USA Truck swings to loss of US$4.3M in Q3 from year-ago period's profit of US$586M as base revenue climbs 1.9% to US$102.6M; results attributed to softer than expected freight volumes, high number of unmanned tractors, operating system transition

Alison Gallant

Alison Gallant

VAN BUREN, Arkansas , October 21, 2011 (press release) – USA Truck, Inc. (NASDAQ:USAK - News) today announced base revenue of $102.6 million for the quarter ended September 30, 2011, an increase of 1.9% from $100.8 million for the same quarter of 2010. Net loss was $4.3 million, $0.42 per share, for the quarter ended September 30, 2011, compared to net income of $0.6 million, $0.06 per share, for the same quarter of 2010.

Base revenue increased 9.1% to $310.8 million for the nine months ended September 30, 2011, from $284.9 million for the same period of 2010. We incurred a net loss of $6.4 million, $0.62 per share, for the nine months ended September 30, 2011, compared to a net loss of $1.5 million, $0.15 per share, for the same period of 2010.

Cliff Beckham, President and CEO, made the following statements:

Overview

“The third quarter of 2011 presented several challenges. These included a major operating system transition, softer than expected freight volumes, and a persistently high number of unmanned tractors. We were unable to overcome these challenges and produce sufficient revenue to operate profitably. We have addressed a number of the underlying problems, but we still have work to do in order to achieve sustained profitability.

“We completed our migration to new operating software in our Trucking division during the third quarter. We had planned for a modest reduction of efficiency during the transition, but the magnitude and duration of the disruption was much greater than we had anticipated. The operating system conversion was complicated by problems with a customized portion of the software. This software shortcoming hampered our network visibility for several weeks as a solution was developed. We believe the ripple effects included significant disruption to our load velocity, overly conservative booking of customers' loads, lost freight opportunities, and increased driver turnover.

“Our business environment was softer than in the second quarter. We felt a modest step-down in overall freight demand in our markets, which we attribute to slower growth in the U.S. economy. In addition, we began phasing out service on two major accounts, one due to the end of a project and one due to inadequate pricing. In a softer overall freight market, we had fewer opportunities to replace all of this business with high-quality freight. Industry-wide, we believe freight demand and trucking capacity are in relative equilibrium, but the spot market is less robust than during the second quarter. This contributed to a reduction in overall miles and an increase in our percentage of non-revenue miles.

“For the quarter, in our Trucking operations, tractor utilization decreased 13.2% and our empty mile factor increased approximately 200 basis points, to 12.4%, compared with the third quarter of 2010. Base Trucking revenue per mile was a positive, however, rising approximately 7.2% compared with the third quarter of 2010. In addition, revenue in our SCS segment (Strategic Capacity Solutions, our freight brokerage service offering) increased 82%, and the amount of gross margin increased 80%.

“From a cost perspective, driver wages, net fuel cost, equipment repairs, and insurance and claims all increased on a per mile basis. These increases more than offset our increase in Trucking revenue per mile. In addition, the decrease in tractor utilization less effectively covered our fixed costs, and increased empty miles percentage hurt fuel surcharge recovery as well as overall base revenue per mile.

Balance Sheet and Liquidity

“Our balance sheet remains solid, and we continue to have significant liquidity to operate the business. At September 30, 2011, we were in compliance with all our debt covenants, and we have $28.2 million available under our revolving credit agreement and $28.8 million available through equipment financing commitments. During the third quarter of 2011, we reduced the size of our in-service fleet by 49 tractors due to the high unmanned tractor count. We also reduced our expected tractor purchases for the second half of 2011 from 250 tractors to 155 tractors, which will reduce our expected net capital expenditures for the second half of 2011 from $18.1 million to $10.1 million.

Management Team

“We are streamlining our management structure to improve accountability and speed of execution. Our executive management team has been reduced from nine members at the beginning of the second quarter to seven members at the end of the second quarter, to five members today. As part of this realignment, we are consolidating accountability for revenue production in our Trucking segment under a single executive officer. On August 1, 2011, David B. Hartline joined the Company as Chief Operating Officer for Trucking. During mid-October, after stabilizing our fleet operations, he assumed direct responsibility for all sales, pricing and operations activities in our Trucking segment. As part of this realignment, the corporate strategy department was eliminated, and management information systems and engineering, which formerly reported to the corporate strategy department, now report to the Chief Financial Officer.

Outlook

“Since August, we have been implementing changes in our operational discipline, market emphasis, customer service, and driver relations to reflect the experience and philosophies of our Chief Operating Officer for Trucking. Along with the implementation of our new operating system, this has required a significant investment in training our operations personnel. We believe certain metrics associated with on-time delivery, pre-booking of freight, load planning, freight market selection, and driver miles are beginning to show improvement. Nevertheless, revenue-related operational measures currently indicate potential softness in fourth quarter operating results. We caution, however, that it remains too early in the quarter to draw definite conclusions because of the numerous changes underway and the significant operating leverage in our income statement. Among other factors, changes in revenue items such as base Trucking revenue per mile, seated truck count, and miles per tractor, as well as expense items such as insurance and claims, net fuel cost and equipment maintenance, significantly impact operating results.

“Base Trucking revenue per mile for the first few weeks of October decreased 1.1% from the average of the third quarter of 2011, while average length of haul has remained relatively constant at 509 miles for the first two weeks of October and the third quarter of 2011.

"The number of Company-owned tractors without drivers was approximately 10.0% of the fleet for the third quarter and for the first two weeks of October.

“Miles per seated truck for the first two weeks of October were approximately 3.1% higher than the average for the third quarter of 2011.

“From a cost perspective, the Company has improved its fuel purchasing efficiency, reduced headcount, implemented new maintenance procedures, and identified a wide range of additional cost-saving measures that are expected to contribute to several million dollars of annual savings. These savings are expected to be phased in over the fourth quarter of 2011.

“Our path forward requires that we perform the basic processes fundamental to our Trucking business. During the third quarter, we completed our operating system conversion. We also completed our search for a Chief Operating Officer for Trucking who could bring substantial experience and success in managing regional operations. Despite the near-term disruptions we have experienced, we believe we have the right systems and leadership to drive future success. Now it is up to us to execute.”

Response to Celadon Group Schedule 13D

In other news, the Board of Directors has considered the recent Schedule 13D filed by Celadon Group, Inc., including Celadon Group's request for a meeting with USA Truck's management. Among other factors, the Board of Directors considered the recent management changes and the Board's desire to remain focused on increasing value through operational improvements. Accordingly, the Board of Directors unanimously decided to decline a meeting at this time.

The following table summarizes the results of operations information of USA Truck, Inc. ("Company") for the three and nine month periods indicated:

 

   

USA TRUCK, INC.

 

CONSOLIDATED STATEMENTS OF OPERATIONS

 

(UNAUDITED)

 
   
 

(in thousands, except per share data)

 
 

Three Months Ended

 

Nine Months Ended

 
 

September 30,

 

September 30,

 
 

2011

 

2010

 

2011

 

2010

 
                         

Revenue:

                       

Trucking revenue(1)                                    

$

84,254

 

$

90,667

 

$

262,940

 

$

260,061

 

Strategic Capacity Solutions revenue                       

 

18,389

   

10,103

   

47,829

   

24,816

 

Base revenue                                       

 

102,643

   

100,770

   

310,769

   

284,877

 

Fuel surcharge revenue                                 

 

27,494

   

17,996

   

82,438

   

53,194

 

Total revenue                                       

 

130,137

   

118,766

   

393,207

   

338,071

 
                         

Operating expenses and costs:

                       

Fuel and fuel taxes                                     

 

33,397

   

28,249

   

104,456

   

83,860

 

Salaries, wages and employee benefits                     

 

34,423

   

33,418

   

102,229

   

98,728

 

Purchased transportation                                

 

32,213

   

20,977

   

89,073

   

55,577

 

Depreciation and amortization                             

 

12,390

   

12,612

   

37,491

   

37,246

 

Operations and maintenance                             

 

11,650

   

9,963

   

31,942

   

25,931

 

Insurance and claims                                   

 

5,581

   

5,236

   

17,145

   

16,831

 

Operating taxes and licenses                             

 

1,345

   

1,427

   

4,118

   

4,232

 

Communications and utilities                              

 

1,103

   

1,004

   

3,136

   

2,969

 

Gain on disposal of revenue equipment, net                 

 

(648)

   

(45)

   

(2,904)

   

(88)

 

Other                                                

 

4,542

   

3,609

   

13,350

   

10,931

 

Total operating expenses and costs                     

 

135,996

   

116,450

   

400,036

   

336,217

 

Operating (loss) income                                 

 

(5,859)

   

2,316

   

(6,829)

   

1,854

 
                         

Other expenses (income):

                       

Interest expense                                       

 

877

   

931

   

2,440

   

2,643

 

Other, net                                             

 

(174)

   

(79)

   

(210)

   

100

 

Total other expenses, net                              

 

703

   

852

   

2,230

   

2,743

 

(Loss) income before income taxes                       

 

(6,562)

   

1,464

   

(9,059)

   

(889)

 

Income tax (benefit) expense                             

 

(2,257)

   

878

   

(2,636)

   

621

 
                         

Net (loss) income                                       

$

(4,305)

 

$

586

 

$

(6,423)

 

$

(1,510)

 
                         

Net (loss) earnings per share information:

                       

Average shares outstanding (Basic)                       

 

10,294

   

10,297

   

10,304

   

10,294

 

Basic (loss) earnings per share                           

$

(0.42)

 

$

0.06

 

$

(0.62)

 

$

(0.15)

 
                         

Average shares outstanding (Diluted)                       

 

10,294

   

10,312

   

10,304

   

10,294

 

Diluted (loss) earnings per share                          

$

(0.42)

 

$

0.06

 

$

(0.62)

 

$

(0.15)

 
   

(1)     Includes Intermodal revenue

 
                       
USA Truck is a dry van truckload carrier transporting general commodities via our General Freight and Dedicated Freight service offerings. We transport commodities throughout the continental United States and into and out of portions of Canada. We also transport general commodities into and out of Mexico by allowing through-trailer service from our terminal in Laredo, Texas. Our Strategic Capacity Solutions operating segment provides customized transportation solutions using our technology and multiple modes of transportation including our assets and the assets of our partner carriers.
 

* All content is copyrighted by Industry Intelligence, or the original respective author or source. You may not recirculate, redistrubte or publish the analysis and presentation included in the service without Industry Intelligence's prior written consent. Please review our terms of use.

Share:

About Us

We deliver market news & information relevant to your business.

We monitor all your market drivers.

We aggregate, curate, filter and map your specific needs.

We deliver the right information to the right person at the right time.

Our Contacts

1990 S Bundy Dr. Suite #380,
Los Angeles, CA 90025

+1 (310) 553 0008

About Cookies On This Site

We collect data, including through use of cookies and similar technology ("cookies") that enchance the online experience. By clicking "I agree", you agree to our cookies, agree to bound by our Terms of Use, and acknowledge our Privacy Policy. For more information on our data practices and how to exercise your privacy rights, please see our Privacy Policy.