USA Truck swings to Q2 earnings of US$0.9M, compared with loss of US$1.1M a year ago, as base revenue increases 16.8% to US$94.9M, on improving operating environment and sale of fuel contract
VAN BUREN, Arkansas
July 22, 2010
– USA Truck, Inc. (Nasdaq:USAK - News) today announced base revenue of $94.9 million for the quarter ended June 30, 2010, an increase of 16.8% from $81.2 million for the same quarter of 2009. Net income was $0.9 million for the quarter ended June 30, 2010, compared to a net loss of $1.1 million for the same quarter of 2009. Diluted earnings per share were $0.09 for the quarter ended June 30, 2010, compared to a loss per share of $0.11 for the same quarter of 2009. During the quarter, we entered into, and subsequently sold, a fuel hedge contract which resulted in a reduction of fuel expense on a pre-tax basis of approximately $1.2 million and on a net of tax basis of approximately $0.7 million or $0.07 per share.
Base revenue increased 12.2% to $184.1 million for the six months ended June 30, 2010 from $164.1 million for the same period of 2009. We incurred a net loss of $2.1 million for the six months ended June 30, 2010, compared to a net loss of $3.0 million for the same period of 2009. For the six months ended June 30, 2010, we incurred a loss per share of $0.20 compared to a loss per share of $0.30 for the same period of 2009.
In comparing the financial results of the quarter ended June 30, 2010 to the comparable period of 2009, Clifton R. Beckham, President and CEO of the Company, made the following statement:
"We made solid year-over-year progress this quarter and dramatically improved our performance sequentially from the first quarter this year. Through disciplined execution of our long-term strategic plan, VEVA (Vision for Economic Value Added), and aided by an improving operating environment and the sale of a fuel contract, we achieved our near-term goal of returning to profitability by the second quarter 2010.
"Our employees, particularly our professional drivers, have faced many challenges over the past two years, and we are deeply proud of the work ethic and resilience they have displayed in our return to profitability. Through their efforts, we posted year-over-year improvements in practically every area of our operations including miles per tractor per week (+4.3%), Trucking base revenue per total mile (+6.1%), Spider Web lane compliance (+12.0 percentage points), empty mile factor (down 11.3%), insurance and claims expense (down 100 basis points), Strategic Capacity Solutions base revenue (+171.2%) and Intermodal base revenue (+53.8%).
"Though improved year-over-year, our tractor utilization (miles per tractor per week) remains below our expectations. The single largest contributor to our utilization shortfall was our unmanned tractor count (6.5% of the fleet during the quarter) resulting from a substantially tighter market for hiring qualified drivers. Also hampering utilization were an overall lack of lane density that often positioned our tractors in the wrong markets, and excessive freight volumes in the Northeast U.S. where maintaining high tractor utilization is inherently difficult. Between enhancing our recruiting and retention efforts and continuing to build Spider Web lane compliance, we expect continued utilization improvement if the freight markets maintain an upward trend.
"Our tractors and trailers are still young by industry standards (2.4 and 5.4 years, respectively), but have higher mileage than we prefer. The result is our maintenance costs per mile increased by approximately 100 basis points year-over-year. Also, after several years of improving fuel economy, we are now experiencing year-over-year declines due to the higher mileage on this equipment.
"While our Trucking base revenue per mile has steadily improved over the past few years, we are still below the targets we have established for our freight network. Several years of declining industry freight prices have taken their toll. We do not believe we are being adequately compensated for our services, particularly in the face of higher operating costs (tractor and trailer prices, toll charges, taxes, health insurance, etc.).
"Moving forward, we intend to remain disciplined in the execution of our VEVA plan. We will not be distracted by the pursuit of short-term, but unsustainable, profits when such an extraordinary opportunity lies before us to build a model we believe is capable of producing superior long-term returns for our shareholders. As such, our priorities for the remainder of 2010 are as follows:
* Continue to build our Spider Web freight network. During the quarter, Spider Web freight network lanes, on average, yielded approximately $0.30 more in rate per loaded mile than our legacy network lanes. Only 45.8% of our freight moved in Spider Web lanes during the quarter (compared to 33.8% in the second quarter 2009).
* Improve tractor utilization. We are already working on specific plans to improve our tractor utilization by deploying more of our unmanned tractors into service, by redirecting our capacity away from the congested Northeast U.S. and by building Spider Web lane density. We expect these efforts will provide our customers with additional capacity where they need it most.
* Reduce maintenance costs by lowering the fleet age. Between July and October 2010, we plan to place in-service approximately 285 new tractors (with pre-2010 emission engines) that were purchased, and included on our balance sheet, during the first half of this year. We also intend to purchase an additional 300-500 new tractors to be placed in-service between November 2010 and May 2011. Each of these new tractors will be offset by the corresponding sale of an old truck from our active fleet. The net result will be zero fleet growth, but a declining average age of tractors. We expect the reduced age to have a positive effect on our maintenance costs in 2011, though maintenance costs will likely climb sequentially over the next few quarters. Despite the capital expenditures this undertaking requires, we expect to produce positive free cash flow (net cash flow from operations less net cash used in investing activities) over the next twelve months (even at a very modest level of profitability).
* Increase freight network yield. We are reviewing the lowest yielding lanes within our freight network and taking proactive steps to improve their pricing and operational characteristics in order to achieve an acceptable level of profitability. We expect to continue this yield management activity until we are generating acceptable rates of return on our invested capital.
* Continue growing our asset-light business. Finally, we expect continued aggressive, but controlled and profitable, growth within our Strategic Capacity Solutions and Intermodal operating segments. In a tightening capacity environment, we believe it is essential to offer our customers flexible sources of capacity to fulfill their transportation needs. During the quarter, base revenue from our asset-light services more than doubled (+128.5%), and was a much more significant part of our business at 11.9% of our total base revenue compared to just 6.1% in the second quarter of 2009.
"These priorities reflect our outlook for industry conditions, which are presently characterized by a considerable shortage of capacity. This tight capacity environment has been growing steadily tighter since mid-February when we believe freight demand experienced a systemic improvement as businesses began to restock inventory in response to unsustainably low inventory levels. However, stubbornly low inventory-to-sales ratios suggest that such buying is merely replenishing sales and not rebuilding inventory levels. So, although we do not describe today's freight volumes as robust, they are substantially better than 2009 levels. We believe this incremental improvement has revealed the dramatic exodus of trucking capacity over the past several years. The result is a tight capacity environment that we expect may only grow tighter when the world economy returns to normal growth rates and when new government regulations (such as the Department of Transportation's Comprehensive Safety Analysis 2010, a wide-ranging performance based safety initiative) reduce the number of employable truck drivers. We believe those eventualities coupled with long-term demographic trends reducing the population of qualified truck drivers and lack of Class 8 tractor builds over the past few years will converge to create an extended period of tight capacity in the industry."