P.A.M. earnings hit road block

P.A.M. Transportation Services faced stiff headwinds in December sending the trucker’s fourth quarter earnings south bound after 11 months of forward progress.

The Tontitown-based carrier reported net losses of $311,000, or 4 cents a share in the fourth quarter. This lackluster performance compared to net profits of $133,037, or 2 cents per share earned in the year-ago period.

For the full year, P.A.M. pocketed net earnings of $2.178 million, or 25 cents a share in 2012. This compared to an annual net loss of $2.857 million, or 32 cents per share during 2011.

Operating revenues were $95.77 million for the fourth quarter of 2012, up 7.1% from a year earlier. For fiscal 2012 P.A.M. benefited from operating revenue of $380.632 milllion, a 6% increase from fiscal 2011.

"We finished the year with eleven consecutive profitable months, followed by a single month of loss in December. We are pleased with the progress achieved during 2012, reflected in the 57-cent swing in earnings per share. … This improvement was achieved in an environment characterized by rising fuel prices that averaged 12 cents per gallon higher in 2012 compared to 2011, rising equipment and replacement parts costs, increased competition for drivers, increased regulation, and an economy that continues to struggle to get traction,” Daniel H. Cushman, president of the company, commented in the earnings release.

Total revenue in the quarter was $95.772 million, up from $89.388 million a year earlier. For the full year of 2012 revenue totaled $380.632 million, an increase from $359.242 million in 2011.

Cushman said fourth quarter freight demand began up year over year and remained strong through the Friday before Christmas. However, demand fell off more drastically the last 10 days of 2012 than in 2011.

He said the slack was largely attributable to the mid-week holiday in 2012, compared to the weekend holiday in 2011 and the firm had to manage through this negative calendar effect on momentum.

"We made significant progress towards the goal of sustainable profitability during 2012, but will not be satisfied until we can overcome months like December that pose specific challenges to profitability,” Cushman said.

P.A.M. continues to replenish its fleet taking delivery on approximately 600 tractors and 600 trailers in 2012, with a similar purchases expected in 2013.

"Our fleet replenishment cycle is on schedule with the average age of our tractor fleet reaching 1.70 years as of December 2012, down from 2.67 years at December 2011 and 3.47 years at its peak in April 2011,” Cushman said.

He said the newer fleet is providing fuel efficiency and lower maintenance costs in addition to higher driver and customer satisfaction rates,

P.A.M’s truck fleet was equipped with electronic on-board recorders for all of 2012, well in advance of the July 2015 mandated implementation.

"The driver market continued to tighten throughout 2012, but we ended the year with 260 more drivers and 143 more owner operators than we ended with in 2011. We continue to focus on programs and processes centered in our driving associates and our dedication to creating value for them with P.A.M. in an intensely competitive market,: Cushman said.

P.A.M. management continues to diversify its customer base, citing an intensified focus on premium service, with a larger portion of revenue earned from Mexico Expedited Services and Dedicated operations.

Bob Costello, chief economist with the American Trucking Associations, recently noted that December was a tough year-over-year comparison for many firms.

Costello anticipates more sluggishness in the freight index in 2013, especially early in the year, as the economy continues to face several headwinds.  

“As paychecks shrink for all households due to higher taxes, I’m expecting a weak first quarter for tonnage and the broader economy” Costello said. “Since trucks account for the vast majority of deliveries in the retail supply chain, any reduction in consumer spending will have ramifications on truck tonnage levels.” 

Shares of P.A.M. Transportation closed Wednesday at $9.68. The thinly traded and closely held stock is not followed by Wall Street Analysts so there was no Street estimate to beat.

The share price has ranged from a low $8.81 per share to a high $12.58 over the past 52-week period.

FINANCIAL SNAPSHOT

TOTAL REVENUE
2012: $380.632 million
2011: $359.242 million

NET INCOME
2012: $2.178 million
2011: $-2.857 million

EARNINGS PER SHARE
2012: 25 cents
2011: -32 cents