PAMT experienced a financial breach of contract related to debt obligations, as disclosed in its second quarter SEC filing.
In a recent development, truckload carrier PAMT has breached a debt covenant at the end of the second quarter, marking the seventh consecutive quarter of operating losses for the company. This unfortunate turn of events has raised concerns about PAMT's financial stability.
The breach of the financial covenant, even though a waiver has been agreed upon by the unidentified lender on August 7, serves as a stark reminder of PAMT's precarious financial position. The waiver was granted just a day before the company's quarterly 10-Q filing.
PAMT's EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) has reportedly declined, contributing to the covenant violation. However, it's worth noting that PAMT did not disclose its calculation of EBITDA in its earnings reports.
The increased debt from $144.2 million in equipment purchases last year has been a significant factor in the debt covenant violation. As of June 30, PAMT's long-term debt and current maturities of long-term debt stood at $331.2 million, an increase from $325.6 million at the end of 2024.
PAMT's CEO, Joe Vitiritto, resigned when the company's first quarter earnings were released. In November 2021, Vitiritto had stated that PAMT's goal was to have $1 billion in revenue by 2025. However, the company's six-month revenue was only $306.5 million, putting it far from that goal.
The debt to EBITDA ratio, used in the debt covenant, is a rolling four-quarter calculation. PAMT currently operates under a $60 million revolving line of credit with an interest rate of the New York Federal Reserve's Secured Overnight Financing Rate plus 1.85%.
Analyst coverage for PAMT is limited, with little attention from the financial community. Only two buy-side analysts are known to follow PAMT, according to SeekingAlpha. An article on SeekingAlpha recommends a sell position on PAMT's stock.
Sharpe Quest, an investment firm, 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." Sharpe Quest also noted that "practically every dollar coming in is entirely spent" due to PAMT's high operating ratio.
In conclusion, PAMT's recent financial troubles, including the debt covenant violation and the resignation of its CEO, highlight the challenges the company is facing. The company's precarious financial position, limited analyst coverage, and high operating ratio are concerns for investors. It remains to be seen how PAMT will navigate these challenges moving forward.
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