Income up, revenue down at USA Truck; execs move to cut fleet size

Financial gains continue for USA Truck, with second quarter net income of $2.46 million and a positive operating income for the company’s trucking segment. However, declining overall revenue and a slip in logistics operating income has execs with the Van Buren-based company planning to cut jobs and the trucking fleet size in an effort to “restore our momentum.”

The trucking, brokerage and logistics company announced Tuesday morning that second quarter net income was $2.46 million, better than the $722,000 during the second quarter of 2014. However, the 2014 quarter took a $2.163 million hit to earnings for legal costs related to a hostile takeover attempt by Knight Transportation.

Total revenue during the quarter was $133.573 million, down almost 13% compared to the same period in 2014.

For the first half of 2015, net income reached $3.576 million, a big improvement over the $867,000 loss during the first half of 2014. Again, that loss included the one-time charge for legal fees. Total revenue during the first half of 2015 was $189.214 million, almost 11% below the $208.912 million during the same period of 2014.

Operating income in the company’s trucking segment during the first half of 2015 was $2.64 million, a big improvement over the $7.855 million loss during the same period of 2014. Operating income in the company’s logistics division – Strategic Capacity Solutions (SCS) – during the first half of 2015 was $6.235 million, down considerably from the $11.069 million during the same period of 2014.

‘ROOM TO IMPROVE’
Operations in 2015 follow a turnaround in 2014 that saw the company end five consecutive years of losses. The 2014 net income of $6.033 million was a more than $15 million swing from the $9.11 million loss in 2013.

USA Truck is also now without John Simone, the CEO who hired in early 2013 to work with Board Chairman Robert Peiser on a turnaround plan. Simone left the company early in the year for medical reasons, and on July 9 the company announced he had left the company to focus on his battle with lung cancer. Thomas Glaser, who has more than 30 years in the trucking industry and who was managing the company during Simone’s medical leave, was tapped as the new CEO.

“Pricing and fuel efficiency were better than last year, while other areas still have significant room to improve, including maintenance, risk management and, importantly, driver retention,” Glaser said in the earnings report. “In SCS, gross margin remained solid, reflecting steady pricing and lower fuel costs compared to the prior-year period; however, operating income declined due to lower revenue, higher purchased transportation costs and start-up expenses to support our growth plans.”

NEW INITIATIVES
Glaser said the company is taking several steps to “accelerate the pace of improvement” in the trucking segment. Those include:
• Reducing the size of the tractor fleet by 400 in 2015 by retiring 800 older tractors and replacing them with 400 tractors that are more fuel efficient and require less maintenance;
• Increase driver pay and increasing driver home time with improvements in scheduling, dispatch and other methods;
• Reduce overall corporate costs to reflect a trucking operation with 400 fewer tractors; and
• Strict adherence to pricing in an effort to boost the return on assets.

The company ended the first half of 2015 with an average of 2,119 tractors, down from a 2,218 average during the first half of 2014. The average number of seated tractors – trucks with drivers – was 1,929 in the first half of 2015, down from 2,040 during the same period of 2014.

“Our goal in trucking is to realize operating income improvements of approximately $50 million over the next several years through these and other high leverage opportunities. We also expect these efforts to position the Company to respond faster and more favorably to new business opportunities and changes in market conditions,” Glaser said in the report.

On the logistics side, USA Truck execs plan to expand office operations – possibly through acquisitions – and add more intermodal, refrigerated truck and less-than-truckload options to their service offerings. Glaser said the focus with SCS is to “restore the pace of growth and improve the profitability.”

The company also announced a share repurchase plan of up to 1 million shares. The repurchase window runs from Aug. 6 to July 28, 2018.

USA Truck shares (NASDAQ: USAK) were trading early Tuesday above $22. The share price closed Monday at $19.62. During the past 52 weeks the share price has ranged from a $32.14 high to a $13.90 low.