Truckload carrier PAMT found itself in violation of a debt covenant at the end of the second quarter and is operating under a waiver from the lender granted last month.
In the company’s quarterly 10-Q filing with the SEC last month, filed roughly two weeks after PAMT reported its earnings, the company with a strong exposure to the automotive industry said the loan agreement with the unidentified lender required PAMT to keep a ratio of debt to EBITDA at less than 4:1 at the end of each quarter.
PAMT (NASDAQ: PAMT) was not in compliance with that requirement at the close of the second quarter on June 30, according to the filing.
The ratio is not calculated solely on the basis of one quarter. Rather, it is a rolling four-quarter calculation.
The PAMT filing said it was in compliance with all other covenants under the lender’s agreement beyond the debt to EBITDA ratio.
Once the June 30 covenant was breached, according to the PAMT filing, it set off a 45-day “cure period” where PAMT was “not deemed to be in default of the loan agreement.” Before that expired, on August 7–one day before the 10-Q report was filed–PAMT and the lender agreed on a continued waiver for the covenant violation.
PAMT said in the filing it was “currently working with the lender to amend the financial covenant terms of the agreement on a prospective basis and anticipate having a revised covenant metric in place prior to the end of the quarter, ending September 30, 2025.”
Equipment purchases boosted debt levels
In its SEC filing, PAMT said the covenant was violated on one side of the equation primarily because of new debt the company took on to fund $144.2 million in equipment purchases last year.
On the other side of the ratio was PAMT’s declining EBITDA, which under the rolling quarter calculation would have sliced better performing quarters out of the calculation to be replaced by increasingly weak numbers throughout the last 12 months.
PAMT does not disclose its calculation of EBITDA in its earnings reports. FreightWaves has chosen not to calculate an independent estimate from the company’s quarterly earnings statements as the method used by the company and its lender to calculate the ratio is not known, as there can be differences in methodology to produce that number.
Phone messages and an email to PAMT from FreightWaves had not been responded to by publication time.
Elsewhere in the filing, the company said its long-term debt and current maturities of long-term debt, on an aggregate basis, were $331.2 million on June 30. That was up from $325.6 million at the end of 2024.
It has been a rough year for PAMT, the former PAM Transport. Its second quarter earnings reported an operating ratio of 112.5%. That was worse than the first quarter OR of 110.9%. The second quarter marked the seventh straight quarter of operating losses.
And while it does not affect the ratio in the covenant, its stock price has been on a long-term decline. Since PAMT recorded a stock price of about $40 in March 2022, the value of its shares is down more than 70%. Company CEO Joe Vitiritto resigned when the company’s first quarter earnings were released.
PAMT stock is down about a third in the last year.
A long way from a one-time revenue goal
In November 2021, with its stock price soaring, Vitiritto told FreightWaves in an interview that PAMT’s goal was to have $1 billion in revenue by 2025. But its six-month revenue was $306.5 million, putting it on track to be far from that goal.
In the SEC filing, PAMT said it had a $60 million revolving line of credit that had no borrowings against it. The interest rate on that line of credit is the New York Federal Reserve’s Secured Overnight Financing Rate plus 1.85%. PAMT said on June 30, that rate would have been 6.2%.
PAMT, mostly controlled by the Moroun family, has little analyst coverage. SeekingAlpha lists only two buy-side analysts that follow PAMT (but does not identify them by name), and the company does not hold an earnings call with analysts. Its earnings reports are largely the bare minimum amount of information that could be expected, with little to no commentary.
An article on SeekingAlpha Thursday written by The Sharpe Quest described PAMT as a “cyclical carrier with low multiples, with certain problems controlling margins, very dependent on the auto sector, since GM represents more than 10% of sales, and on the US-Mexico corridor, with more than 40% of revenues.” That author is recommending a sell position on the stock.
Sharpe Quest noted with the 100%-plus OR, “practically every dollar coming in is entirely spent.”
“The recent breach of financial covenants, even though the bank has granted a waiver, only reinforces this weak position.,” Sharpe Quest said.
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