P.A.M. Transportation(PTSI) - 2021 Q4 - Annual Report

Report Overview Forward-Looking Statements The report includes forward-looking statements on operations, financial performance, and industry trends, with actual results potentially varying due to various risks - Forward-looking statements cover operational and growth strategies, expected financial condition, industry trends, capital expenditures, and financing plans[13] - Actual results may differ significantly due to factors like the COVID-19 pandemic, trucking industry overcapacity, fuel price volatility, driver retention difficulties, increased insurance premiums, and Mexican business risks[13] PART I Business Overview P.A.M. Transportation Services, Inc. is a dry van truckload carrier operating across North America, focusing on comprehensive solutions and cost control - The company is a dry van truckload carrier, transporting general commodities including automotive parts, expedited freight, consumer goods, and industrial products across the continental U.S., Canada, and Mexico[19] 2019-2021 Operating Revenue Composition (Excluding Fuel Surcharges) | Year | Truckload Services % | Brokerage Logistics Services % | | :--- | :--- | :--- | | 2021 | 67.0% | 33.0% | | 2020 | 76.9% | 23.1% | | 2019 | 82.7% | 17.3% | 2021 Revenue Geographic Distribution | Region | Revenue % | | :--- | :--- | | Domestic Transportation | 68% | | Mexico or Canada | 32% | - The company's strategy includes providing comprehensive truckload solutions, developing customer relationships in high-density traffic lanes, offering superior and flexible customer service, and implementing strict cost controls[31][32][33][35] Impact of COVID-19 The company prioritized safety during COVID-19, implementing protective measures, and expects to meet future capital needs despite potential ongoing pandemic impacts - The company implemented measures during the pandemic to protect employee and public safety, including remote work, distributing cleaning and protective supplies, increasing cleaning frequency, and providing guidance on preventative measures[26] - The company expects to meet working capital and planned capital expenditure needs for the next twelve months through cash balances, operating cash flow, and existing financing sources[30] Marketing and Significant Customers Marketing targets time-sensitive freight to become a core carrier, optimizing freight flow, with revenue highly concentrated in the automotive sector 2019-2021 Major Customer Revenue Contribution | Customer/Industry | 2021 Revenue % | 2020 Revenue % | 2019 Revenue % | | :--- | :--- | :--- | :--- | | Top Five Customers | 33% | 35% | 40% | | General Motors Company | 11% | 15% | 19% | | Walmart Inc. | 9% | 5% | 2% | | Fiat Chrysler Automobiles | 5% | 6% | 9% | | Total Automotive Industry | 27% | 30% | 40% | Revenue Equipment As of December 31, 2021, the company operated 1,970 trucks and 6,859 trailers, focusing on newer models for efficiency and safety December 31, 2021 Fleet Overview | Metric | Quantity/Age | | :--- | :--- | | Number of Trucks | 1,970 vehicles (including 378 independent contractor trucks) | | Number of Trailers | 6,859 vehicles | | Average Truck Age | 1.8 years | | Average Trailer Age | 5.5 years | - As of December 31, 2021, approximately 281 independent contractors leased 444 trucks through the company's lease-purchase program[53] Human Capital Resources As of December 31, 2021, the company employed 2,510 full-time staff, primarily drivers, prioritizing safety, diversity, and competitive compensation December 31, 2021 Employee Composition | Category | Number of People | | :--- | :--- | | Total Employees | 2,510 | | Drivers | 1,831 | | Maintenance | 202 | | Operations | 268 | | Marketing | 59 | | Safety and Personnel | 87 | | Administrative and Accounting | 63 | - The company recruits and retains veteran drivers through its "Road to a Million Miles" program, which provides on-the-job training and benefits[60] - The company faces challenges with a shortage of qualified drivers, leading to increased recruitment and retention costs and underutilization of equipment[59] Regulation The company operates under extensive federal, state, and international regulations, maintaining a "Satisfactory" DOT rating, though new rules increase costs and recruitment challenges - The company is regulated by U.S. federal and state, Canadian provincial, and Mexican federal agencies, covering operations, driver hours of service (HOS), drug and alcohol testing, safety, equipment size and weight, and more[63] - The company has received a "Satisfactory" rating from the U.S. Department of Transportation (DOT), the highest of three ratings[63] - New regulations such as HOS rules, mandatory Electronic Logging Devices (ELDs), the CSA safety compliance program, EPA and NHTSA heavy-duty truck emission standards, and the CDL Drug and Alcohol Clearinghouse increase operating costs and driver recruitment difficulties[65][66][67][68][69] Risk Factors The company faces diverse risks from industry cycles, operational challenges, and financial factors, compounded by governance structure and liquidity concerns - Industry risks include fuel price volatility, industry overcapacity, excess used equipment markets, increased interest rates, taxes, insurance premiums, and difficulties in attracting and retaining qualified drivers[76][81][82][83] - Business risks include high reliance on major customers (in 2021, the top five customers accounted for 33% of total revenue, and the automotive industry for 27%), labor disputes, increased insurance and claims costs, litigation, high debt, credit market disruptions, Mexican business risks (such as new labor outsourcing laws, border delays), seasonality, natural disasters, cybersecurity risks, high fixed costs, and potential unionization[101][103][104][106][107][108][111][112][113][114][115][117][121][122][123] - Risks related to common stock include the chairman holding a 70.2% controlling interest, limiting public shareholders' influence on significant corporate actions; potentially insufficient stock trading volume for adequate liquidity; and no current plans to pay future dividends[126][128][130] Unresolved Staff Comments This report contains no unresolved staff comments Properties The company owns its main hub in Tontitown, Arkansas, along with other owned and leased facilities across multiple states and Mexico - The company owns administrative offices and its main hub facility in Tontitown, Arkansas, spanning approximately 46.3 acres and comprising 134,581 square feet of office, maintenance, and warehouse facilities[132] - The company owns hub facilities in Little Rock, Arkansas; North Jackson, Ohio; Willard, Ohio; and Irving and Laredo, Texas[133] - The company leases facilities in Fort Wayne and Indianapolis, Indiana; Romulus, Michigan; Memphis, Tennessee; and Monterrey, Mexico[133] Legal Proceedings The company faces multiple legal proceedings, including a 2021 class action lawsuit not covered by insurance, and has settled prior wage and classification claims - The company is a defendant in a class action lawsuit filed in August 2021 by former drivers, alleging unpaid minimum wages, violations of the Electronic Fund Transfer Act, Arkansas Wage Payment Law and common law, and the Racketeer Influenced and Corrupt Organizations Act (RICO); any losses from this lawsuit are not covered by existing insurance policies[137] - In July 2020, the company settled a class action lawsuit for $16.5 million, alleging unpaid minimum wages to employee drivers[344] - In March 2020, the company paid approximately $421,000 to settle an independent contractor misclassification lawsuit[345] - Since September 1, 2020, the company has been self-insured for automotive liability claims exceeding $2 million[135][346] Mine Safety Disclosures Mine safety disclosures are not applicable to this report PART II Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities The company's common stock trades on Nasdaq, has approximately 59 registered shareholders, and actively repurchases shares but does not plan future dividends - The company's common stock trades on the Nasdaq Global Market under the symbol PTSI[140] - As of February 21, 2022, there were approximately 59 registered holders of common stock[140] - The company currently does not intend to pay cash dividends in the foreseeable future[141] - The company's stock repurchase program was reauthorized in November 2021 to repurchase 500,000 shares of common stock[142] - In July 2021, the company repurchased 272,405 shares of common stock at $37.00 per share through a Dutch auction tender offer, totaling approximately $10.1 million[145] Item 6. [Reserved] This item is reserved Management's Discussion and Analysis of Financial Condition and Results of Operations This section analyzes the company's financial performance and condition from 2019-2021, highlighting revenue growth, operational efficiency, liquidity sources, and key accounting estimates Business Overview The company, headquartered in Tontitown, Arkansas, provides truckload and brokerage services across North America, with revenue driven by freight and costs influenced by various operational factors - Company revenue is primarily influenced by rates per mile, equipment utilization, and the percentage of non-compensated miles[152] - Key cost challenges include fuel, driver recruitment, training, wages and benefits, independent broker costs (included in purchased transportation), insurance and claims, and maintenance and capital equipment costs[153] 2019-2021 Operating Revenue Composition (Excluding Fuel Surcharges) | Year | Truckload Services % | Brokerage Logistics Services % | | :--- | :--- | :--- | | 2021 | 67.0% | 33.0% | | 2020 | 76.9% | 23.1% | | 2019 | 82.7% | 17.3% | Results of Operations - Truckload Services Truckload services saw significant revenue growth in 2021 driven by higher rates and post-pandemic recovery, with improved operating ratios in both 2021 and 2020 2021 Compared to 2020 In 2021, truckload services revenue (excluding fuel surcharges) increased by 27.3% to $429.6 million, primarily due to a 34.6% increase in loaded rate per mile and recovery from 2020 COVID-19 related shutdowns 2021 Compared to 2020 Truckload Services Key Financial Metrics | Metric | 2021 | 2020 | Change Rate/Amount | | :--- | :--- | :--- | :--- | | Operating Revenue (excluding fuel surcharges) | $429.6 million | $337.5 million | +27.3% | | Loaded Rate per Mile | $2.58 | $1.91 | +34.6% | | Operating Ratio | 82.3% | 92.0% | -9.7 percentage points | | Salaries, Wages, and Benefits (% of revenue) | 30.6% | 35.3% | -4.7 percentage points | | Operating Supplies and Expenses (% of revenue) | 8.3% | 10.7% | -2.4 percentage points | | Rents and Purchased Transportation (% of revenue) | 24.3% | 23.2% | +1.1 percentage points | | Depreciation (% of revenue) | 12.5% | 16.5% | -4.0 percentage points | | Insurance and Claims (% of revenue) | 4.4% | 2.6% | +1.8 percentage points | 2020 Compared to 2019 In 2020, truckload services revenue (excluding fuel surcharges) decreased by 7.2% to $337.5 million, mainly due to COVID-19 related shutdowns and fewer trucks in service, despite a 3.9% increase in loaded rate per mile 2020 Compared to 2019 Truckload Services Key Financial Metrics | Metric | 2020 | 2019 | Change Rate/Amount | | :--- | :--- | :--- | :--- | | Operating Revenue (excluding fuel surcharges) | $337.5 million | $363.6 million | -7.2% | | Loaded Rate per Mile | $1.91 | $1.84 | +3.9% | | Operating Ratio | 92.0% | 97.7% | -5.7 percentage points | | Salaries, Wages, and Benefits (% of revenue) | 35.3% | 34.5% | +0.8 percentage points | | Operating Supplies and Expenses (% of revenue) | 10.7% | 6.5% | +4.2 percentage points | | Rents and Purchased Transportation (% of revenue) | 23.2% | 28.3% | -5.1 percentage points | | Depreciation (% of revenue) | 16.5% | 15.0% | +1.5 percentage points | | Insurance and Claims (% of revenue) | 2.6% | 9.8% | -7.2 percentage points | Results of Operations - Logistics and Brokerage Services Logistics and brokerage services achieved substantial revenue growth in 2021 and 2020, driven by increased freight volume and improved operating ratios 2021 Compared to 2020 In 2021, logistics and brokerage services revenue (excluding fuel surcharges) increased by 108.6% to $211.7 million, driven by a 69.5% increase in customer freight volume and a 23.1% increase in revenue per loaded mile 2021 Compared to 2020 Logistics and Brokerage Services Key Financial Metrics | Metric | 2021 | 2020 | Change Rate/Amount | | :--- | :--- | :--- | :--- | | Operating Revenue (excluding fuel surcharges) | $211.7 million | $101.5 million | +108.6% | | Customer Freight Volume | N/A | N/A | +69.5% | | Revenue per Loaded Mile | N/A | N/A | +23.1% | | Operating Ratio | 88.7% | 93.3% | -4.6 percentage points | | Salaries, Wages, and Benefits (% of revenue) | 4.6% | 5.0% | -0.4 percentage points | | Rents and Purchased Transportation (% of revenue) | 82.5% | 86.5% | -4.0 percentage points | 2020 Compared to 2019 In 2020, logistics and brokerage services revenue (excluding fuel surcharges) increased by 33.6% to $101.5 million, primarily driven by a 36.0% increase in customer freight volume 2020 Compared to 2019 Logistics and Brokerage Services Key Financial Metrics | Metric | 2020 | 2019 | Change Rate/Amount | | :--- | :--- | :--- | :--- | | Operating Revenue (excluding fuel surcharges) | $101.5 million | $75.9 million | +33.6% | | Customer Freight Volume | N/A | N/A | +36.0% | | Operating Ratio | 93.3% | 94.7% | -1.4 percentage points | | Salaries, Wages, and Benefits (% of revenue) | 5.0% | 5.8% | -0.8 percentage points | | Rents and Purchased Transportation (% of revenue) | 86.5% | 86.4% | +0.1 percentage points | Results of Operations - Combined Services The company achieved significant growth in net income and diluted EPS in 2021 and 2020, reflecting strong operational performance and stable effective tax rates 2021 Compared to 2020 In 2021, consolidated net income across all segments increased to $76.5 million (11.9% of revenue excluding fuel surcharges), up from $17.8 million (4.1%) in 2020 2021 Compared to 2020 Combined Services Key Financial Metrics | Metric | 2021 | 2020 | Change Rate | | :--- | :--- | :--- | :--- | | Consolidated Net Income | $76.5 million | $17.8 million | +330.9% | | Net Income (% of revenue excluding fuel surcharges) | 11.9% | 4.1% | +7.8 percentage points | | Diluted Earnings per Share | $6.69 | $1.55 | +331.6% | | Income Tax Expense | $26 million | $5.6 million | +364.3% | | Effective Tax Rate | 25.4% | 23.8% | +1.6 percentage points | 2020 Compared to 2019 In 2020, consolidated net income across all segments increased to $17.8 million (4.1% of revenue excluding fuel surcharges), up from $7.9 million (1.8%) in 2019 2020 Compared to 2019 Combined Services Key Financial Metrics | Metric | 2020 | 2019 | Change Rate | | :--- | :--- | :--- | :--- | | Consolidated Net Income | $17.8 million | $7.9 million | +125.3% | | Net Income (% of revenue excluding fuel surcharges) | 4.1% | 1.8% | +2.3 percentage points | | Diluted Earnings per Share | $3.09 | $1.34 | +130.6% | | Income Tax Expense | $5.6 million | $2.2 million | +154.5% | | Effective Tax Rate | 23.8% | 21.9% | +1.9 percentage points | Liquidity and Capital Resources Liquidity is driven by operating cash flow, equipment sales, and borrowings, with significant capital expenditures planned for 2022, financed by installment notes and credit 2019-2021 Cash Flow Overview (in thousands) | Cash Flow Category | 2021 | 2020 | 2019 | | :--- | :--- | :--- | :--- | | Net Cash Provided by Operating Activities | $101,740 | $67,590 | $84,297 | | Net Cash Provided by (Used in) Investing Activities | $9,250 | ($32,692) | ($62,310) | | Net Cash Used in Financing Activities | ($92,818) | ($34,879) | ($21,951) | | Net Increase in Cash and Cash Equivalents | $18,172 | $19 | $36 | | Cash and Cash Equivalents at End of Period | $18,509 | $337 | $318 | - In 2021 and 2020, the company financed approximately $51.9 million and $106.9 million of revenue equipment purchases, respectively, using cash, installment notes, and credit facilities[199] 2020-2021 Installment Notes Overview | Metric | December 31, 2021 | December 31, 2020 | | :--- | :--- | :--- | | Total Outstanding Installment Notes | $222.3 million | $250.6 million | | Weighted Average Interest Rate | 2.81% | 3.30% | - As of December 31, 2021, the company's revolving credit facility was $60 million, with approximately $400,000 drawn (including $300,000 in letters of credit), leaving $59.6 million available[203] - The company expects to purchase 400 new trucks and 1,000 trailers in 2022, with net capital expenditures projected at approximately $95.1 million[212] Inflation Inflation impacts most operating costs, and sustained high rates, supply chain issues, and international events could significantly increase expenses - Inflation affects most of the company's operating costs, and if current inflation rates persist, coupled with supply chain issues and international events, it could lead to increased costs for drivers, employee wages, equipment, fuel, and other expenses[213] Critical Accounting Estimates Financial statements rely on critical accounting estimates for depreciation, amortization, and claims reserves, which are regularly evaluated for potential material impact - Critical accounting estimates include accrued liabilities for insurance claims, legal reserves, estimated useful lives and salvage values of property and equipment, current expected credit losses, and income tax estimates[248] - Depreciation and amortization: Trucks and trailers are depreciated using the straight-line method, typically over 3 to 10 years, considering estimated salvage values; management exercises judgment in determining useful lives and salvage values[215][217] - Claims reserves: The company self-insures for health and workers' compensation benefits, and for automotive liability claims exceeding $2 million since September 1, 2020; claims costs are accrued based on estimates of known claims and incurred but not reported (IBNR) claims[218][219] Quantitative and Qualitative Disclosures About Market Risk The company is exposed to equity price, interest rate, commodity price, and foreign exchange risks, with sensitivity analysis indicating potential material financial impact - The company's primary market risk exposures include equity price risk, interest rate risk, commodity price risk (diesel fuel), and foreign currency exchange rate risk[220] - Equity price risk: As of December 31, 2021, the company held marketable equity securities with a fair value of $39.4 million; a 10% decrease in market prices would result in a corresponding decrease of approximately $3.9 million[222] - Interest rate risk: The revolving credit facility bears interest at a floating rate based on LIBOR plus a fixed percentage; assuming $18 million in floating-rate debt, a 100 basis point increase in LIBOR would result in an additional $180,000 in annual interest expense[223] - Commodity price risk (diesel fuel): Based on 2021 fuel consumption, a 10% increase in the average annual price of diesel fuel would increase the company's annual fuel expense by approximately $5.2 million[225] - Foreign currency exchange rate risk: The company's Mexican branch operations face foreign currency exchange rate risk; based on 2021 peso-denominated expenses, a 10% decrease in the exchange rate would increase annual operating expenses by approximately $200,000[226] Financial Statements and Supplementary Data This section presents the audited consolidated financial statements for 2019-2021, including balance sheets, income statements, equity, cash flows, and notes, with an unqualified audit opinion Report of Independent Registered Public Accounting Firm Grant Thornton LLP issued an unqualified opinion on the financial statements and internal controls, highlighting claims reserve estimation as a critical audit matter - Grant Thornton LLP issued an unqualified opinion on the company's consolidated financial statements as of December 31, 2021 and 2020, and on the effectiveness of internal control over financial reporting as of December 31, 2021[229][230][381][382] - The estimation of automotive liability and workers' compensation claims reserves was identified as a critical audit matter due to the high estimation uncertainty in determining the severity of these claims and the inherent subjectivity of management's judgment in estimating the total cost of claims[234][236] Consolidated Balance Sheets As of December 31, 2021, total assets increased to $587.4 million, driven by cash, receivables, and marketable securities, while liabilities decreased and equity rose 2021 Compared to 2020 Consolidated Balance Sheet Overview (in thousands) | Metric | December 31, 2021 | December 31, 2020 | Change Amount | | :--- | :--- | :--- | :--- | | Total Assets | $587,381 | $578,592 | +$8,789 | | Cash and Cash Equivalents | $18,509 | $337 | +$18,172 | | Accounts Receivable—Net | $121,854 | $77,731 | +$44,123 | | Marketable Equity Securities | $39,424 | $27,941 | +$11,483 | | Net Property and Equipment | $384,179 | $450,825 | -$66,646 | | Total Liabilities | $371,271 | $428,611 | -$57,340 | | Total Stockholders' Equity | $216,110 | $149,981 | +$66,129 | Consolidated Statements of Operations The company's total operating revenue and net income significantly increased in 2021 compared to prior years, reflecting improved efficiency and higher freight rates 2019-2021 Consolidated Statements of Operations Overview (in thousands) | Metric | 2021 | 2020 | 2019 | | :--- | :--- | :--- | :--- | | Total Operating Revenue | $707,120 | $486,825 | $514,177 | | Operating Revenue (excluding fuel surcharges) | $641,253 | $438,987 | $439,511 | | Fuel Surcharges | $65,867 | $47,838 | $74,666 | | Operating Income | $100,205 | $33,923 | $12,547 | | Income Before Income Taxes | $102,505 | $23,409 | $10,115 | | Net Income | $76,516 | $17,827 | $7,900 | | Basic Earnings per Share | $6.74 | $1.55 | $0.68 | | Diluted Earnings per Share | $6.69 | $1.55 | $0.67 | Consolidated Statements of Stockholders' Equity Stockholders' equity significantly increased in 2021, driven by net income, alongside a 2-for-1 stock split and ongoing treasury stock repurchases 2019-2021 Consolidated Stockholders' Equity Overview (in thousands) | Metric | December 31, 2021 | December 31, 2020 | December 31, 2019 | | :--- | :--- | :--- | :--- | | Total Stockholders' Equity | $216,110 | $149,981 | $133,975 | | Net Income | $76,516 | $17,827 | $7,900 | | Treasury Stock Repurchases | ($10,828) | ($2,281) | ($14,285) | | Stock Split | 2-for-1 in August 2021 | N/A | N/A | Consolidated Statements of Cash Flows In 2021, operating cash flow significantly increased, investing activities generated cash, and financing activities used cash for debt repayment and stock repurchases 2019-2021 Consolidated Cash Flow Overview (in thousands) | Cash Flow Category | 2021 | 2020 | 2019 | | :--- | :--- | :--- | :--- | | Net Cash Provided by Operating Activities | $101,740 | $67,590 | $84,297 | | Net Cash Provided by (Used in) Investing Activities | $9,250 | ($32,692) | ($62,310) | | Net Cash Used in Financing Activities | ($92,818) | ($34,879) | ($21,951) | | Net Increase in Cash and Cash Equivalents | $18,172 | $19 | $36 | | Cash and Cash Equivalents at End of Period | $18,509 | $337 | $318 | Notes to Consolidated Financial Statements This section provides detailed notes to the consolidated financial statements, covering accounting policies, revenue, assets, liabilities, equity, and other key financial disclosures 1. ACCOUNTING POLICIES This note outlines the company's principal accounting policies, including consolidation, estimates, asset and liability recognition, income taxes, and revenue recognition - The company's consolidated financial statements include P.A.M. Transportation Services, Inc. and its wholly-owned operating subsidiaries[247] - Key accounting estimates include accrued liabilities for insurance claims, legal reserves, estimated useful lives and salvage values of property and equipment, current expected credit losses, and income tax estimates[248] - Revenue is recognized over time as freight is transported, allocated based on the percentage of transit time in each period[267] - The company continuously monitors the COVID-19 pandemic, whose future impact could materially adversely affect its financial condition, results of operations, cash flows, and liquidity[275] - In March 2022, the Board of Directors declared a 2-for-1 common stock split (100% stock dividend) and canceled 12,268,395 treasury shares on the same date[273][274] 2. REVENUE RECOGNITION Revenue is recognized over time from truckload and brokerage services, based on transportation progress and categorized into freight and fuel surcharge - The company's sole performance obligation is to transport customers' goods, with the option to use its own transportation or arrange third-party transportation[278] - Revenue is categorized into freight revenue (for transportation and ancillary services) and fuel surcharge revenue (adjusted based on diesel fuel costs)[281][282] - Revenue is recognized over time, allocated based on the progress of goods transportation and the percentage of transit time in each period[283] 3. TRADE ACCOUNTS RECEIVABLE Net trade accounts receivable increased to $121.9 million as of December 31, 2021, with the allowance for doubtful accounts estimated based on aging and credit risk 2021 Compared to 2020 Trade Accounts Receivable Overview (in thousands) | Metric | December 31, 2021 | December 31, 2020 | | :--- | :--- | :--- | | Billed | $105,992 | $68,584 | | Unbilled | $20,388 | $12,629 | | Current Expected Credit Losses | ($4,526) | ($3,482) | | Trade Accounts Receivable—Net | $121,854 | $77,731 | 2019-2021 Allowance for Doubtful Accounts Analysis (in thousands) | Metric | 2021 | 2020 | 2019 | | :--- | :--- | :--- | :--- | | Beginning Balance | $3,482 | $2,952 | $2,224 | | Provision for Doubtful Accounts | $1,044 | $530 | $728 | | Ending Balance | $4,526 | $3,482 | $2,952 | 4. MARKETABLE EQUITY SECURITIES Marketable equity securities, measured at fair value with changes recognized in net income, increased to $39.4 million by December 31, 2021, and may serve as collateral 2021 Compared to 2020 Marketable Equity Securities Overview (in thousands) | Metric | December 31, 2021 | December 31, 2020 | | :--- | :--- | :--- | | Fair Value | $39,424 | $27,941 | | Cost | $29,385 | $25,860 | | Net Unrealized Gain | $10,039 | $2,081 | 2019-2021 Marketable Equity Securities Dividend Income (in thousands) | Year | Dividend Income | | :--- | :--- | | 2021 | $1,448 | | 2020 | $1,266 | | 2019 | $1,309 | 2020 Compared to 2021 Margin Account Borrowings (in thousands) | Metric | December 31, 2021 | December 31, 2020 | | :--- | :--- | :--- | | Margin Account Borrowings | $1,214 | $11,251 | 5. ACCRUED EXPENSES AND OTHER LIABILITIES Accrued expenses and other liabilities decreased to $14.1 million by December 31, 2021, mainly due to a significant reduction in margin account borrowings 2021 Compared to 2020 Accrued Expenses and Other Liabilities Overview (in thousands) | Metric | December 31, 2021 | December 31, 2020 | | :--- | :--- | :--- | | Total Accrued Expenses and Other Liabilities | $14,114 | $26,601 | | Margin Account Borrowings | $1,214 | $11,251 | | Self-Insured Claims and Legal Reserves | $5,437 | $3,303 | 6. CLAIMS LIABILITIES The company self-insures various claims, including cargo loss, automotive liability, workers' compensation, and employee health, with liabilities accrued based on estimated known and IBNR claims - The company self-insures for cargo loss ($10,000 deductible), automotive liability claims exceeding $2 million (since September 1, 2020), workers' compensation ($500,000 self-insured retention), and employee health claims ($400,000 stop-loss limit per employee)[298][299][300] - Claims liabilities are accrued based on estimates of known claims and incurred but not reported (IBNR) claims, with estimation methods based on historical claims information and other data[262][300] 7. LONG-TERM DEBT Total long-term debt decreased to $222.3 million by December 31, 2021, primarily equipment and real estate financing, with a $60 million revolving credit facility largely available 2021 Compared to 2020 Long-Term Debt Overview (in thousands) | Metric | December 31, 2021 | December 31, 2020 | | :--- | :--- | :--- | | Total Long-Term Debt | $222,277 | $286,106 | | Less: Current Maturities | ($49,544) | ($57,776) | | Long-Term Debt—Net | $172,733 | $228,330 | | Equipment Financing | $206,539 | $250,572 | | Real Estate Financing | $15,738 | $17,288 | | Revolving Credit Facility (Outstanding) | - | $18,246 | - As of December 31, 2021, the company's revolving credit facility was $60 million, with approximately $400,000 drawn (including $300,000 in letters of credit), leaving $59.6 million available[304] - The weighted average interest rate for equipment financing was 2.81% as of December 31, 2021[304] 8. NONCASH INVESTING AND FINANCING ACTIVITIES The company financed $36.1 million and $80.7 million in equipment purchases through noncash activities in 2021 and 2020, respectively 2020 Compared to 2021 Noncash Equipment Purchase Financing (in millions) | Year | Equipment Purchase Financing Amount | | :--- | :--- | | 2021 | $36.1 | | 2020 | $80.7 | 9. CAPITAL STOCK The company's authorized capital includes 40 million common shares and 10 million preferred shares, with active stock repurchases and a 2022 2-for-1 stock split 2021 Compared to 2020 Common Stock Overview | Metric | December 31, 2021 | December 31, 2020 | | :--- | :--- | :--- | | Common Stock Issued | 23,400,796 shares | 23,391,438 shares | | Common Stock Outstanding | 11,174,011 shares | 11,455,790 shares | | Treasury Stock Quantity | 12,226,785 shares | 11,935,648 shares | | Treasury Stock Cost | $169.9 million | $159.1 million | - In July 2021, the company repurchased 272,405 shares of common stock through a Dutch auction tender offer for approximately $10.1 million[309] - The company's stock repurchase program was reauthorized in November 2021 to repurchase 500,000 shares of common stock[312] - On March 8, 2022, the Board of Directors declared a 2-for-1 common stock split (100% stock dividend)[274] 10. SEGMENT INFORMATION, SIGNIFICANT CUSTOMERS, INDUSTRY CONCENTRATION AND GEOGRAPHIC AREAS All revenue stems from the motor carrier segment, with 67.9% from domestic U.S. transportation and significant concentration among top customers, particularly the automotive industry - All of the company's revenue is derived from the motor carrier segment and aggregated into a single reportable segment under GAAP[314] 2019-2021 Operating Revenue by Geographic Area (in thousands) | Region | 2021 Revenue | 2021 % | 2020 Revenue | 2020 % | 2019 Revenue | 2019 % | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Domestic U.S. Transportation | $474,291 | 67.9% | $316,542 | 66.1% | $326,559 | 63.5% | | To or From Mexico | $223,315 | 32.0% | $161,412 | 33.7% | $186,392 | 36.3% | | To or From Canada | $891 | 0.1% | $1,156 | 0.2% | $1,226 | 0.2% | | Total Operating Revenue | $698,497 | 100% | $479,110 | 100% | $514,177 | 100% | - In 2021, the company's top five customers accounted for approximately 33% of total revenue, General Motors Company for approximately 11%, and the automotive industry as a whole for approximately 27%[315][316] 11. DIVIDENDS The company has paid past dividends but currently does not plan future cash dividends, with decisions based on financial condition and capital needs - The company has paid cash dividends in the past but currently does not intend to pay cash dividends in the foreseeable future[141][317] 12. FEDERAL AND STATE INCOME TAXES Deferred income taxes reflect temporary differences, with net deferred tax liabilities at $86.7 million as of December 31, 2021, and an effective tax rate of 25.4% 2021 Compared to 2020 Deferred Tax Liabilities and Assets Overview (in thousands) | Metric | December 31, 2021 | December 31, 2020 | | :--- | :--- | :--- | | Total Deferred Tax Liabilities | $89,444 | $105,915 | | Of which: Property and Equipment | $84,081 | $100,736 | | Total Deferred Tax Assets | $2,729 | $37,032 | | Of which: Current Expected Credit Losses | $1,165 | $896 | | Net Deferred Tax Liabilities | $86,715 | $68,883 | 2019-2021 Reconciliation of Effective Income Tax Rate to Statutory Federal Income Tax Rate | Metric | 2021 | 2020 | 2019 | | :--- | :--- | :--- | :--- | | Federal Income Tax Statutory Rate | 21.0% | 21.0% | 21.0% | | State Income Tax/Other, Net | 4.4% | 1.5% | -2.5% | | Total Income Tax Expense | 25.4% | 23.9% | 21.9% | - As of December 31, 2021 and 2020, management believes that the future reversal of existing taxable temporary differences and available tax strategies will generate sufficient future taxable income to realize its tax assets, thus no valuation allowance is required[266][322] 13. STOCK-BASED COMPENSATION The company's stock-based compensation plan grants awards to key personnel, with 716,000 shares available for future grants and $1.847 million in unrecognized expense as of December 31, 2021 - As of December 31, 2021, approximately 716,000 shares were available for future grants of stock options or restricted stock[335] 2021 Unvested Restricted Stock Activity Overview | Metric | Quantity | Weighted-Average Grant Date Fair Value | | :--- | :--- | :--- | | Unvested at January 1, 2021 | 122,070 | $18.06 | | Granted | 7,608 | $30.40 | | Vested | (9,358) | $21.71 | | Unvested at December 31, 2021 | 119,606 | $18.50 | 2019-2021 Pre-Tax Stock-Based Compensation Expense (in thousands) | Year | Pre-Tax Stock-Based Compensation Expense | | :--- | :--- | | 2021 | $441 | | 2020 | $461 | | 2019 | $912 | - As of December 31, 2021, total unrecognized stock-based compensation expense was approximately $1.847 million, to be amortized over the remaining vesting period[336] 14. EARNINGS PER SHARE Diluted EPS for 2021 was $6.69, significantly higher than prior years, with calculations including the dilutive effect of stock-based compensation 2019-2021 Earnings per Share Overview (in thousands, except per share data) | Metric | 2021 | 2020 | 2019 | | :--- | :--- | :--- | :--- | | Net Income | $76,516 | $17,827 | $7,900 | | Basic Weighted Average Common Shares Outstanding | 11,357 | 11,504 | 11,663 | | Dilutive Effect of Common Stock Equivalents | 75 | 32 | 97 | | Diluted Weighted Average Common Shares Outstanding | 11,432 | 11,536 | 11,760 | | Basic Earnings per Share | $6.74 | $1.55 | $0.68 | | Diluted Earnings per Share | $6.69 | $1.55 | $0.67 | 15. BENEFIT PLAN The company offers a 401(k) plan with a 50% employer match up to 3% of compensation, with total contributions of approximately $190,000 in 2021 - The company offers a 401(k) benefit plan with an employer matching contribution of 50% of employee voluntary contributions, up to 3% of compensation, fully vested over five years[341] 2019-2021 Total Employer Matching Contributions (in thousands) | Year | Total Employer Matching Contributions | | :--- | :--- | | 2021 | $190 | | 2020 | $190 | | 2019 | $198 | 16. COMMITMENTS AND CONTINGENCIES The company faces various legal proceedings and claims, including a 2021 class action lawsuit not covered by insurance, and has settled prior wage and classification claims - The company is a defendant in a class action lawsuit filed in August 2021 by former drivers, alleging unpaid minimum wages, violations of the Electronic Fund Transfer Act, etc., with any losses from this lawsuit not covered by existing insurance policies[343] - In July 2020, the company paid a $16.5 million settlement for a class action lawsuit regarding employee driver minimum wages[344] - In March 2020, the company paid approximately $421,000 to settle an independent contractor misclassification lawsuit[345] - Since September 1, 2020, the company has been self-insured for automotive liability claims exceeding $2 million[346] 17. LEASES The company holds operating leases with $1 million in right-of-use assets, operates a lease-purchase program for trucks, and made $1.405 million in related-party real estate lease payments in 2021 - As of December 31, 2021, the company's operating leases resulted in right-of-use assets and corresponding operating lease liabilities valued at approximately $1 million[348] - The company operates a lease-purchase program allowing independent contractors to lease company-owned trucks; as of December 31, 2021, the cost of company-owned trucks in this program was approximately $55.986 million, with a net book value of approximately $28.951 million[352] 2020 Compared to 2021 Lease Revenue (in thousands) | Lease Type | 2021 | 2020 | | :--- | :--- | :--- | | Leased Truck Revenue | $7,747 | $6,756 | | Leased Building Space Revenue | $735 | $573 | | Total Lease Revenue | $8,482 | $7,329 | - In 2021, the company paid $1.405 million in real estate lease payments to related parties[359] 18. FAIR VALUE OF FINANCIAL INSTRUMENTS The company's financial instruments, including cash, securities, receivables, and debt, are measured at fair value using market approaches and discounted cash flow analysis - The company's financial instruments include cash and cash equivalents, marketable equity securities, accounts receivable, trade accounts payable, and borrowings[362] - Marketable equity securities are measured at fair value based on active market quotes, totaling $39.424 million as of December 31, 2021, and $27.941 million as of December 31, 2020[366][367] - The carrying value and estimated fair value of long-term debt were $222.3 million and $224.2 million, respectively, as of December 31, 2021, and $267.9 million and $268.6 million, respectively, as of December 31, 2020[368] 19. RELATED PARTY TRANSACTIONS The company conducts various transactions with related parties, including transportation, maintenance, and leases, with significant operating revenue and expenses exchanged 2019-2021 Related Party Transactions Overview (in thousands) | Metric | 2021 | 2020 | 2019 | | :--- | :--- | :--- | :--- | | Operating Revenue from Related Parties | $8,085 | $9,897 | $2,691 | | Operating Expenses Paid to Related Parties | $11,103 | $6,791 | $9,190 | | Automotive Liability Insurance Premiums Paid to Affiliated Insurer | $9,851 | $8,516 | $10,345 | | Workers' Compensation Insurance Premiums Paid to Affiliated Insurer | $300 | $299 | $266 | 2021 Compared to 2020 Related Party Receivables and Payables (in thousands) | Metric | December 31, 2021 | December 31, 2020 | | :--- | :--- | :--- | | Related Party Receivables | $636 | $2,348 | | Related Party Payables | $1,276 | $1,864 | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure This report discloses no changes in accountants or disagreements regarding accounting and financial disclosures Controls and Procedures Management concluded that disclosure controls and procedures were effective as of December 31, 2021, with no significant internal control changes, and received an unqualified audit opinion - As of December 31, 2021, management, including the Chief Executive Officer and Chief Financial Officer, evaluated and concluded that the company's disclosure controls and procedures were effective at a reasonable assurance level[375] - No significant changes in internal control occurred during the reporting period[377] - Management reported that the company's internal controls were effective as of December 31, 2021, and received an unqualified opinion from independent registered public accounting firm Grant Thornton LLP[378][381] Other Information This report contains no other information requiring disclosure Disclosure Regarding Foreign Jurisdictions that Prevent Inspections Disclosure regarding foreign jurisdictions that prevent inspections is not applicable to this report PART III Directors, Executive Officers and Corporate Governance Information for this section is incorporated by reference from the company's definitive proxy statement for the upcoming annual meeting Executive Compensation Information for this section is incorporated by reference from the company's definitive proxy statement for the annual meeting Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters Information for this section is incorporated by reference from the proxy statement, detailing unvested restricted stock and shares available for future issuance December 31, 2021 Equity Compensation Plan Information | Plan Category | 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 | | :--- | :--- | :--- | :--- | | Equity compensation plans approved by security holders | 119,606 | - | 835,744 | | Equity compensation plans not approved by security holders | - | - | - | | Total | 119,606 | - | 835,744 | Certain Relationships and Related Transactions, and Director Independence Information for this section is incorporated by reference from the company's definitive proxy statement for the annual meeting Principal Accounting Fees and Services Information for this section is incorporated by reference from the company's definitive proxy statement for the annual meeting PART IV Exhibits, Financial Statement Schedules This section lists financial statements, schedules, and various exhibits, with applicable schedules omitted as information is presented elsewhere - This report includes the report of independent registered public accounting firm, consolidated balance sheets, statements of operations, comprehensive income, stockholders' equity, cash flows, and notes to financial statements[398] - All applicable financial statement schedules have been omitted because the required information is not applicable or has been presented in the consolidated financial statements or related notes[398] - Exhibits include the company's articles of incorporation, employment agreements, the 2014 Amended and Restated Equity Incentive Plan, loan agreements, guarantee agreements, and a list of subsidiaries, among others[401] SIGNATURES This report was signed by P.A.M. Transportation Services, Inc.'s President and CEO, and CFO on March 11, 2022, as required by the Securities Exchange Act of 1934 - This report was signed on March 11, 2022, by Joseph A. Vitiritto, President and Chief Executive Officer, and Allen W. West, Member of the Board of Directors and Chief Financial Officer[407][408]