Higher rates and a bigger fleet in a strong freight market produced record profits for P.A.M. Transportation Services in the third quarter.
The Tontitown, Ark.-based truckload carrier and logistics service provider earned $9.2 million, or $1.52 a share, in the three months ended Sept. 30, compared with $3.4 million, or 54 cents a share, in the same period a year ago.
Revenue surged 29.9% to $140.3 million in the third quarter from $108.9 million in 2017.
“The third quarter of 2018 was an extremely satisfying quarter for our team,” President Daniel Cushman said in a statement Oct. 12. “Not only did we achieve record quarterly operating income for the company, each month of the quarter individually set a new operating income record.”
Cushman said the performance was the best since 2015 and reflects a turnaround from lackluster results in 2017.
“Our expectation was that a strong economic environment, combined with the necessity of industrywide increases in driver compensation would help drive shipping rates higher,” Cushman said. “We expected that higher rates, combined with various internal growth and savings strategies, would allow us to offer driver pay increases to help expand our fleet and, in turn, improve overall profitability. What we did not expect was the speed in which we would achieve our goal.”
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Since implementing an across-the-board pay increase for drivers in December 2017, the company was able to expand the size of its truck fleet by 11%, with growth of 10% expected in 2019, according to Cushman.
P.A.M. operated 1,351 company-owned trucks on average in the third quarter of 2018 compared with 1,160 in the same period a year ago, a gain of 16%. However, the average number of owner-operator trucks fell to 565 from 648, a drop of 12.8%.
Cushman said the company also has benefited from a decision in 2016 to diversify its customer base to include retail and nonautomotive manufacturing companies.
“These relationships were established at a time when other carriers were abandoning business due to downward rate pressure,” Cushman said. “We stepped in to fill those voids, often at less favorable rates, with the belief that circumstances would eventually improve and that these relationships would result in future growth opportunities. Returns on this investment have been realized in 2018.”
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A significant part of P.A.M.’s business is conducted in Mexico, and Cushman said that he does not expect the recent announcement of a United States-Mexico-Canada Agreement to have a negative effect on the company.
For the first nine months of 2018, P.A.M. said it earned $17.9 million, or $2.89 a share, on revenue of $395.1 million, compared with net income of $7.3 million, or $1.14 a share, on revenue of $326.9 million in 2017.