P.A.M. Transportation earnings fall 45% from driver costs, stable fuel prices

Tontitown-based P.A.M. Transportation Services reported net income of $2.934 million, or earnings per share of 41 cents, for the first quarter ended March 31. Profits tumbled 45% from $5.369 million, or earnings per share of 72 cents, a year ago because of higher driver costs and stable fuel prices.

Revenue including fuel surcharges rose 4% to $103.589 million in the first quarter. A year ago the company’s total revenue was $99.483 million. Fuel surcharges totaled $9.94 million to begin 2016, down from $16.798 million in the same quarter of 2015. The company said without fuel surcharges revenues increased 13.3% to $93.648 million compared to $82.694 million a year ago.

“Despite the softer freight environment, we were able to achieve base revenue growth of over 13% during the first quarter of 2016. This growth came primarily from an increase in our overall fleet size and from growth in our Dedicated and Mexico divisions. Fuel surcharge revenue continued to be lower on a year-over-year basis as fuel prices remained lower in 2016,” P.A.M. President Daniel Cushman said in the statement. “While revenue growth was positive, it was not enough to overcome the many cost challenges we faced in year-over-year cost comparables, primarily as they relate to fuel costs, driver acquisition costs, and health care costs.”

He said in 2015 fuel prices continued to decline though the first quarter compared to more or less stable prices in same quarter this year which resulted in a $1.2 million increase in net fuel costs for the company. Other challenges the company faced in the recent quarter include higher health care claims costs, something Cushman said is difficult to control. He said more high-dollar health care claims resulted in an increase of $1 million, or 87%, in health care costs for the first quarter of 2016 as compared to the first quarter of 2015.

The largest challenge faced by the entire trucking industry is the shortage of drivers which escalated to 48,000 last year, according to the American Trucking Association. The trade group said the if trend holds the shortage of drivers may balloon to nearly 175,000 by 2024.

Cushman said major changes the company made last year in its driver recruitment and retention programs continues to dig into profits to the tune of $1.4 million more spent on driver acquisition costs in the year-over-year period. He said as 2016 continues the company expects the incremental impact of theses costs to lessen.

“While we are not satisfied with our earnings results for the first quarter of 2016, they do represent one of our top three best reported results for a first quarter. We remain optimistic that our business model will allow us the flexibility to quickly adapt to changing market conditions so that we can advance our goal of continuous improvement,” Cushman said.

The company said for the remainder of the year it will focus on revenue growth, believing its investments in drivers retention will provide a reasonable rate of return.

“Given the current state of the driver market, we expect to see driver pay pressure during the remainder of 2016 and the near future. Many of our competitors have announced significant across-the-board driver pay increases over the last few years while we have limited our driver pay increases to select drivers based on lane-by-lane profitability and desirability. We cannot rule out the possibility of a future broad based pay rate increase to our drivers and third-party owner operators,” Cushman said.

Operating income in the first quarter totaled $5.586 million, down from $9.146 million a year ago. Salaries and wages increased 5.97% year-over-year. Operating expenses were lower, offset by higher rent and transportation costs in the quarter.

In its flagship truckload division, P.A.M. trucks logged 57.362 million miles in the quarter, up from 51.826 million a year ago. Revenue per mile rose to $1.43, up from $1.40 a year ago. Revenue per truck per day also rose to $678, compared to $642 in the same period last year. However, the company’s operating ratio rose to 93.72%, up from 87.71% last year.

The logistics brokerage operation had total revenue of $11.541 million, up 13.64% from the same period last year.

After the close of the quarter P.A.M. finalized the Dutch auction tender offer where the company repurchased 567,413 shares of its common stock. A total of approximately 2.2 million shares of common stock have been repurchased by the company since its first Dutch auction in 2013. Additionally, approximately 435,000 shares remain available for purchase under our previously authorized stock repurchase program.

Shares (NASDAQ: PTSI) of the thinly traded company closed at $24.25 on Friday (April 29), down 2.57% on the day. The shares have traded between $22.13 and $62.84 over the past 52 months.