Trucker’s income tops $31M

P.A.M. reports fourth-quarter rise aided by new tax law

P.A.M. Transportation Services Inc. reported net income of $31.6 million during the fourth quarter, a large increase from the same period a year ago that was the result of the new corporate tax structure.

Earnings per share were $5, up from 11 cents from the fourth quarter of 2016. The company also said revenue of $110.9 million was a 2.3 percent increase from $108.4 million a year ago.

The Tontitown company’s fourth-quarter performance was aided by a deferred tax benefit of nearly $29 million from the new federal tax law, which lowered the corporate rate from 35 percent to 21 percent. Excluding the benefit, P.A.M said earnings for the quarter were 28 cents per share.

Daniel Cushman, P.A.M.’s chief executive officer, said in a statement that the company also benefited from an increase in demand during the fourth quarter, which gave the company a chance to begin charging higher rates. But Cushman said P.A.M did not finish the year strong because of weaker results in December, which stemmed from automotive plant shutdowns and shortfalls in freight commitments from some customers.

“This shortfall left us scrambling to find acceptable replacement freight for that reserved capacity and while freight was plentiful, with such short notice it was difficult to find destinations and rates which were both desirable and network friendly,” Cushman said.

The company also reported full-year results Thursday. P.A.M.’s net income for the year was $38.9 million, or $6.08 per share. Earnings per share for the year excluding the tax benefit were $1.43. Fullyear revenue of $437.8 million was a 1.2 percent increase from $432.9 million in 2016.

P.A.M’s logistics division — which accounts for roughly 12 percent of the business

— reported total revenue of $15.3 million in the fourth quarter. It was a 50 percent increase from a year ago. The logistics segment reported $51.1 million in revenue for the year.

Cushman said P.A.M. faced challenges throughout 2017 because of the “downward rate pressure” from a majority of its customer base. Customers often requested significant rate decreases and if an agreement could

not be reached with P.A.M., the freight was awarded to a new low bidder.

The company’s average fleet size decreased nearly 10 percent as a result. But Cushman said P.A.M. plans to restore lost ground in 2018, recently ordering 725 new trucks and 1,000 trailers.

“We expect to finish 2018 with a company-owned truck fleet in excess of 20 percent larger from where we finished 2017,” Cushman said.

Improving freight rates in the fourth quarter did give the company an opportunity to address another concern

by increasing pay for its drivers. The pay increase went into effect late in the quarter and Cushman believes it was an “absolute necessity” to remain competitive in the current driver market.

“Our retention levels after the first three months had started to deteriorate prior to this pay increase, but since implementation, we have seen positive trends in both recruitment and retention of both student and experienced drivers,” Cushman said.

P.A.M has historically relied on hiring and training new student drivers, according

to Cushman. He said the model had worked because other larger competitors didn’t hire drivers with less than a year of experience.

But those experience requirements have decreased over time because of a shortage of qualified drivers.

“There’s so much demand, they’re finding themselves forced to make those adjustments just to find drivers,” said Bob Williams, senior vice president and managing director of Simmons First Investment Group.

P.A.M. shares fell $1.83 to close Thursday at $35.97.