USA Truck Attracts Welcome Attention

USA Truck Inc. of Van Buren has a 16-year track record of meandering performance since going public. Those inconsistent results produced an up-and-down stock ride over the years, but it was tame compared with this summer’s dramatic three-week swing.

Shares fell to a 52-week low of $9.50 on July 15, only to bounce back and establish a 52-week high of $19.53 on Sept. 2.

The yo-yo pricing coincided with the July 17 announcement that USA Truck’s second-quarter earnings improved 32 percent to $2.1 million, blowing away analysts’ gloomy expectations of a $1 million loss.

Clifton Beckham, president and CEO of the truckload carrier, enjoyed watching the market mayhem.

“We were the only profitable publicly traded truckload carrier in the nation to show year-over-year earnings improvement during the second quarter,” Beckham said.

That good news, which ended three consecutive losing or break-even quarters, was followed by favorable nods from analysts.

BB&T Capital Markets of Richmond, Va., upgraded its recommendation from “underweight” to “hold” on July 18. Stephens Inc. of Little Rock upgraded its recommendation from “equal weight” to “overweight” on July 28.

The stunning second-quarter results set the stage for USA Truck to host a gathering of investment analysts at its corporate headquarters recently. Seven of the 10 trucking analysts invited took part, including representatives from two firms that don’t follow the company: Wachovia Securities of St. Louis and Stifel Nicolaus & Co. of Baltimore.

“It was very good for our company and the Street to get exposure to each other,” Beckham said. “This gave our management team a chance to present itself and give the analysts a chance to learn a little bit more about what we’re doing here.

“We wanted to answer the question ‘Can this young management team get it done?’”

At 36, Beckham is the youngest CEO of an Arkansas public company. Excluding the chairman, Bob Powell, the average age of USA Truck’s 11-member management team is 41. On the other hand, the 10 youngsters have been with the company an average of 15 years.

“We’ve all grown up in this business and been through the ups and downs,” Beckham said. “We feel really good about the plan we’ve put together. The feedback I get is positive, too. Now the hard part is to execute and come out every quarter and produce results.”

‘Money Managers’

The company is buckling down to improve its operational margins, broaden its revenue streams and boost earnings.

Toward that end, USA Truck’s freight brokerage business grew 68 percent to $8 million during the second quarter, and the company entered the intermodal rail business with a 2008 revenue goal of $2 million.

Dove-tailing with these internal initiatives is calling a halt to growth in the asset-based portion of the company. The plan is to squeeze out more efficiencies in the USA Truck fleet without increasing its size, augmented by independent drivers to meet excess demand.

The company’s ultimate utilization goal is 2,500 miles per tractor per week. That average increased to 2,311 for the quarter ending June 30, compared with 2,292 in 2007.

Adding to the number-crunching mix is the goal of expanding the pool of owner/operators from 66 in 2007 to 120 during 2008.

The big picture goal is to crank out six more quarters or so of upward trending profits. That performance would lay the groundwork of operational consistency and position the company to grow through a series of small acquisitions.

The moves mark a departure from the company’s historic growth-oriented path built on a model of expanding its fleet, trying to land more business and build revenue.

Today’s efforts are made with an eye toward meeting or beating a return on investment of 10 percent.

“The basic fundamental shift is that we are investment money managers, and we are focused on producing a good return on investment,” Beckham said. “The current business environment is absolutely brutal, and things remain very difficult.

“We certainly haven’t been immune to that, but we believe we have a plan in place to make our company perform well despite the economic conditions.”

That’s the kind of bean-counter talk and early favorable results that cause ears to perk up in the investment community.

Beckham’s promotion from chief financial officer to president and CEO a year ago was couched under the mandatory retirement of Jerry Orler. But the succession reflected a stepped-up commitment to a changing of the guard at USA Truck.

Orler held the CEO post for only seven months before exiting at age 65. He followed Bob Powell, who vacated the position in January 2007 at age 72.

The tenure of Powell and Orler even predates the company’s spin-off into a stand-alone venture in 1989 as part of Arkansas Best Corp.’s successful effort to fend off a hostile takeover attempt.

Beckham credits an out-of-the-blue buyout offer in October 2006 for paving the way for today’s repositioned USA Truck.

Liberate Technologies Inc. of Palo Alto, Calif., announced a cash offer of $231 million to acquire USA Truck.

The $21 per share proposal represented a 22 percent premium.

Buying activity in USA Truck stock was busier than normal in the days preceding the Liberate Technologies announcement. After the stock price pumped up in the wake of the announcement, shares were sold.

“We never heard from them again,” Beckham said. “There was some suspicious trading in [USA Truck] stock in the days before and after the offer. There was a huge amount of front-running going on, and it looked like a case of pump and dump.”

Liberate Technologies, established from a division of Oracle Corp., was a literal shell of its former self when the offer to buy USA Truck was made. All its assets had been sold off earlier.

The one-time software company is now recognized as an ultra-penny stock company, trading at about half a cent. Total employees: one.

“I talked with a number of people on Wall Street who said they had never seen anything quite like that,” Beckham said. “The bizarre overture was annoying. But it did jolt us into doing something about our business plan. Our strategic direction needed to change.”

Since the company’s initial public stock offering in 1992, USA Truck’s uneven performance caused its stock to close as high as $31.62 in December 2005 and as low as $7.25 in March 2000.

More recently, shares are trading in the $18.40 range.

Beckham admits that he isn’t always correct in interpreting the sentiments of the crowd when it comes to USA Truck. He still gets a laugh from recalling his visit to New York last November to ring the closing bell in recognition of the company’s 15th anniversary of trading on the Nasdaq exchange.

“We walked outside afterward and saw a crowd that we thought was fired up about USA Truck,” he said. “Our company name was on the marquee overlooking the street and everything.

“We later found out the crowd was gathered because the Jonas Brothers were down the street at MTV Total Request Live.”