Continuing a trend that started in 2017, higher rates from customers in a strong freight market produced record profits for P.A.M. Transportation Services in the first quarter of 2019.
The Tontitown, Ark.-based truckload carrier and logistics company provider on April 15 reported net income of $8.3 million, or $1.39 a share, compared with $1.4 million, or 22 cents a share, a year ago.
Operating revenue surged 7.7% to $128.7 million compared with $119.5 million in the 2018 period.
“An obvious component of our success was based on our ability to acquire higher rates from customers. These higher rates were necessary to help offset rising costs experienced by the company over the past three years, not just to be a straight pass through to income,” CEO Daniel Cushman said in a statement. “We are very pleased with our first-quarter results. The first quarter of each year can be very challenging as we sometimes experience plant downtime with some of our customers and face disruptive weather events.”
Operating ratio improved to 90.95 from 96.37 in the same period a year ago. Operating ratio is a key industry metric used to measure efficiency. The lower the ratio, the greater the company’s ability to generate a profit.
P.A.M. operated 1,457 company-owned trucks on average in the first quarter compared with 1,233 in the same period in 2018, a gain of 18%. The average number of owner-operator trucks increased to 582 from 550, a jump of 5.8%.
As it expanded the number of trucks it runs, P.A.M. raised drivers’ salaries in 2017 and 2018.
“Our driver pay increases given over the last two years were very much needed and deserved, and that is a cost increase you can’t take back so it must be recovered through higher rates. We anticipate that the driver market will continue to demand additional pay increases during 2019 so we must have a means to recover these costs and will shift our capacity if necessary to do so,” Cushman said. “During 2018, we grew our fleet over 20% as we had success in both recruiting and retaining drivers. That level of growth is not expected for 2019. However, we do plan on growth.”
A significant percentage of P.A.M.’s business is in Mexico, and company officials said that will continue to be an area of growth.
“Our Mexico service offering remains strong as market demand and rates continue to be at all-time high levels,” Cushman said.
P.A.M. ranks No. 71 on the Transport Topics Top 100 list of largest for-hire carriers in North America.