P.A.M. Transportation(PTSI) - 2023 Q3 - Quarterly Report

Part I. Financial Information Financial Statements The unaudited financial statements show decreased total assets and a significant decline in net income and cash from operations for the nine months ended September 30, 2023 Condensed Consolidated Balance Sheets Total assets decreased to $731.7 million as of September 30, 2023, driven by lower receivables, while stockholders' equity increased Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | Sep 30, 2023 | Dec 31, 2022 | | :--- | :--- | :--- | | Total Current Assets | $269,599 | $280,766 | | Net Property and Equipment | $456,920 | $463,595 | | TOTAL ASSETS | $731,721 | $749,162 | | Total Current Liabilities | $135,856 | $141,965 | | Long-term Debt | $171,418 | $205,466 | | TOTAL LIABILITIES | $415,439 | $448,979 | | Total Stockholders' Equity | $316,282 | $300,183 | Condensed Consolidated Statements of Operations Operating revenues and net income declined sharply in Q3 and the first nine months of 2023, resulting in significantly lower earnings per share Key Operating Results (in thousands, except per share data) | Metric | Q3 2023 | Q3 2022 | Nine Months 2023 | Nine Months 2022 | | :--- | :--- | :--- | :--- | :--- | | Total Operating Revenues | $201,502 | $252,630 | $630,639 | $709,246 | | Operating Income | $8,833 | $35,495 | $31,121 | $103,522 | | Net Income | $6,097 | $24,566 | $20,648 | $72,690 | | Diluted EPS | $0.28 | $1.09 | $0.93 | $3.24 | Condensed Consolidated Statements of Cash Flows Net cash from operating activities decreased year-over-year, while cash used for investing was substantially lower due to a prior-year acquisition Cash Flow Summary (Nine Months Ended Sep 30, in thousands) | Activity | 2023 | 2022 | | :--- | :--- | :--- | | Net cash provided by operating activities | $93,804 | $120,073 | | Net cash used in investing activities | $(10,914) | $(95,620) | | Net cash used in financing activities | $(54,678) | $(155) | | Net Increase in Cash | $28,212 | $24,298 | Notes to Condensed Consolidated Financial Statements Key notes detail revenue recognition, a single reportable segment, a class action lawsuit settlement, and the company's stock repurchase program - The company has two operating segments, Truckload Services and Brokerage and Logistics Services, which are aggregated into a single reportable segment: Motor Carrier Operations[47] - A class action lawsuit regarding driver pay was settled for $4,750,000, with final approval granted on October 11, 2023, and the company does not expect this to be covered by insurance[64] - In July 2023, the Board reauthorized the repurchase of 500,000 shares of common stock, with 475,066 shares remaining authorized for repurchase as of September 30, 2023[48] Management's Discussion and Analysis of Financial Condition and Results of Operations Management attributes the significant decline in profitability to challenging market conditions, though liquidity remains solid despite lower cash from operations Results of Operations – Truckload Services Truckload services revenue fell 22.6% in Q3 2023, leading to a significant deterioration in the operating ratio to 95.8% from 82.6% - Q3 2023 truckload services revenue (before fuel surcharge) decreased 22.6% to $112.3 million from $145.0 million in Q3 2022[93] - The decline was caused by a market-driven decrease in average rate per mile, a 150-truck reduction in average fleet size, and the impact of the UAW strike[93] - The truckload operating ratio increased from 82.6% in Q3 2022 to 95.8% in Q3 2023[99] Results of Operations – Logistics and Brokerage Services Logistics and brokerage revenue decreased 13.2% in Q3 2023 due to lower rates, causing the operating ratio to worsen to 93.3% from 85.7% - Q3 2023 logistics and brokerage revenue (before fuel surcharge) decreased 13.2% to $62.1 million from $71.5 million in Q3 2022[110] - Rents and purchased transportation costs increased from 80.4% of revenue in Q3 2022 to 86.8% in Q3 2023, indicating margin compression[111] - The logistics and brokerage operating ratio increased from 85.7% in Q3 2022 to 93.3% in Q3 2023[112] Results of Operations – Combined Services Combined net income for Q3 2023 fell sharply to $6.1 million from $24.6 million year-over-year, with diluted EPS dropping to $0.28 from $1.09 Combined Net Income and EPS | Period | Net Income | Diluted EPS | | :--- | :--- | :--- | | Q3 2023 | $6.1 million | $0.28 | | Q3 2022 | $24.6 million | $1.09 | | Nine Months 2023 | $20.6 million | $0.93 | | Nine Months 2022 | $72.7 million | $3.24 | Liquidity and Capital Resources The company generated $93.8 million in operating cash flow, plans $90.8 million in net capital expenditures, and maintains full availability on its credit line - Generated $93.8 million in cash from operating activities in the first nine months of 2023[119] - Expects to purchase approximately 330 trucks and 1,130 trailers during the remainder of 2023, resulting in net capital expenditures of about $90.8 million[121] - At September 30, 2023, there were no borrowings against the line of credit, with $59.6 million of availability[122] Quantitative and Qualitative Disclosures about Market Risk The company's primary market risks include equity prices, interest rates, diesel fuel prices, and foreign currency exchange rates - The company is exposed to equity price risk with a portfolio of marketable equity securities valued at $41.3 million; a hypothetical 10% price decrease would cause a $4.1 million reduction in value[130] - The company is exposed to commodity price risk from diesel fuel; a 10% increase in the average annual price per gallon would increase annual fuel expenses by $9.7 million[132] - The company is exposed to foreign currency risk from its Mexico operations; a 10% increase in the U.S. dollar to Mexican peso exchange rate would increase annual operating expenses by $0.6 million[133] Controls and Procedures Management concluded that disclosure controls and procedures were effective as of September 30, 2023, with no material changes to internal controls - The CEO and CFO concluded that as of September 30, 2023, the company's disclosure controls and procedures are effective at a reasonable assurance level[136] - There were no changes in internal control over financial reporting during the quarter ended September 30, 2023, that have materially affected, or are reasonably likely to materially affect, the company's internal controls[138] Part II. Other Information Legal Proceedings The company settled a class action lawsuit concerning driver wages for $4.75 million, with final court approval granted in October 2023 - A class action lawsuit alleging failure to pay minimum wage and other violations was settled for $4,750,000, resolving all claims from January 1, 2020, through July 31, 2022[142] - The court granted final approval of the settlement on October 11, 2023, and the company does not admit liability for any claim[142] Risk Factors Key risks include the impact of customer labor disputes, such as the UAW strike, and the company's status as a "controlled company" - A significant labor dispute, such as the UAW strike against Ford, General Motors, and Stellantis, could negatively impact the company's revenue and profitability[144] - Family trusts associated with Chairman Matthew T. Moroun collectively own over 50% of the company's outstanding common stock, giving them control over shareholder actions[145] - Due to its "controlled company" status under NASDAQ rules, the company is exempt from requirements for a majority-independent board and fully independent nominating and compensation committees[147] Unregistered Sales of Equity Securities and Use of Proceeds The company repurchased 24,934 shares of its common stock for an average price of $25.73 per share during the third quarter of 2023 Issuer Purchases of Equity Securities (Q3 2023) | Period | Total Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | July 1-31, 2023 | 24,934 | $25.73 | | August 1-31, 2023 | - | - | | September 1-30, 2023 | - | - | | Total | 24,934 | $25.73 | Exhibits This section lists all exhibits filed with the Form 10-Q, including governance documents, agreements, certifications, and Inline XBRL data