Losses widen for USA Truck

An improving economy and rebounding truck tonnage across the industry was not enough to push USA Truck back into the black to start 2012.

The Van Buren-based transport company lost $4.9 million in the first quarter of this year, which equated to a 47-cent per share earning deficit. The recent losses widened from a net income deficit of $2.7 million or 26 cents per share lost in the same quarter of 2011.

Wall Street analysts expected a loss of 38 cents per share on revenue of $129.3 million in the recent quarter. However, the trucking firm missed both marks posting total revenue of $123.6 million, which included fuel surcharges of $25.85 million. Without fuel charges, base revenue declined 1.8% per from the year ago period.

The wider losses were not totally unexpected by stock traders as shares of USA Truck (NASDAQ: USAK) opened at $6.79 this morning (April 19) rising to $6.87 by mid-morning following the report.

CEO Cliff Beckham noted in the release the company continues working to improve performance metrics that will eventually bring acceptable financial results.

“For the first quarter, several of these metrics continued to improve. Our overall financial performance remained approximately the same as the third and fourth quarters of 2011. The improvements in certain operating metrics were offset by an increase in unmanned tractors and higher fuel prices,” Beckham said.

He knows the results are mixed but said the company’s brokerage segment – Strategic Capacity Solutions – posted a 15.8% growth in operating income to $1.54 million year-over-year in spite of tepid freight demand.

The company’s intermodal segment that moves freight via rail and truck continued to post losses in the recent quarter. The intermodal segment reported operating losses of $224,000,which were reduced some 43.5% from the losses in the prior year.

Beckham said these two business units despite their growing pains still produced more than 22% of the company’s base revenue for the quarter and contributed a reasonable gross margin.

That said, the company’s trucking segment continued to see mixed results in the reporting period posting a net operating loss of $7.956 million, compared to a $4.117 million operating deficit a year ago.

"All-in-all, the pace of improvement in our one-way domestic truckload business is behind our expectations. We are not yet achieving optimal operating efficiencies from our network which we must attain in order to most effectively improve yield and profitability,” Beckham said.

He said the company is beginning to see improvement in equipment utilization — miles per tractor per week — and more loads in general but in the recent reporting period revenue per load totaled $2,619 which was down 4.8% from the the prior-year period. This improvement was better than expected given the increase in unmanned tractors, which are included in the measurements. He said other intangibles that will pay off in the future include improvement in safety performance and core customer on-time service.

Beckham said while the company saw a fractional improvement in revenue per total mile from a year ago, the gain was offset by an increase in empty miles and higher fuel costs.

"Also disappointing was an increase in our unmanned tractor count, which rose sharply in February and March. Prior to that, we had reduced unmanned tractors from a peak of 230 to approximately 100 in January.  A combination of network changes, less than optimal velocity, and seasonal job alternatives caused an increase in unmanned tractors back to 200 during March," Beckham said.

Thomas Albrecht, analyst with BB&T Capital Markets, said driver shortages will be the biggest hurdle trucking companies see in 2012.

“Two years ago driver turnover was an afterthought, last year it moved onto the back burner and in 2012 it may be the headline story, despite the nearly 9% national unemployment rate. Numerous factors have contributed to the truckload driver turnover rate rising to 89% in the third quarter of 2011, from under 40% in 2010,” Albrecht said.

The Department of Energy reports the average diesel price per gallon was $3.97 for the first quarter of 2012, compared with $3.57 for the first quarter of 2011.

Although the delivery of new, fuel-efficient tractors during 2011 contributed to a year-over-year improvement in miles per gallon, the fuel price increase combined with higher empty miles led to an increase in our net fuel cost per mile for USA Truck.

At the end of the March, USA Truck reported $4.3 million in cash with a long term debt of $16.25 million. The company’s total liabilities were $58.7 million, down from $60.15 million a year ago.

Beckham said USA Truck is in compliance with all of its debt covenants.

Looking ahead, Beckham said there is no quick fix for putting the company back into a profitable mode. He said the company continues to look at every metric from reducing empty miles, better load planning, fleet management and improving freight mix in an effort to hit pay dirt.

“Our progress may be uneven as we shift assets, refine the network, and implement internal operations initiatives.  As we look ahead in 2012, we have pushed out our expectations for improvement over 2011 into the second half of the year," Beckham said.