P.A.M. Transportation Services Inc. returned to paydirt in the second quarter, posting net income of $2.682 million, or 31 cents a share. Net profits rose 186% from $934,791 earned in the second quarter of last year.

The earnings report was issued after the market closed on Friday (July 26).

The Tontitown-based carrier’s total revenues surpassed $104.4 million in the quarter, up 10% from the same period in 2012 and blowing past analysts’ predictions of $103 million.

“Second quarter operating income of $5.0 million was very satisfying and represents the highest quarterly operating income that we have reported since the fourth quarter of 2006,” said Daniel Cushman, president of the company.

He attributed the revenue growth to several factors, including fleet growth of 3.1%, improved utilization with a reduction in empty miles, and a 2.3% increase in the rate charged per mile. He said demand for P.A.M. services was relatively strong and steady through the second quarter with the exception of a couple of valuable “project lanes” that transitioned back to intermodal suppliers and away from trucks.

“However, our success in securing new business was strong enough in the quarter to replace these lost lanes and achieve year over year revenue growth,” he added.

P.A.M., like a number of other truckload carriers, benefited from a freight volume increase as the quarter progressed. After a sluggish April, overall freight trends were significantly better in June amid the truckload sector, according to analysts with Stephens Inc.

Stephens Inc. analyst Brad Delco noted that freight pricing in the quarter was fairly lackluster as shippers have been reluctant to increase rates ahead of hours-of-service regulations and sluggish freight demand in the early part half of the quarter. He said going forward carrier rates will need rates to cover 2% to 2.5% cost inflation headwinds on top of 1% to 3% utilization headwinds due to hours of service regulations

The improved earnings report came with a cautious tone from company management.

“As with most other carriers, our random freight division presents one of our greatest challenges. Due to the non-repetitive nature of the customers, routes, pickup and transit times, among other factors, we incur considerably more cost and driver dissatisfaction with this category of freight,” Cushion, noted in the release.

He said the company continues to transition away from random freight services, which lowered the impact it has on total operations.

“The percentage of freight serviced by our random freight division decreased from 45.2% of our total freight in the second quarter 2012 to 38.7% of our total freight in the second quarter 2013,” Cushman said. “We continuously seek to improve profitability through more disciplined choices, better planning, and more efficient execution.”

P.A.M. also benefited from better fuel efficiency in its newer fleet and an overall decreased in the cost of fuel in the quarter. The efficiency gains contributed to a reduction in fuel costs of approximately $700,000 for the second quarter 2013 as compared to the second quarter of 2012, the company said.

Cushman said the company continues to invest in updating its fleet because newer fleets provide for higher driver satisfaction, lower repair costs and greater fuel savings. The firm’s average age of its truck was 1.5 years at the end of the second quarter.

“Our current capital expenditures program is designed to maintain the 1.5 year average truck age and includes fleet growth of approximately 100 trucks. In addition, our program includes the replacement of 60 trailers each month for the remainder of 2013,” Cushion said.

He said the driver recruitment remains a challenge and continues to hinder the firm’s planned internal growth. Increased competition for professional drivers is coming from construction and manufacturing sectors which have picked up steam in the past year.

P.A.M. ended the quarter with 127 more drivers and 203 more owner operators than those at the end of the second quarter of 2012. However, Cushion said sustained intense competition for a dwindling pool of qualified drivers coupled with more stringent governmental regulations could make it difficult to recruit and retain qualified professional drivers.

Shares of P.A.M. Transportation Services Inc. rose 5.3% on the strong earnings announcement Friday (July 26). Shares closed at $11.30, up 57 cents in heavy volume for what is typically a thinly traded stock.

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Kim Souza

Kim Souza

Kim Souza is the Northwest Arkansas Editor for The City Wire, a content partner with Talk Business & Politics. You can reach her by email at KSouza@TheCityWire.com or follow her on Twitter: @TCWKim.