periods (including
interim periods within those periods) beginning after December 15, 2017 for public companies. Early adoption is
not permitted. Entities have the option of using either a full retrospective or modified approach to adopt ASU
2014-09. ASU 2014-09 was modified by the issuance of ASU 2015-14 Revenue from Contracts with Customers
in August 2015. This amendment deferred the effective date of ASU 2014-09. The adoption of this guidance is
not expected to have a significant impact on the Company’s financial condition, results of operations, or cash
flows.
In June 2014, the FASB issued ASU 2014-12, (“ASU 2014-12”), Stock Compensation - Accounting for Share-
Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the
Requisite Service Period. The amendments in this update require performance targets that could be achieved
after the requisite service period be treated as performance conditions that affect the vesting of the award. ASU
2014-12 is effective for annual and interim periods beginning after December 15, 2015, with early adoption
permitted. The adoption of this guidance is not expected to have a significant impact on the Company’s financial
condition, results of operations, or cash flows.
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In November 2015, the FASB issued ASU No. 2015-17, (“ASU 2015-17”), Income Taxes (Topic 740): Balance
Sheet Classification of Deferred Taxes, which simplifies the presentation of deferred income taxes. Under the
new accounting standard, deferred tax assets and liabilities are required to be classified as noncurrent,
eliminating the prior requirement to separate deferred tax assets and liabilities into current and noncurrent. ASU
2015-17 is effective for annual and interim periods beginning after December 15, 2016, with early adoption
permitted. The adoption of this guidance is not expected to have a significant impact on the Company’s financial
condition, results of operations, or cash flows.
In January 2016, the FASB issued ASU 2016-01, (“ASU 2016-01”), Financial Instruments - Overall (Subtopic
825-10): Recognition and Measurement of Financial Assets and Financial Liabilities. The updated guidance
enhances the reporting model for financial instruments, which includes amendments to address aspects of
recognition, measurement, presentation and disclosure. ASU 2016-01 is effective for annual and interim periods
beginning after December 15, 2017, with early adoption permitted. The adoption of this guidance is not expected
to have a significant impact on the Company’s financial condition, results of operations, or cash flows.
In February 2016, the FASB issued ASU 2016-02, (“ASU 2016-02”), Leases (Topic 842). This update seeks to
increase the transparency and comparability among entities by requiring public entities to recognize lease assets
and lease liabilities on the balance sheet and disclose key information about leasing arrangements. To satisfy
the standard’s objective, a lessee will recognize a right-of-use asset representing its right to use the underlying
asset for the lease term and a lease liability for the obligation to make lease payments. Both the right-of-use
asset and lease liability will initially be measured at the present value of the lease payments, with subsequent
measurement dependent on the classification of the lease as either a finance or an operating lease. For leases
with a term of 12 months or less, a lessee is permitted to make an accounting policy election by class of
underlying asset not to recognize lease assets and lease liabilities. If a lessee makes this election, it should
recognize lease expense for such leases generally on a straight-line basis over the lease term. Accounting by
lessors will remain mostly unchanged from current U.S. GAAP.
In transition, lessees and lessors will be required to recognize and measure leases at the beginning of the
earliest period presented using a modified retrospective approach. The modified retrospective approach includes
a number of optional practical expedients that companies may elect to apply. These practical expedients relate to
the identification and classification of leases that commenced before the effective date, initial direct costs for
leases that commenced before the effective date, and the ability to use hindsight in evaluating lessee options to
extend or terminate a lease or to purchase the underlying asset. The transition guidance also provides specific
guidance for sale and leaseback transactions, build-to-suit leases, leveraged leases, and amounts previously
recognized in accordance with the business combinations guidance for leases. The new standard is effective for
public companies for annual periods beginning after December 15, 2018, and interim periods within those years,
with early adoption permitted. The Company is currently evaluating the effect that adopting this standard will
have on the Company’s financial condition, results of operations, or cash flows.
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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 collectability. Accounts receivable balances consist of the following
components as of December 31, 2015 and 2014:
Billed
Unbilled
Allowance for doubtful accounts
Total accounts receivable—net
2015
2014
(in thousands)
$
43,502 $
6,359
(549)
49,302
5,292
(1,611)
$
49,312 $
52,983
An analysis of changes in the allowance for doubtful accounts for the years ended December 31, 2015, 2014,
and 2013 follows:
Balance—beginning of year
Provision for bad debts
Charge-offs
Recoveries
Balance—end of year
3. MARKETABLE EQUITY SECURITIES
2015
2014
(in thousands)
2013
$
$
1,611 $
151
(1,231)
18
549 $
1,477 $
456
(322)
-
1,611 $
1,157
424
(104)
-
1,477
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 (loss).
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 (loss) 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, 2015, 2014 and 2013, the evaluation resulted in impairment charges of
approximately $833,000, $1,000 and $29,000, respectively, being reported in the Company’s non-operating
income (loss) in its statements of operations.
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The following table sets forth cost, market value and unrealized gain on equity securities classified as available-
for-sale and equity securities classified as trading as of December 31, 2015 and 2014.
Available-for-sale securities
Fair market value
Cost
Unrealized gain
Trading securities
Fair market value
Cost
Unrealized gain
Total
Fair market value
Cost
Unrealized gain
2015
2014
(in thousands)
24,575 $
16,015
8,560 $
24,592
14,272
10,320
- $
-
- $
303
157
146
24,575 $
16,015
8,560 $
24,895
14,429
10,466
$
$
$
$
$
$
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, 2015 and 2014.
Available-for-sale securities
Gross unrealized gains
Gross unrealized losses
Net unrealized gains
2015
2014
(in thousands)
$
$
9,893 $
1,333
8,560 $
10,710
390
10,320
As of December 31, 2015 and 2014, the total net unrealized gains, net of deferred income taxes, in accumulated
other comprehensive income was approximately $5,310,000 and $6,402,000, respectively.
For the year ended December 31, 2015 the Company had net unrealized losses in market value on securities
classified as available-for-sale of approximately $1,079,000, net of deferred income taxes. For the year ended
December 31, 2014, the Company had net unrealized gains in market value on securities classified as available-
for-sale of approximately $237,000, net of deferred income taxes.
For the years ended December 31, 2015, 2014 and 2013, the Company recognized dividends of approximately
$1,058,000, $896,000, and $781,000 in non-operating income in its statements of operations, respectively.
During 2015, the Company reclassified the securities which were classified as trading to available-for-sale at their
fair market values at the time of transfer. During 2014, there were no reclassifications of marketable securities
between trading and available for sale.
As of December 31, 2014, the Company's marketable securities that were classified as trading had gross
recognized gains of approximately $146,000 and had no gross recognized losses.
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The following table shows recognized gains (losses) in market value for securities classified as trading during
2015, 2014 and 2013.
Trading securities
Recognized gain (loss) at beginning of period
Recognized gain at end of period
Securities transferred from trading to available-for-
sale
$
Change in net recognized gain (loss)
$
2015
2014
(in thousands)
2013
146 $
-
(81)
(65) $
8 $
146
-
138 $
(26)
8
-
34
The following table shows the Company’s realized gains during 2015, 2014 and 2013 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
2015
2014
(in thousands)
2013
$
$
$
1,500 $
434
1,720 $
818
1,066 $
902 $
654 $
546 $
857
290
567
346
At December 31, 2015, the Company’s investments’ approximate fair value of securities in a loss position and
related gross unrealized losses were $5,099,000 and $1,332,000, respectively. At December 31, 2014, the
Company’s investments’ approximate fair value of securities in a loss position and related gross unrealized
losses were $3,961,000 and $390,000, respectively. As of December 31, 2015 and 2014, there were no
investments that had been in a continuous unrealized loss position for twelve months or longer.
The market value of the Company’s equity securities are periodically used as collateral against any outstanding
margin account borrowings. As of December 31, 2015 and 2014, the Company had outstanding borrowings of
$11,949,000 and $11,723,000 under its margin account, respectively. The weighted average interest rate on
margin account borrowings was 0.94% and 0.76% as of December 31, 2015 and 2014, respectively.
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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
Deferred equipment gain – current portion
$
2015
2014
(in thousands)
1,792 $
1,771
2,371
58
2,181
11,949
6,840
131
1,954
1,687
2,309
61
1,584
11,723
7,975
224
Total accrued expenses and other liabilities
$
27,093 $
27,517
5. CLAIMS LIABILITIES
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 $7,500, $10,000 and $2,500, respectively. Prior to October 1, 2013, the Company
elected to self-insure for physical damage to trailers. Effective October 1, 2013, the Company began insuring
trailers for physical damage with a $2,500 deductible per occurrence until October 1, 2015, at which time the
Company elected to self-insure trailers for physical damage losses. 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 $600,000 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 $325,000 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 July 1, 2017, and collateralized by
accounts receivable (1)
Equipment financing (2)
Total long-term debt
$
Less current maturities
2015
2014
(in thousands)
9,977 $
129,271
139,248
(40,025)
-
95,201
95,201
(42,908)
Long-term debt—net of current maturities
$
99,223 $
52,293
(1) Line of credit agreement with a bank provides for maximum borrowings of $40.0 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 1.50%
(1.74% at December 31, 2015) 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 debt to equity ratio of no more than 3.00:1. The Company was in compliance with all provisions
under this agreement throughout 2015.
(2) Equipment financings consist of installment obligations for revenue equipment purchases, payable in
various monthly installments with various maturity dates through October 2020, at a weighted average
interest rate of 2.27% as of December 31, 2015 and collateralized by revenue equipment.
The Company has provided letters of credit to third parties totaling approximately $791,000 at December 31,
2015. 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, 2015, are:
2016
2017
2018
2019
2020
Total
7. CAPITAL STOCK
(in thousands)
$
40,025
36,999
48,716
11,217
2,291
$
139,248
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, 2015, there were
11,497,471 shares of our common stock issued and 7,116,661 shares outstanding. At December 31, 2014, there
were 11,474,096 shares of our common stock issued and 7,423,115 shares outstanding. No shares of our
preferred stock were issued or outstanding at December 31, 2015 or 2014.
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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, 2015, we have no agreements or understandings for the issuance of any
shares of preferred stock.
Treasury Stock
In February 2016, our Board of Directors authorized the repurchase of up to 325,000 shares of our common
stock through a Dutch auction tender offer (the “2016 tender offer”). Subject to certain limitations and legal
requirements, the Company could repurchase up to an additional 2% of its outstanding shares which totals
142,413 shares. The 2016 tender offer commenced on February 18, 2016 and expires on March 17, 2016.
Through this tender offer, the Company’s shareholders have the opportunity to tender some or all of their shares
at a price within the range of $27.00 to $30.00 per share.
In May 2015, our Board of Directors authorized the repurchase of up to 80,000 shares of our common stock
through a Dutch auction tender offer (the “2015 tender offer”). In June 2015, the Company extended the offer
and increased the offer from 80,000 shares to 150,000 shares. Subject to certain limitations and legal
requirements, the Company could repurchase up to an additional 2% of its outstanding shares which totaled
148,566 shares. The 2015 tender offer began on the date of the announcement, May 22, 2015 and expired on
July 9, 2015. Through this tender offer, the Company’s shareholders had the opportunity to tender some or all of
their shares at a price within the range of $59.00 to $63.00 per share. Upon expiration, 298,566 shares were
tendered through this offer at a final purchase price of $59.00 per share for a total purchase price of
approximately $17.8 million, including fees and commission and was settled on July 16, 2015. The Company
accounted for the repurchase of these shares as treasury stock on the Company’s consolidated balance sheet
as of December 31, 2015.
In November 2014, our Board of Directors authorized the repurchase of up to 640,000 shares of our common
stock through a Dutch auction tender offer (the “2014 tender offer”). Subject to certain limitations and legal
requirements, the Company could repurchase up to an additional 2% of its outstanding shares which totaled
160,000 shares. The 2014 tender offer began on the date of the announcement, December 2, 2014 and expired
on December 30, 2014. Through this tender offer, the Company’s shareholders had the opportunity to tender
some or all of their shares at a price within the range of $46.00 to $50.00 per share. Upon expiration, 571,865
shares were tendered through this offer at a final purchase price of $50.00 per share for a total purchase price of
approximately $28.7 million, including fees and commission and was settled on January 6, 2015. The Company
accounted for the repurchase of these shares as treasury stock on the Company’s consolidated balance sheet
as of December 31, 2014.
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In November 2013, our Board of Directors authorized the repurchase of up to 600,000 shares of our common
stock through a Dutch auction tender offer (the “2013 tender offer”). Subject to certain limitations and legal
requirements, the Company could repurchase up to an additional 2% of its outstanding shares which totaled
173,000 shares. The 2013 tender offer began on the date of the announcement, December 2, 2013 and expired
on December 30, 2013. Through this tender offer, the Company’s shareholders had the opportunity to tender
some or all of their shares at a price within the range of $19.00 to 21.00 per share. Upon expiration, 675,000
shares were tendered through this offer at a final purchase price of $20.50 per share for a total purchase price of
approximately $13.9 million, including fees and commission and was settled on January 6, 2014. The Company
accounted for the repurchase of these shares as treasury stock on the Company’s consolidated balance sheet
as of December 31, 2013.
The Company’s stock repurchase program has been extended and expanded several times, most recently in
May 2014, when the Board of Directors reauthorized 500,000 shares of common stock for repurchase under the
initial September 2011 authorization. During 2015, the Company repurchased 31,263 shares of its common
stock under this program. Following the reauthorization in 2014, the Company repurchased 33,341 shares of its
common stock during the remainder of 2014 under this repurchase program. Prior to the reauthorization, and
under the initial September 2011 authorization, the Company had repurchased 224,000 shares of its common
stock during 2011, 50,325 shares of its common stock during 2013 and 37,850 shares of its common stock
during 2014. 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, 2015, 4,380,810
shares were held in the treasury at an aggregate cost of approximately $101,779,000.
8. COMPREHENSIVE INCOME (LOSS)
Comprehensive income (loss) was comprised of net income (loss) plus or minus market value adjustments
related to marketable securities. The following table summarizes the changes in accumulated balances of other
comprehensive income for the years ended December 31, 2015 and 2014:
Unrealized
gains and
losses on
available-for-
sale securities
(in thousands)
$
6,160
871
(629)
242
6,402
(962)
(130)
(1,092)
5,310
Balance at January 1, 2014, net of tax of $3,770
Other comprehensive income before reclassifications, net of tax of $533
Amounts reclassified from accumulated other comprehensive income, net of tax of
$(385)
Net other comprehensive income (loss)
Balance at December 31, 2014, net of tax of $3,918
Other comprehensive income before reclassifications, net of tax of $(588)
Amounts reclassified from accumulated other comprehensive income, net of tax of
$(80)
Net other comprehensive income (loss)
Balance at December 31, 2015, net of tax of $3,250
$
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The following table provides details about reclassifications out of accumulated other comprehensive income for the
years ended December 31, 2015 and 2014:
Details about Accumulated Other
Amounts Reclassified from
Accumulated Other
Comprehensive Income
(a)
Comprehensive Income Component
2015
2014
(in thousands)
Unrealized gains and losses on available-for-
sale securities:
Statement of Operations
Classification
Realized gain on sale of securities
Impairment expense
Total before tax
Tax expense
Total after tax
$
$
1,043 $
(833)
210
(80)
130 $
1,015 Non-operating income
(1) Non-operating income
Income before income taxes
Income tax expense
1,014
(385)
629 Net income
(a) Amounts in parentheses indicate debits to profit/loss
9. SIGNIFICANT CUSTOMERS AND INDUSTRY CONCENTRATION
In 2015, three customers, who are in the automobile manufacturing industry, accounted for 37% of revenues. In
2014 and 2013, two customers, who are in the automobile manufacturing industry, accounted for 34% and 33%
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 2015, 2014 and 2013, 47%, 48% and 46%, respectively, were derived from transportation services
provided to the automobile manufacturing industry. Accounts receivable from the three largest customers totaled
approximately $27,051,000 and $28,297,000 at December 31, 2015 and 2014, respectively.
10. DIVIDENDS
The Company has paid cash dividends in the past, however, the Company currently intends to retain future
earnings 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 the Company’s 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:
2015
2014
(in thousands)
Current
Long-Term Current
Long-Term
Deferred tax liabilities:
Property and equipment
Unrealized gains on securities
Prepaid expenses and other
$
- $
3,250
3,056
76,362 $
-
-
- $
3,918
3,837
64,341
-
-
Total deferred tax liabilities
6,306
76,362
7,755
64,341
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
208
-
-
-
625
2,340
-
-
1,283
-
-
-
15
-
1,378
864
124
-
-
230
19
-
3,258
-
15
-
612
-
-
-
564
2,592
-
-
686
-
339
-
11
-
1,206
864
124
-
-
579
28
-
4,392
-
23
-
Total deferred tax assets
4,471
5,888
4,804
7,216
Net deferred tax liability
$
1,835 $
70,474 $
2,951 $
57,125
The reconciliation between the effective income tax rate and the statutory Federal income tax rate for the years
ended December 31, 2015, 2014 and 2013 is presented in the following table:
2015
2014
(in thousands)
2013
Amount
Percent
Amount
Percent
Amount
Percent
Income tax at
the statutory
federal rate
Nondeductible
expenses
State income
taxes/other—
net of federal
benefit
$
11,876
34.0 $
7,552
34.0 $
3,288
34.0
149
0.4
154
0.7
127
1.3
1,467
4.2
1,015
4.6
341
3.6
Total income tax
expense
$
13,492
38.6 $
8,721
39.3 $
3,756
38.9
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The provision for income taxes consisted of the following:
2015
2014
(in thousands)
2013
Current:
Federal
State
Deferred:
Federal
State
$
98 $
493
591
10,782
2,119
12,901
814 $
395
1,209
6,111
1,401
7,512
Total income tax expense
$
13,492 $
8,721 $
124
35
159
2,909
688
3,597
3,756
The Company has alternative minimum tax credits of approximately $1,378,000 at December 31, 2015, 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 $8,584,000 which begin to expire after the year 2030.
In determining whether a tax asset valuation allowance is necessary, management, in accordance with the
provisions of ASC 740-10-30, weighs all available evidence, both positive and negative to determine whether,
based on the weight of that evidence, a valuation allowance is necessary. If negative conditions exist which
indicate a valuation allowance might be necessary, consideration is then given to what effect the future reversals
of existing taxable temporary differences and the availability of tax strategies might have on future taxable
income to determine the amount, if any, of the required valuation allowance. As of December 31, 2015 and 2014,
management determined that the future reversals of existing taxable temporary differences and available tax
strategies would generate sufficient future taxable income to realize its tax assets and therefore a valuation
allowance was not necessary.
The Company recognizes a tax benefit from an uncertain tax position only if it is more likely than not that the
position will be sustained on examination by taxing authorities, based on the technical merits of the position. As
of December 31, 2015, an adjustment to the Company’s consolidated financial statements for uncertain tax
positions has not been required as management believes that the Company’s tax positions taken in income tax
returns filed or to be filed are supported by clear and unambiguous income tax laws. The Company recognizes
interest and penalties related to uncertain income tax positions, if any, in income tax expense. During 2015 and
2014, the Company has not recognized or accrued any interest or penalties related to uncertain income tax
positions.
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 2012 and forward remain open to examination in those jurisdictions.
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The Company contracts with a third-party qualified intermediary in order to maintain 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, 2015, the Company had $484,000 of restricted
cash held by the third-party qualified intermediary. At December 31, 2014, the Company had $8,496,000 of
restricted cash held by the third-party qualified intermediary. Restricted cash is accounted for in “Accounts
receivable-other”.
12. STOCK-BASED COMPENSATION
The Company maintains a stock option plan under which incentive stock options, nonqualified stock options and
other stock awards 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”). 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 closing price of the Company’s common stock, on its primary exchange, on
the same date that the option is granted. On March 13, 2014, the Company’s Board of Directors adopted and on
May 29, 2014, our shareholders approved, the 2014 Amended and Restated Stock Option and Incentive Plan
(the “2014 Plan”) which replaced the 2006 Plan. The shares which remained reserved under the 2006 Plan were
transferred to the 2014 Plan and are reserved for the issuance of stock awards to directors, officers, key
employees, and others. Stock option exercise price under the 2014 Plan is the fair market value of the stock on
the date the option is granted. The restricted stock purchase price under the 2014 Plan shall not be less than
85% of the fair market value of the Company’s common stock on the date the award is made. 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 or award is granted.
Outstanding nonqualified stock options at December 31, 2015, must be exercised within either five or ten years
from the date of grant. Nonqualified stock options granted to members of the Company’s Board of Directors vest
immediately while nonqualified stock options issued to employees vest in increments of 20% each year.
In March 2015, 1,225 shares of common stock were granted to non-employee directors under the 2014 Plan.
This stock award has a grant date fair value of $57.27 per share, based on the closing price of the Company’s
stock on the date of grant and vests immediately.
In November 2014, the Board of Directors granted 9,500 restricted shares of the Company’s stock to certain key
employees. This restricted stock award has a grant date fair value of $42.65, based on the closing price of the
Company’s stock on the date of grant, of which 20% of the award vested immediately and the remaining award
vests in increments of 20% each year for the next four years.
In March 2014, 3,024 shares of common stock were granted to non-employee directors under the 2014 Plan.
This stock award has a grant date fair value of $19.88 per share, based on the closing price of the Company’s
stock on the date of grant and vests immediately.
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. These nonqualified stock options vest in increments of 20% each year.
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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 beginning 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.
During 2015, there were no grants of nonqualified stock options. At December 31, 2015, 358,000 shares were
available for granting future options or restricted stock.
The grant date fair value of stock and stock options vested during 2015, 2014 and 2013 was approximately
$274,000, $263,000 and $346,000, respectively. Total pre-tax stock-based compensation expense, recognized in
Salaries, wages and benefits was approximately $267,000 during 2015 and includes approximately $70,000
recognized as a result of the grant of 175 shares of stock to each non-employee director during the first quarter
of 2015. The Company recognized a total income tax benefit of approximately $103,000 related to stock-based
compensation expense during 2015. The recognition of stock-based compensation expense decreased diluted
and basic income per common share by approximately $0.02 during 2015. As of December 31, 2015, the
Company had stock-based compensation plans with total unvested stock-based compensation expense of
approximately $344,000 which is being amortized on a straight-line basis over the remaining vesting period. As a
result, the Company expects to recognize approximately $167,000 in additional compensation expense related to
unvested option awards during 2016, $109,000 in additional compensation expense related to unvested option
awards during 2017 and $68,000 in additional compensation expense related to unvested option awards during
2018.
Total pre-tax stock-based compensation expense, recognized in Salaries, wages and benefits was approximately
$270,000 during 2014 and included approximately $60,000 recognized as a result of the grant of 504 shares of
stock to each non-employee director during the first quarter of 2014 and approximately $94,000 recognized as a
result of the grant of 9,500 shares of stock to certain key employees during the fourth quarter of 2014. The
Company recognized a total income tax benefit of approximately $106,000 related to stock-based compensation
expense during 2014. The recognition of stock-based compensation expense decreased diluted and basic
income per common share by approximately $0.02 during 2014.
Total pre-tax stock-based compensation expense, recognized in Salaries, wages and benefits was approximately
$317,000 during 2013 and included approximately $179,000 recognized as a result of the annual grant of 5,000
stock options to each non-employee director during the first quarter of 2013. The Company recognized a total
income tax benefit of approximately $123,000 related to stock-based compensation expense during 2013. The
recognition of stock-based compensation expense decreased diluted earnings per common share and basic
earnings per common share by approximately $0.02 and $0.03, respectively during 2013. At December 31, 2013,
the Company had stock-based compensation plans with total unvested stock-based compensation expense of
approximately $518,000.
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Transactions in stock options under these plans are summarized as follows:
Outstanding—January 1, 2013:
Granted
Exercised
Canceled
Outstanding—December 31, 2013:
Granted
Exercised
Canceled
Outstanding—December 31, 2014:
Granted
Exercised
Canceled
Outstanding—December 31, 2015:
Options exercisable—December 31, 2015:
Shares
Under
Option
Weighted-
Average
Exercise Price
235,442 $
35,000
(7,257)
(99,087)
164,098 $
-
(77,708)
(42)
86,348 $
-
(20,250)
-
66,098 $
37,893 $
11.38
10.44
10.94
11.71
10.99
-
10.88
11.22
11.09
-
11.65
-
10.92
10.93
The fair value of the Company’s 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 (years)
Fair value of options (per share)
There were no options granted during 2015 or 2014.
2013
0%
62.69%
0.61%
4.3
$5.13
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.
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Table Of Contents
Information related to the Company’s option activity as of December 31, 2015, and changes during the year then
ended is presented below:
Weighted-
Average
Remaining
Contractual
Term
(in years)
Aggregate
Intrinsic
Value*
Shares
Under
Option
Weighted-
Average
Exercise
Price
86,348 $
-
(20,250)
-
66,098 $
(per share)
11.09
-
11.65
-
10.92
4.1 $ 1,101,716
37,893 $
10.93
2.5 $
631,168
Outstanding at January 1, 2015
Granted
Exercised
Canceled/forfeited/expired
Outstanding at December 31, 2015
Fully vested and exercisable at December
31, 2015
__________________________
*
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, 2015, was $27.59.
The weighted-average grant-date fair value of options granted during 2013 was $5.13 per share. There were no
options granted during 2015 or 2014. The weighted-average grant-date fair value of options either canceled,
forfeited, or expired during the years 2014 and 2013 were $6.34 and $5.92 per share, respectively. There were
no options either canceled, forfeited, or expired during 2015.
The total intrinsic value of options exercised during the years ended December 31, 2015, 2014 and 2013, were
approximately $940,043, $1,355,000 and $53,000, respectively.
A summary of the status of the Company’s nonvested options and restricted stock as of December 31, 2015 and
changes during the year ended December 31, 2015, is presented below:
Stock Options:
Nonvested at January 1, 2015
Granted
Canceled/forfeited/expired
Vested
Nonvested at December 31, 2015
- 62 -
Number of
Options
Weighted-
Average
Grant Date
Fair Value
48,109 $
-
-
(19,904)
28,205 $
6.10
-
-
6.15
6.07
Table Of Contents
Restricted Shares:
Nonvested at January 1, 2015
Granted
Canceled/forfeited/expired
Vested
Nonvested at December 31, 2015
__________________________
Number of
Shares
Weighted-
Average
Grant Date
Fair Value (1)
7,600 $
1,225
-
(3,125)
5,700 $
42.65
57.27
-
48.38
42.65
(1) The weighted-average grant date fair value was based on the closing price of the Company’s stock on the
date of the grant.
The number, weighted average exercise price and weighted average remaining contractual life of options
outstanding as of December 31, 2015 and the number and weighted average exercise price of options
exercisable as of December 31, 2015 is as follows:
Exercise
Price
Shares
Under
Outstanding
Options
$
$
$
$
$
$
10.44
10.90
10.90
11.22
11.54
11.75
15,000
6,000
29,600
7,498
4,000
4,000
66,098
Weighted-
Average
Remaining
Contractual
Term
(in years)
Shares
Under
Exercisable
Options
2.2
1.4
6.4
4.9
1.2
0.2
4.1
15,000
6,000
2,000
6,893
4,000
4,000
37,893
Cash received from option exercises totaled approximately $236,000, $846,000 and $46,000 during the years
ended December 31, 2015, 2014 and 2013, respectively. The Company issues new shares upon option exercise.
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13. EARNINGS PER SHARE
Basic earnings per common share was computed by dividing net income by the weighted average number of
shares outstanding during the period. Diluted earnings per common share was calculated as follows:
For the Year Ended December 31,
2015
2013
2014
(in thousands, except per share data)
Net income
$
21,436 $
13,491 $
5,915
Basic weighted average common shares
outstanding
Dilutive effect of common stock equivalents
Diluted weighted average common shares
outstanding
Basic earnings per share
Diluted earnings per share
7,288
37
7,990
44
8,662
20
7,325
8,034
8,682
$
$
2.94 $
2.93 $
1.69 $
1.68 $
0.68
0.68
Average options outstanding to purchase 14,915 shares of common stock for December 31, 2013 were not
included in the computation of diluted earnings per share because to do so would have an anti-dilutive effect.
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 were approximately $171,000, $162,000 and
$188,000 in 2015, 2014 and 2013, respectively.
15. COMMITMENTS AND CONTINGENCIES
Other than the lawsuit discussed below, 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.
We are a defendant in a collective-action lawsuit which was filed on August 22, 2013, in the United States District
Court for the Western District of Arkansas. The plaintiffs, who are current and former drivers and who worked for
the Company during the period of August 22, 2010, through the date of the filing, allege claims for unpaid wages
under the Fair Labor Standards Act and the Arkansas Minimum Wage Law. The complaint alleges that the
Company failed to pay newly hired drivers minimum wage during orientation, training, and while traveling during
normal business hours and that the Company failed to pay all drivers when working on assignment for more than
24 hours. The plaintiffs seek to enjoin the Company from continuing its current pay practices related to the
allegations. They also seek actual damages, liquidated damages equal to accrual damages, court costs, and
legal fees. During 2014, the Company reached a preliminary settlement with the plaintiffs in the amount of
$3,950,000 and accordingly, reserved this amount, along with estimated settlement costs, in its 2014
consolidated financial statements. During the first quarter of 2015, the Company negotiated a reduction in the
settlement amount to approximately $3,450,000. The settlement was approved by the court in January 2016 and
we expect to make the settlement payment during 2016. Management has determined that any losses under this
claim will not be covered by existing insurance policies.
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During 2014, the Company’s subsidiaries entered into operating leases for the lease of 421 trucks. Revenue
equipment held under operating leases is not carried on our balance sheet and the respective lease payments
are reflected in our consolidated statements of operations as a component of the Rents and purchased
transportation category.
Leases for revenue equipment and certain premises under non-cancellable operating leases expire at various
dates through 2019. Future minimum lease payments related to these non-cancellable leases at December 31,
2015 are as follows:
2016
2017
2018
2019
2020 and thereafter
Total
(in thousands)
$
10,113
6,371
400
11
-
$
16,895
Total rental expense, net of amounts reimbursed, for the years ended December 31, 2015, 2014 and 2013 was
approximately $12,057,000, $6,239,000, and $1,572,000, respectively.
16. LEASE INCOME
The Company has a lease-purchase program whereby we offer independent contractors the opportunity to lease
a Company-owned tractor. The terms associated with these leases require weekly lease payments over the term
of the leases which range from 10 to 30 months. The cost and carrying amount of Company-owned tractors in
this program at December 31, 2015 were approximately $35,199,000 and $15,382,000, respectively. The cost
and carrying amount of Company-owned tractors in this program at December 31, 2014 was $14,143,000 and
$6,136,000, respectively.
Leases in our lease-purchase program expire at various dates through 2018. Payments received under this
program are classified in the Company’s financial statements under Revenue. Future minimum lease receipts
related to these leases at December 31, 2015 and 2014 were approximately $7,970,000 and 4,712,000.
The Company leases office and shop facilities to a related party. See Note 18 to our consolidated financial
statements. At December 31, 2015, the cost and carrying amount of the facilities leased were approximately
$1,697,000 and $1,310,000, respectively. At December 31, 2014, the cost and carrying amount of the facilities
leased were approximately $1,697,000 and $1,368,000, respectively. Future minimum lease receipts related to
this lease at December 31, 2015 are approximately $48,000.
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17. 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, 2015, the following items are measured at fair value on a recurring basis:
Marketable equity securities
$
24,575 $
24,575
-
-
Total
Level 1
Level 2
Level 3
(in thousands)
During 2015 and 2014, there were no transfers of marketable securities between levels of fair value
measurement.
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, 2015
and 2014 are summarized as follows:
2015
2014
Carrying
Value
Estimated
Fair Value
Carrying
Value
Estimated
Fair Value
(in thousands)
Long-term debt
$
129,271 $
129,024 $
95,201 $
95,326
The Company has not elected the fair value option for any of our financial instruments.
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18. 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 controlling stockholder. The
Company recognized approximately $11,325,000, $13,253,000 and $10,350,000 in operating revenue and
approximately $4,834,000, $1,440,000 and $1,303,000 in operating expenses in 2015, 2014 and 2013,
respectively. In addition, also in the normal course of business, the Company sold tractors to an affiliated
company owned by a controlling stockholder for approximately $750,000 during 2014.
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 controlling stockholder. Premiums
paid for physical damage coverage were approximately $2,467,000, $2,597,000 and $2,036,000 for 2015, 2014
and 2013, respectively. Premiums paid for auto liability coverage during 2015, 2014 and 2013 were
approximately $9,605,000, $9,464,000 and $9,461,000, respectively. Premiums paid for general liability
coverage during 2015, 2014 and 2013 were approximately $23,000, $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 2015, 2014, and 2013 were
approximately $276,000, $267,000 and $254,000, respectively.
Amounts owed to the Company by these affiliates were approximately $2,482,000 and $2,598,000 at December
31, 2015 and 2014, respectively. Of the accounts receivable at December 31, 2015, approximately $2,370,000
represents freight transportation, approximately $5,000 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, and approximately $106,000 represents property lease
charges. Amounts representing prepaid insurance premiums at December 31, 2015 and 2014 were
approximately $481,000 and $1,624,000, respectively. Amounts payable to affiliates at December 31, 2015 and
2014 were approximately $1,236,000 and $971,000 respectively.
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Table Of Contents
19. QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
The tables below present quarterly financial information for 2015 and 2014:
2015
Three Months Ended
March 31
June 30
September
30
December
31
(in thousands, except per share data)
Operating revenues
Operating expenses and costs
$
99,483 $
90,336
108,033 $
96,151
107,110 $
96,884
102,424
97,449
Operating income
Non-operating income (loss)
Interest expense
Income tax expense
Net income
Net income per common share:
Basic
Diluted
9,147
245
617
3,406
11,882
272
644
4,471
10,226
(132)
732
3,567
4,975
1,131
825
2,048
5,369 $
7,039 $
5,795 $
3,233
0.72 $
0.72 $
0.95 $
0.94 $
0.81 $
0.80 $
0.45
0.45
$
$
$
Average common shares outstanding:
Basic
Diluted
7,425
7,467
7,431
7,474
7,186
7,219
7,116
7,144
2014
Three Months Ended
March 31
June 30
September
30
December
31
(in thousands, except per share data)
Operating revenues
Operating expenses and costs
$
97,820 $
94,975
104,343 $
95,754
107,059 $
98,609
101,715
98,589
Operating income
Non-operating income
Interest expense
Income tax expense
Net income
Net income per common share:
Basic
Diluted
Average common shares outstanding:
Basic
Diluted
2,845
272
862
898
8,589
259
743
3,160
8,450
594
632
3,355
3,126
974
660
1,308
1,357 $
4,945 $
5,057 $
2,132
0.17 $
0.17 $
0.62 $
0.62 $
0.63 $
0.63 $
0.27
0.27
$
$
$
7,985
8,033
7,992
8,035
7,993
8,032
7,988
8,027
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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, 2015, 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 the 2013 Internal Control—Integrated Framework issued by
the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). Based on this evaluation,
management concluded that our internal control over financial reporting was effective as of December 31, 2015.
Management reviewed the results of its assessment with our Audit Committee. The effectiveness of our internal
control over financial reporting as of December 31, 2015 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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Table Of Contents
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, 2015, based on criteria established in the 2013
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, 2015, based on criteria established in the 2013 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, 2015, and
our report dated March 15, 2016, expressed an unqualified opinion on those financial statements.
/s/ GRANT THORNTON LLP
Tulsa, Oklahoma
March 15, 2016
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Table Of Contents
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 April 26, 2016. 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, 2015, 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
71,798 $
10.92(1)
357,951
-0-
-0-
-0-
Plan Category
Equity Compensation Plans
approved by Security Holders
Equity Compensation Plans not
approved by Security Holders
Total
71,798 $
10.92
357,951
(1) Excludes shares of restricted stock, which do not require the payment of an exercise price.
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Table Of Contents
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, 2015 and 2014
Consolidated Statements of Operations - Years ended December 31, 2015, 2014 and 2013
Consolidated Statements of Comprehensive Income - Years ended December 31, 2015, 2014 and 2013
Consolidated Statements of Stockholders’ Equity - Years ended December 31, 2015, 2014 and 2013
Consolidated Statements of Cash Flows - Years ended December 31, 2015, 2014 and 2013
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 required information is inapplicable, or because the information is presented in the consolidated
financial statements or related notes.
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Table Of Contents
(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) the 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) the Form 8-K filed on July 16, 2009 (“7/16/09 8-K”); (x) Form 8-K
filed on December 3, 2010 (“12/03/10 8-K”); (xi) the Schedule 14A filed on April 23, 2014; (“4/23/14 DEF
14A”); or (xii) the Schedule TO filed on December 2, 2014 (“12/2/14 TO-I”).
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)
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Table Of Contents
*4.6
Fourteenth Amendment to Loan Agreement dated November 17, 2014, by and among First
Tennessee Bank National Association, the Company and P.A.M. Transport, Inc., together
with Promissory Note in the principal amount of $40,000,000 (Exh. (b)(5), 12/2/14 TO-I)
*10.1
(1) Employment Agreement between the Registrant and Daniel H. Cushman, dated June 29,
2009 (Exh. 10.2, 7/16/09 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, 7/16/09 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)
*10.8
(1) 2014 Amended and Restated Stock Option and Incentive Plan (Appendix A, 4/23/14 DEF
14A)
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
21.1
23.1
31.1
31.2
32.1
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.
- 74 -
Table Of Contents
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 10, 2016
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 10, 2016
Dated: March 10, 2016
Dated: March 10, 2016
Dated: March 10, 2016
Dated: March 10, 2016
Dated: March 10, 2016
By:/s/ Frederick P. Calderone
FREDERICK P. CALDERONE, 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/ Norman E. Harned
NORMAN E. HARNED, Director
By:/s/ Franklin H. McLarty
FRANKLIN H. MCLARTY, Director
By:/s/ Manuel J. Moroun
MANUEL J. MOROUN, Director
Dated: March 10, 2016
By:/s/ Matthew T. Moroun
Dated: March 10, 2016
Dated: March 10, 2016
MATTHEW T. MOROUN, Director and Chairman of
the Board
By:/s/ Daniel C. Sullivan
DANIEL C. SULLIVAN, Director
By:/s/ Allen W. West
ALLEN W. WEST
Vice President-Finance, Chief Financial Officer,
Secretary and Treasurer
(principal financial and accounting officer)
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Table Of Contents
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) the 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) the Form 8-K filed on July 16, 2009 (“7/16/09 8-K”); (x) Form 8-K filed on December 3,
2010 (“12/03/10 8-K”); (xi) the Schedule 14A filed on April 23, 2014 (“4/23/14 DEF 14A”); or (xii) the Schedule TO filed
on December 2, 2014 (“12/2/14 TO-I”)..
Exhibit #
*3.1
*3.2
*4.1
*4.2
*4.2.1
*4.3
*4.3.1
*4.3.2
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)
*4.3.3
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)
*4.4
*4.4.1
*4.4.2
*4.4.3
*4.5
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)
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Table Of Contents
*4.6
Fourteenth Amendment to Loan Agreement dated November 17, 2014, by and among First
Tennessee Bank National Association, the Company and P.A.M. Transport, Inc., together with
Promissory Note in the principal amount of $40,000,000 (Exh. (b)(5), 12/2/14 TO-I)
*10.1
(1) Employment Agreement between the Registrant and Daniel H. Cushman, dated June 29, 2009 (Exh.
10.2, 7/16/09 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)
*10.8
(1) 2014 Amended and Restated Stock Option and Incentive Plan (Appendix A, 4/23/14 DEF 14A)
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.